UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

# Washington, 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, 2007.

 

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

** **

For the transition periodfrom _______________________________________ to__________________________________________

 

Commission File Number:______________________________________________________________________________________

 
| **First Hartford 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   o 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 filero                                   Acceleratedfiler o                                            Non-accelerated filerx

 

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

     o 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.

 

3,046,267as of September 19, 2007

 

 

| 1 |
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### FIRSTHARTFORD CORPORATION AND SUBSIDARIES

 

#### INDEX

 

| **PART I.** | **FINANCIALINFORMATION**                                                       | **PAGE** |
|-------------|--------------------------------------------------------------------------------|----------|
|        | ** **                                                                     |     |
| Item 1.     | FinancialStatements                                                            |     |
|        |                                                                           |     |
|        | CondensedConsolidated Balance Sheets –                                    |     |
|        |      July31, 2007 (unaudited) and April 30, 2007 (audited) | 3 - 4    |
|        |                                                                           |     |
|        | CondensedConsolidated Statements of Operations                                 |     |
|        |      Forthe Three Months                                   |     |
|        |      EndedJuly 31, 2007 and 2006 (unaudited)               | 5        |
|        |                                                                           |     |
|        | CondensedConsolidated Statements of Cash Flows                                 |     |
|        |      Forthe Three Months                                   |     |
|        |      EndedJuly 31, 2007 and 2006 (unaudited)               | 6 - 7    |
|        |                                                                           |     |
|        | Notesto Condensed Consolidated Financial Statements                       | 8 - 11   |
|        |                                                                           |     |
| Item 2.     | Management’sDiscussion and Analysis  of Financial Condition     | 12 - 14  |
|        | AndResults of Operations                                                       |     |
|        |                                                                           |     |
| Item 3.     | Quantitativeand Qualitative Disclosures  About Market Risk                     | 14       |
|        |                                                                           |     |
| Item 4T.    | Controlsand Procedures                                                         | 15       |
|        |                                                                           |     |
| **PART II** | **OTHERINFORMATION**                                                           |     |
|        |                                                                           |     |
| Item 1.     | LegalProceedings                                                               | 16       |
|        |                                                                           |     |
| Item 1A     | RiskFactors                                                                    | 16       |
|        |                                                                           |     |
| Item 2.     | UnregisteredSales of Equity Securities and Use of Proceeds                | 16       |
|        |                                                                           |     |
| Item 3.     | DefaultsUpon Senior Securities                                                 | 16       |
|        |                                                                           |     |
| Item 4.     | Submissionof Matters to a Vote Of Security Holders                   | 16       |
|        |                                                                           |     |
| Item 5.     | OtherInformation                                                               | 16       |
|        |                                                                           |     |
| Item 6.     | Exhibits                                                                  | 16       |
|        |                                                                           |     |
|        | Signatures                                                                | 18       |
|        |                                                                           |     |

| 2 |
|---|

 

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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES 

**CONDENSED CONSOLIDATED BALANCE SHEETS**

#  

# ASSETS

 

|                                                                                                                                  | **July 31, 2007** |   | **April 30, 2007**       |
|---------------------------------------------------------------------------------------------------------------------------------------|-------------------|--------|--------------------------|
|                                                                                                                                  | (unaudited)       |   | (audited)                |
| Real estate and    equipment:                                                                                                         |              |   |                     |
|    Developed properties                                                                                                     | $57,826,464       |   |    $47,676,462 |
|    Equipment and    leasehold improvements                                                                                  | 506,299           |   | 475,138                  |
|                                                                                                                                  | 58,332,763        |   | 48,151,600               |
|                                                                                                                                  |              |   |                     |
|    Less: accumulated    depreciation and amortization                                                                       | 4,750,075         |   | 4,406,052                |
|                                                                                                                                  | 53,582,688        |   | 43,745,548               |
|                                                                                                                                  |              |   |                     |
|    Property under    construction                                                                                           | 19,575,453        |   | 29,065,238               |
|                                                                                                                                  | 73,158,141        |   | 72,810,786               |
|                                                                                                                                  |              |   |                     |
| Cash and cash equivalents                                                                                                             | 1,344,748         |   | 2,585,076                |
|                                                                                                                                  |              |
| Investment in marketable    securities                                                                                                | 1,171,153         |   | 733,980                  |
|                                                                                                                                  |              |   |                     |
| Accounts and    reimbursement receivable, less allowance

			for doubtful accounts of    $14,000 for July 31, 2007 and April 30, 2007 | 3,166,818         |   | 1,267,603                |
|                                                                                                                                  |              |   |                     |
| Deposits, escrows,    prepaid and deferred expenses, net                                                                              | 3,805,579         |   | 4,212,652                |
|                                                                                                                                  |              |   |                     |
| Investment in affiliates                                                                                                              | 9,665             |   | 9,665                    |
|                                                                                                                                  |              |   |                     |
| Due from related parties    and affiliates                                                                                            | 386,226           |   | 375,335                  |
|                                                                                                                                  |              |   |                     |
| Derivative instruments -    swap agreements                                                                                           | 485,973           |   | 0                        |
|                                                                                                                                  |              |   |                     |
| Deferred tax assets, net    of valuation allowance of $508,000 and

			$498,000 for July 31,    2007 and April 30, 2007, respectively | 2,030,000         |   | 1,988,000                |
|                                                                                                                                  |              |   |                     |
|                                                                                                                                  | $85,558,303       |   | $83,983,097              |

 

 

 

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

#  

 

| 3 |
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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES 

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 

| **LIABILITIES AND SHAREHOLDERS’ DEFICIENCY**                        |
|--------------------------------------------------------------------------|
|                                                                     |   |   |   |
|                                                                     | **July 31, 2007** |   | **April 30, 2007** |
| Liabilities:                                                             | (unaudited) |   | (audited) |
|    Mortgages and notes  payable:                               |   |   |   |
|    Construction loan  payable                                  | $2,395,841 |   | $1,235,076 |
|    Mortgages payable                                           | 69,714,118 |   | 69,430,384 |
|    Notes payable                                               | 752,222 |   | 253,711 |
|                                                                     | 72,862,181 |   | 70,919,171 |
|                                                                     |   |   |   |
| Accounts payable                                                         | 1,843,572 |   | 2,179,714 |
| Accrued liabilities                                                      | 744,056 |   | 1,013,002 |
| Deferred income                                                          | 474,560 |   | 483,078 |
| Accrued cost of derivatives                                              | 0 |   | 8,665 |
| Other liabilities                                                        | 5,750,664 |   | 5,834,092 |
| Due to related parties and  affiliated                                   | 106,853 |   | 71,853 |
|                                                                     | 81,781,886 |   | 80,509,575 |
|                                                                     |   |   |   |
| Minority interest                                                        | 4,927,906 |   | 4,642,377 |
|                                                                     |   |   |   |
| 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                                                                  | (7,493,783) |   | (7,511,149) |
|                                                                     | 860,937 |   | 843,571 |
|                                                                     |   |   |   |
| Less: Treasury Stock, at  cost, 252,330 Shares                           | 2,012,426 |   | 2,012,426 |
|                                                                     | (1,151,489) |   | (1,168,855) |
|                                                                     |   |   |   |
|                                                                     | $85,558,303 |   | $83,983,097 |

 

 

 

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

 

 

| 4 |
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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)**

(Unaudited)

 

|                                                                                                          | **Three Months Ended**                 |
|---------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                                                                                                          | **July 31, 2007**                      |   | **   July 31, 2006** |
| ** **                                                                                                    |                                   |   |   |
| Revenues:                                                                                                     |                                   |   |   |
|      Rental income                                                                        | 2,156,598                              |   | 1,394,001 |
|      Service income                                                                       | 426,756                                |   | 32,558 |
|      Other                                                                                |       166,563 |   |      82,241 |
| ** **                                                                                                    | 2,749,917                              |   | 1,508,800 |
| Operating cost and  expenses:                                                                                 |                                   |   |   |
|      Rental expenses                                                                      | 1,139,071                              |   | 612,097 |
|      Service expenses                                                                     | 281,065                                |   | 25,797 |
|      Selling, general and  administrative                                                 |    1,149,074                 |   |    994,185 |
|                                                                                                          |    2,569,210                 |   | 1,632,079 |
|                                                                                                          |                                   |   |   |
| Income (loss) from  operations                                                                                | 180,707                                |   | (123,279) |
|                                                                                                          |                                   |   |   |
| Non-operating income  (expense)                                                                               |                                   |   |   |
|      Interest expense                                                                     | (647,176)                              |   | (469,661) |
|      Gain (loss) on  derivatives                                                          | 494,638                                |   | (89,200) |
|      Other income                                                                         | 69,852                                 |   | 0 |
|                                                                                                          | (82,686)                               |   | (558,861) |
|                                                                                                          |                                   |   |   |
| Income (loss) before income  taxes                                                                            | 98,021                                 |   | (682,140) |
|                                                                                                          |                                   |   |   |
| Provision for (benefit  from) income taxes                                                                    | 13,183                                 |   | (96,248) |
|                                                                                                          |                                   |   |   |
| Income (loss) before  minority interest and equity in 

     unconsolidated  subsidiaries | 84,838                                 |   | (585,892) |
| ** **                                                                                                    |                                   |   |   |
| Minority interest in income  of consolidated joint ventures                                                   | (285,529)                              |   | 0 |
| Equity in earnings of  unconsolidated subsidiaries                                                            | 218,057                                |   | 222,059 |
|                                                                                                          |                                   |   |   |
| Net income (loss)                                                                                             | 17,366                                 |   | (363,833) |
|                                                                                                          |                                   |   |   |
| Net income (loss) per  share                                                                                  | .01                                    |   | (0.12) |
| Net income (loss) per  share - diluted                                                                        | .01                                    |   | N/A |
|                                                                                                          |                                   |   |   |
| Shares used in basic  per share computation                                                                   | 3,046,279                              |   | 3,046,279 |
| Shares used in basic  per share computation - diluted                                                         | 3,181,690                              |   | 3,046,279 |

 

 

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

 

 

5

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

|                                                                                 |              Three Months Ended |
|--------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                                                 | **July 31, 2007**                                                                           |   | **July 31, 2006** |
|                                                                                 |                                                                                        |   |          |
| Cash flows from operating  activities:                                               |                                                                                        |   |   |
|   Net income (loss)                                                             | $17,366                                                                                     |   | ($363,833) |
| Adjustments to reconcile  net income (loss)                                          |                                                                                        |   |   |
|   to net cash used in  operating activities:                                    |                                                                                        |   |   |
|   Equity in earnings of  unconsolidated subsidiaries                            | (218,057)                                                                                   |   | (222,059) |
|   Minority interest in  income of consolidated joint ventures                   | 285,529                                                                                     |   | 0 |
|   Depreciation                                                                  | 344,023                                                                                     |   | 219,497 |
|   Amortization                                                                  | 52,792                                                                                      |   | 14,491 |
|   Deferred income taxes                                                         | (42,000)                                                                                    |   | (78,000) |
|   (Gain) loss on  derivatives                                                   | (494,638)                                                                                   |   | 89,200 |
|                                                                                 |                                                                                        |   |   |
|                                                                                 |                                                                                        |   |   |
| (Increase) decrease in:                                                              |                                                                                        |   |   |
|   Accounts and  reimbursements receivable, net                                  | (1,899,215)                                                                                 |   | (233,907) |
|   Deposits, escrows,  prepaid and deferred expenses                             | 354,281                                                                                     |   | (552,596) |
|                                                                                 |                                                                                        |   |   |
| Increase (decrease) in:                                                              |                                                                                        |   |   |
|   Accrued liabilities                                                           | (268,946)                                                                                   |   | (1,438,966) |
|   Deferred income                                                               | (8,518)                                                                                     |   | (61,828) |
|   Accounts payable                                                              | (336,142)                                                                                   |   | 1,582,953 |
|                                                                                 |                                                                                        |   |   |
| Net cash used in operating  activities                                               | (2,213,525)                                                                                 |   | (1,045,048) |
|                                                                                 |                                                                                        |   |   |
| Cash flows from investing  activities:                                               |                                                                                        |   |   |
|   Distributions from  affiliates, net                                           | 134,629                                                                                     |   | 253,096 |
|   Purchase of marketable  securities                                            | (437,173)                                                                                   |   | (329,839) |
|   Purchase of equipment and  leasehold improvements                             | (31,161)                                                                                    |   | (5,609) |
|   Additions to developed  properties and properties under 

  construction | (660,217)                                                                                   |   | (3,821,646) |
|                                                                                 |                                                                                        |   |   |
| Net cash used in investing  activities                                               | (993,922)                                                                                   |   | (3,903,998) |

 

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

 

| 6 |
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| **FIRST HARTFORD CORPORATION  AND SUBSIDIARIES**                             |
|------------------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**                          |
| (Unaudited)                                                                  |
| (continued)                                                                  |
| ** **                                                                   |
|                                                                         | **Three Months Ended** |
|                                                                         | **July 31, 2007** |   | **July 31, 2006** |
|                                                                         |   |   |   |
|                                                                         |   |   |   |
| Cash flows from financing  activities:                                       |   |   |   |
|                                                                         |   |   |   |
|    Dividend paid                                                   | 0 |   | (304,898) |
|                                                                         |   |   |   |
| Proceeds from:                                                               |   |   |   |
|   Construction loan payable                                             | 1,160,765 |   | 2,282,972 |
|   Mortgages payable                                                     | 447,820 |   | 823,581 |
|    Notes payable                                                   | 500,000 |   | 0 |
|    Advances from related  parties and affiliated partnerships, net | 24,109 |   | 0 |
|                                                                         |   |   |   |
| Principal payments on:                                                       |   |   |   |
|   Mortgage payable                                                      | (164,086) |   | (75,619) |
|   Notes payable                                                         | (1,489) |   | 0 |
|   Advances to related  parties and affiliates, net                      | 0 |   | (15,053) |
|                                                                         |   |   |   |
| Net cash provided by  financing activities                                   | 1,967,119 |   | 2,710,983 |
|                                                                         |   |   |   |
| Net decrease in cash and  cash equivalents                                   | (1,240,328) |   | (2,238,063) |
|                                                                         |   |   |   |
| Cash and cash equivalents,  beginning of period                              | 2,585,076 |   | 5,144,743 |
|                                                                         |   |   |   |
| Cash and cash equivalents,  end of period                                    | $1,344,748 |   | $2,906,680 |
|                                                                         |   |   |   |
| Cash paid during the period  for interest                                    | $745,503 |   | $459,813 |
| Cash paid during the period  for income taxes                                | $55,184 |   | $69,112 |

**                                                              **

** **

 

The accompanying notes are an integral part of these condensed consolidatedfinancial statements

 

 

7

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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

** **

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

 

Descriptionof Business

 

First Hartford Corporation was incorporated in Maine in 1909, and is engaged in the purchase, development, ownership, management and saleof 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 generallyaccepted accounting principles for complete financial statements. In theopinion of management, all adjustments (consisting of normal recurring accrualsand adjustments to previously established loss provisions) considered necessaryfor a fair presentation have been included. Operating results for the threemonths ended July 31, 2007 are not necessarily indicative of the results thatmay be expected for the year ending April 30, 2008. For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company’s annual report on Form 10-K for the fiscal year ended April 30,2007.

 

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

 

Estimates

 

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

 

Significant Accounting Policies

 

There has been no change in the Company's significantaccounting policies from those contained in our Annual Report on Form 10-K forthe year ended April 30, 2007, except as discussed in Note 4.

 

 

 

| 8 |
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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

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

 

LossPer Common Share

 

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

** **

**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 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 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.  The constructionloan is based on the 30 day LIBOR rate plus 1.25% and effectively converts to a24 1⁄2 year self liquidating mortgage starting January 1, 2007.  The Company hasentered into a swap contract with the bank which effectively converts themortgage to a rate of 6.41%.

 

The Company recognized a gain of $494,638 onderivatives in the current quarter. The aggregate fair value of the Company’sswap contracts were in a favorable position of approximately $485,973 as ofJuly 31, 2007 and are recorded as an asset in the accompanying condensedconsolidated balance sheet.

 

**3.         Investment In Affiliated Partnerships**

 

Investments in entities in which the Company is notthe general partner and has less than a 20% interest are carried at cost. Distributions received from those entities are included in income. Distributions received in excess of the Company’s proportionate share ofcapital are applied as a reduction of the cost of the investments.  Investmentsin entities in which the Company has a 20-50% interest but does not  controlare 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 Dover Township, NJ.  Although the Company exercises some influence, the Company does notcontrol the operating and financial policies of these partnerships and,therefore, these partnership are not consolidated.

 

 

| 9 |
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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

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

 

OPERATING RESULTS OF NONCONSOLIDATED 50% OWNEDSUBSIDIARIES

 

|                                    | Three Months Ended 

July 31     |
|-----------------------------------------|----------------------------------|
|                                    | 2007                             | 2006 |
| Cranston Parkade, LLC                   |                             |   |
|       Revenues | $1,220,175                       | $1,327,420 |
|       Expenses |      993,901 |   1,051,688 |
| Net Profit                              | $   226,274            | $  275,732 |
| Dover Parkade, LLC                      |                             |   |
|      Revenues       | $  650,464                  | $ 660,222 |
|      Expenses       |     475,542       |    510,353 |
| Net Profit                              | $   174,922            | $ 149,869 |

** **

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, 2007 and April 30, 2007, $5,675,830 and $5,759,255, respectively, is included inother liabilities in the consolidated balance sheets representing the carryingvalue of these investments.

 

**4.         IncomeTaxes**

 

The Company has adopted the provisions of FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes – anInterpretation of FASB Statement No. 109”, or FIN 48, on May 1, 2007. TheCompany did not have any unrecognized tax benefits and there was no effect onthe financial condition or results of operations as a result of implementing FIN48.

 

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subjectto U.S. federal tax examinations for years before May 1, 2004. Statejurisdictions could remain subject to examination for longer periods. TheCompany does have one issue with the Internal Revenue Service which it believesis not an uncertain tax position. The Service contends that a 75% ownedsubsidiary should be treated as a C Corp., although the Service has not suppliedthe Company with any documentation to support their determination. The Companytreats it as a partnership. If the Service prevails, the net operating losscarry forward of the Company will be reduced by approximately $291,000 for theyear ended April 30, 2006.

 

The Company’s policy is to recognize interest andpenalties accrued on any unrecognized tax benefits as a component of income taxexpense. As of the date of adoption of FIN 48, we did not have any accruedinterest or penalties associated with any unrecognized tax benefits, nor wasany interest expense recognized during the quarter.

 

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 would reduce such amounts through a charge to incomein the period in which that determination is made. Conversely, if the Companywere to determine that it would be able to realize its deferred tax assets inthe future in excess of the net carrying amounts, it woulddecrease the recorded valuation allowance through an increase to income in theperiod in which that determination is made.

 

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# FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**4.         Income Taxes (continued)**

 

As of July 31, 2007, the Company has concluded that itis more likely than not that the Company will realize $2,030,000 in deferredtax assets. Accordingly, the Company has recognized a deferred tax benefit of$42,000 for the three months ended July 31, 2007.

 

**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).  The Company expenses its share-based compensationunder 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 was expensedin prior fiscal years.  

 

During the three months ended July 31, 2007, nooptions were granted or exercised and no compensation expense has beenrecognized.  The aggregate intrinsic value of outstanding options as of July31, 2007 was approximately $325,000.

 

**6.         RecentAccounting Pronouncements**

 

In September 2006, the FASB issued SFAS No. 157, “FairValue Measurements,” which is applicable for fiscal years beginning afterNovember 15, 2007. SFAS No. 157 defines fair value, establishes a framework formeasuring fair value in GAAP and expands disclosures about fair valuemeasurements. SFAS No. 157 applies under other accounting pronouncements thatrequire or permit fair value measurements, the FASB having previously concludedin those accounting pronouncements that fair value is the relevant measurementattribute. Although SFAS No. 157 does not require any new fair valuemeasurements, its application may, for some entities, change current practicesrelated to the definition of fair value, the methods used to measure fair valueand the expanded disclosures about fair value measurements. The Company iscurrently evaluating the impact that the adoption of SFAS No. 157 may have andhas not yet determined its impact on the financial statements. 

 

In February 2007, the FASB issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159creates a “fair value option” under which an entity may elect to record certainfinancial assets or liabilities at fair value upon their initial recognition.The Company would recognize subsequent changes in fair value in earnings asthose changes occur. The Company would make the election of the fair valueoption on a contract-by contract basis, supported by the concurrentdocumentation or a preexisting documented policy. SFAS No. 159 requires anentity to separately disclose the fair value of these items on the balancesheet or in the footnotes to the financial statements and to provideinformation that would allow the financials statement user to understand theimpact on earnings from changes in the fair value. SFAS No. 159 is effectivefor the Company beginning with the fiscal year ending April 30, 2009. TheCompany is currently evaluating the impact that the adoption of SFAS No. 159may have and has not yet determined its impact on the financial statements. 

 

 

 

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**FIRST HARTFORDCORPORATION AND SUBSIDIARIES**

 

**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 howvarious factors including changes in general economic conditions, cost ofmaterials, interest rates and availability of funds, and the nature ofcompetition and relationships with key customers may affect the Company’sperformance.  The Company undertakes no obligation to update publicly anyforward-looking statements, whether as a result of new information, futureevents or other.

###  

Critical Accounting Policies

 

Thediscussion and analysis of financial condition and results of operations isbased upon the condensed consolidated financial statements contained in Item 1in this Quarterly Report.  The condensed consolidated financial statementsinclude the accounts of the Company and its controlled affiliates.  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates 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 Item7 of our Annual Report on Form 10-K for the year ended April 30, 2007 under thesubheading "Critical Accounting Policies and Estimates" is stillconsidered current and applicable, and is hereby incorporated into thisQuarterly Report on Form 10-Q.

 

### Results of Operations

 

Rental income increasedapproximately $763,000 in 2007.  Of that amount, $415,000 was from the additionof Rockland Apartments, LLC, $178,000 was June and July rent for the CranstonPolice Department, and the majority of the balance is from new tenants in the North Adams   Shopping Center.  Rental expenses reflect a corresponding increase for theseitems.  

 

On June 1, 2007 the CranstonPolice Department has taken possession and commenced rental payments on abuilding constructed by the Company for C.P. Associates (a 50% owned subsidiaryof the Company).  Our original understanding of the lease was that the requiredtreatment was going to be a capital lease (treated as a sale).  A more carefulreading and comprehension of the lease resulted in treatment as an operatinglease under SFAS 13.

 

Service income increasedapproximately $394,000.  Two CVS closings amounted to $350,000 of thatincrease.  There were no CVS closings in the corresponding three month periodlast year.

** **

**  **

** **

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**FIRST HARTFORDCORPORATION AND SUBSIDIARIES**

 

**Item 2.           ****MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL**

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

 

### Results of Operations (continued)

 

Other includes a $117,000 feepaid to the Company by Hartford Lubbock LP (98% owned by a Company which is100% owned by President of the Company and his wife).  This fee was for theCompany's assistance in refinancing a mortgage.

 

In North Adams, Massachusetts thearrangement with the lender dictates that until the property has income toqualify for the permanent mortgage, the cash flow will be paid to the lender inlieu of interest.  

 

For the period ended July 31,2007, in connection with this mortgage $140,000 was recorded as interest.Nothing was earned or paid for the three month period ended July 31, 2006.

 

Gains on derivatives of $494,638for the period ended July 31, 2007 compared to a loss of $89,200 for thecorresponding prior quarter, only speak to the volatility of financial marketsand not to anything the Company is doing at this time.

 

Other income of $69,852 was dueto a distribution received from a refinancing of the Hartford Lubbock LimitedPartnership.

 

Capital Resources and Liquidity

 

As reported in Form 8-K, the Company closed a constructionloan of $53,200,000 on its project in Edinburg, Texas on August 23, 2007.

 

On September 17, 2007, the Company obtained a commitmentfrom Citizens Bank for a construction loan of up to $4,750,000 to build ashopping center to include a ground lease for a super market and theconstruction of an 8,000 SF retail building. This shopping center will be in Bangor Maine. Both of the above loans required and received the guarantyof Neil H. Ellis and Elizabeth S. Ellis.

 

Although the Company has adequatecash and lines of credit for its needs, there are unknowns.

 

The two financings above areoccurring simultaneous with the collapse and related fall-out of the sub primemarket.  The effect, if any, on the Company for future financings are unknown.

 

The purchase of the shares of adissident shareholder, as discussed in Part II Item 1 of this document, isunknown as to quantity or price.  We are well aware that a purchase in excessof the value of the shares negatively impacts the remaining shareholders.

 

 

 

 

 

 

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**FIRST HARTFORDCORPORATION AND SUBSIDIARIES**

 

**Item 2.           ****MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL**

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

 

Capital Resources and Liquidity 

 

Long Term ObligationSchedule as of July 31, 2007:

 

| Contractual Obligations | Total      | Less than 1 year | 1-3 years | 3-5 years | More than 5 years |
|-------------------------|------------|------------------|-----------|-----------|-------------------|
|                    |       |             |      |      |              |
| Long-Term Debt          | 62,636,340 | 1,067,092        | 2,377,668 | 2,610,093 | 56,581,487        |
|                    |       |             |      |      |              |
| Short-Term Debt         | 10,225,841 | 10,225,841       |      |      |              |
|                    |       |             |      |      |              |
| Purchase Obligations    | 8,475,987  | 8,475,987        |      |      |              |
|                    |       |             |      |      |              |
| Tenant Allowance        | 56,000     | 56,000           |      |      |              |
|                    |       |             |      |      |              |
| Total                   | 81,394,168 | 19,824,920       | 2,377,668 | 2,610,093 | 56,581,487        |

 

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.

 
| ** **                                                                             | Maturing less   than one year | Maturing greater than one year |
|----------------------------------------------------------------------------------------|-------------------------------|-------------------------------------|
| Revolving line of credit  and Long-term debt                                           |                          |                                |
|           Amount                          | $11,292,933                   | $61,569,248                         |
|           Weighted average  interest rate | 8.11%                         | 5.47%                               |

** **

 

Included in the above isvariable rate debt of $11,321,418 and $10,013,168 for which the Company has aSwap Agreement with its bank, which effectively fixes the interest rate at6.11% and 6.41%, respectively.

** **

** **

** **

** **

** **

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**Item 4T           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, 2007.  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, ourdisclosure controls on procedures as defined in Rule 13a-15(e) may not beeffective enough to qualify under the new guidelines.  The Company does notmaintain effective controls over the financial reporting process to ensure theaccurate preparation and review of its consolidated financial statements. The2005 restatement and audit adjustments recorded in 2007 and 2006 are indicativeof a lack of effective controls over the application of generally acceptedaccounting principles commensurate with the Company’s financial reportingrequirements. Further, the Company does not have effective controls over theprocess for identifying and accumulating all required supporting information toensure the completeness and accuracy of its consolidated financial statements.Management has engaged in remediation efforts to address the materialweaknesses identified in our disclosure controls and procedures and to improveand strengthen our overall control environment, but because of new projectsmore work is necessary.  Notwithstanding weaknesses in our internal controlover financial reporting as of July 31, 2007, we believe that the consolidatedfinancial statements contained in this report present fairly our financialcondition, the results of our operations and cash flows for the fiscal yearscovered thereby in all material respects in accordance with accountingprinciples 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.

 

 

 

 

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**FIRST HARTFORDCORPORATION AND 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, 2007.

 

**Item 1A.          RISKFACTORS**

 

The discussion included inItem 1A of our Annual Report on Form 10-K for the year ended April 30, 2007under the heading "Risk Factors" is still considered current andapplicable, and is hereby incorporated into this Quarterly Report on Form10-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.

 

 

 

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**FIRST HARTFORDCORPORATION AND SUBSIDIARIES**

 

PART II          OTHER INFORMATION (continued):

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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#### 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. Ellis                           |
| September 28, 2007                                          | ______________________________             |
|           Date | NeilH. Ellis – President and          |
|                                                        | Chief Executive Officer                    |
|                                                        |                                       |
|                                                        | /s/ Stuart I. Greenwald                    |
| September 28, 2007                                          | ______________________________   |
|           Date | StuartI. Greenwald – Treasurer        |
|                                                        | and Chief Financial Officer                |

 

                                      

 

 

 

 

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