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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended Commission File No. 0-8862
April 30, 2000 ------
FIRST HARTFORD CORPORATION
--------------------------
(Exact name of registrant as
specified in its charter)
Maine 01-0185800
- ------------------------ ---------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
P.O. Box 1270, 149 Colonial Road, Manchester, Connecticut 06045-1270
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(860) 646-6555
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
1. Common Stock, per value $1 per share
The Company hereby indicates by checkmark whether it (1) has filed all reports
required to be filed by Section 11 or 10 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES |_| NO |X|
Based on the closing sales price of July 5, 2000, the aggregate market value of
the voting stock held by non-affiliates of the Company was approximately
$440,000.00.
Indicate by check mark whether the Company has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
YES |_| NO |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report: 3,089,985.
Total number of pages, including cover page 40.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
First Hartford Corporation (the "Company") which was incorporated in Maine
in 1909, is engaged in the purchase, development, ownership, management and sale
of real estate. As used herein, the term Company shall mean and refer to First
Hartford Corporation and its subsidiaries, unless the context otherwise
requires.
(b) Financial Information about Industry Segments
The Company is engaged in the purchase, development, ownership, management
and sale of real estate, therefore, segment information is not applicable.
(c) Narrative Description of Business
The Company is engaged in the acquisition, development and management of
land and properties with the ultimate goals of selling such properties when
profitable opportunities arise or obtaining rental income therefrom.
The real estate, owned and managed by the Company through various
subsidiaries, is located in Connecticut and New Jersey. Real estate is also held
under option in Rhode Island and Massachusetts. Tenants are obtained through
brokers and employed representatives of the Company, by means of newspaper
advertisements, inquiries by potential tenants at the Company's on-site offices,
and direct contacts with retail stores, banks and other potential commercial
tenants.
The real estate business of the Company is diversified in terms of
geographical location, type of commercial property and form of ownership or
management. The commercial real estate business is not normally thought of as
being divided into significant separate classes of products or services. For the
past four years development has been exclusively on retail.
Operation of the Company's real estate business requires construction
materials and suitable land. Construction materials can be obtained from many
sources, but supplies and construction are subject to strikes and delivery
delays which can greatly increase the cost of a project.
Commercial properties are available in the states where the Company is
qualified to do business, but all real property, is by its nature finite and
subject to fluctuations in cost
1
and to unpredictable changes in local zoning ordinances and to
restrictions on planned construction.
All phases of the real estate business are inherently speculative and
intensely competitive with many enterprises, both large and small, engaged in
businesses similar to the Company's throughout the United States. The success of
the Company, to a large extent, depends upon factors which may be beyond the
control of management. Some of these factors are variable construction costs,
the mortgage market, real estate taxes, income tax laws, government regulations,
the commercial rental market and the economy. The ability of the Company to meet
its debt service obligations and to operate profitably is also dependent on its
ability to attract tenants and to compete successfully with the numerous other
commercial properties available to prospective tenants. The ability to attract
tenants is dependent upon the changing character of the areas in which the
Company's properties are located, the rate of new construction in those areas
and the extent of present and future competition in those areas. The Company's
holdings are diversified both geographically and in use and types of occupancy.
The Company believes that it thereby increases stability and diminishes the
affect of possible adverse economic conditions in any particular geographic or
economic area, but the Company recognizes that diversification by itself will
not assure protection against risk and possible loss.
The real estate business does not experience "backlogs" as that term is
generally understood, nor is it seasonal.
To the Company's knowledge, its real estate business is not dependent upon
a single customer or a few customers.
The Company has no material patent, license, franchise or concession.
Research and development is not a part of the Company's business.
The Company anticipates that compliance with any applicable Federal, state
or local provisions regulating discharges into the environment or otherwise
relating to the protection of the environment will not have a material effect on
its capital expenditures, earnings or competitive position.
At April 30, 2000, the Company employed approximately 21 persons.
(d) Financial Information About Foreign And Domestic Operations and Export
Sales
2
The Company and its subsidiaries do not engage in operations in foreign
countries. No material part of their sales or revenues is derived from customers
in foreign countries.
ITEM 2. DESCRIPTION OF PROPERTY
The following table shows the location, general character and
ownership status of the materially important physical properties of the Company
and its subsidiaries:
Available Space
or Facilities Ownership
Location Use and Major Tenants Status
- -------- --- ----------------- ------
Commercial Properties:
- ----------------------
Lubbock, Strip 162,404 sq. ft. Owned by a partnership
Texas Shopping Walmart 51% in which a subsidiary of the
Center TJ Maxx 15% Registrant is the general
partner with a 1% interest.
Plainfield, Strip 60,150 sq. ft. Owned by a subsidiary of the
Connecticut Shopping Big Y 64% Registrant. There is an
Center CVS 14% outside equity interest in
connection with the financing
Putnam, Shopping 52,877 sq. ft. Owned by a subsidiary of the
CT Center T. J. Maxx 50% Registrant and part of a
Shopping Center complex.
Mt. Olive, Shopping 94,714 sq. ft. Owned by a subsidiary of the
New Jersey Center A & P 59% Registrant.
Dover Township Shopping 97,524 sq. ft. 50% owned by a subsidiary
New Jersey Center Grand Union 57% of the Registrant. (Under
Dollar Tree 10% construction.)
Plus Outparcels
3
ITEM 3. LEGAL PROCEEDINGS
Waterville Industries, Inc. v. First Hartford Corporation and Finance Authority
of Maine, CV-89-311 (Kennebec County Superior Court, Maine) and 89-0209-B
(United States district Court, District of Maine). Actions commenced July 10,
1989.
These two lawsuits allege violation of environmental laws in connection
with property located in Waterville, Maine. Waterville Industries is the current
owner of property located in Waterville, Maine, which includes two waste
treatment lagoons; the Company, through an affiliate, formerly owned the
property, and the Maine Guarantee Authority, predecessor to the Financial
Authority of Maine (FAME) also owned the property prior to its transfer to
Waterville Industries. This lawsuit has been inactive for several years and the
Company does not believe that it will be continued.
First Hartford Corporation Pension Plan & Trust, on behalf of itself, Dollar Dry
Dock Bank of New York and all other similarly situated shareholders of Dollar
Dry Dock Bank of New York, Plaintiff-Appellant v. United States, Defendant -
Appellant No. 99-5032 (United States Court of Appeals for the Federal Circuit).
This is an appeal from the United States Court of Federal Claims in 96-CV-801,
Senior Judge Robert J. York. This was a suit to recover damages sustained by
Dollar Dry Dock Bank of New York, ("Dollar") and its shareholders resulting from
the United States abrogation and repudiation of its contractual obligations to
the institution. The Federal Deposit Insurance Corporation ("FDIC") breached the
Amended and Restated Assistance Agreement ("Agreement") between the FDIC and
Dollar. The Agreement gave Dollar the right to treat certain identified
supervisory goodwill as a regulatory asset to be amortized over eighteen years.
On December 19, 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). As interpreted by the FDIC, FDICIA
prohibited inclusion of supervisory goodwill in calculations of a bank's
regulatory capital. Within weeks after enactment of the FDICIA, the FDIC
recommended that the New York State Superintendent of Banks seize Dollar and
simultaneously appoint FDIC as receiver of Dollar even though Dollar's liquidity
was strong and its deposit base steady. The loss incurred by the First Hartford
Pension Plan & Trust was approximately $1,000,000 which was reimbursed by the
Company. This suit against the FDIC was dismissed by a Federal Court on November
20, 1998, but reinstated by a Federal Appeals Court on October 19, 1999.
OTHER PROCEEDINGS
For proceedings involving officers and directors, see Item 10(f). on page
28 .
The Company is also involved in other legal proceedings which have arisen
during the normal course of its business,
4
including disputes over tax assessments, commercial contracts, lease agreements,
construction contracts and personal injuries, but the Company does not believe
that any of these proceedings will have a material impact on its consolidated
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The last meeting of security holders was held on February 13, 1986. The
Company did not solicit proxies and the Board of Directors as previously
reported were re-elected in its entirety:
Neil H. Ellis
Leonard E. Seader (Deceased August 30, 1997)
Stuart Greenwald
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock, $1 par value, is traded over-the- counter. Any
bids would be contained in the National Daily Quotation Service of the National
Association of Securities Dealers (pink sheets).
The Company has paid no cash dividends in the last five years.
Small sales of the common stock have occurred from time to time, we
believe the range to be 1/8 to 1/2.
The number of shareholders of record for the Company's common stock as of
April 30, 2000, is 929.
5
ITEM 6. SELECTED FINANCIAL DATA
For the Years Ended April 30, 2000, 1999, 1998, 1997 and 1996
The selected financial data set forth below for the years ended April 30,
2000, 1999, 1998, 1997 and 1996 are derived from the Company's financial
statements. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
included in Item 7 and "Financial Statements and Supplementary Data" included in
Item 8 which are incorporated therein by reference.
(Unaudited) (Unaudited) (Unaudited)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Revenues, net $ 3,904,267 $ 2,864,744 $ 26,096,474 $ 16,447,667 $ 8,531,021
Net Income (Loss) (906,170) (507,501) 9,160,515 480,655 2,169,856
Weighted Average Number
of Shares Outstanding 3,089,985 3,089,985 3,089,985 3,089,985 3,089,985
Income (loss)per Share $ (.29) $ (.16) $ 2.96 $ .16 $ .70
============ ============ ============ ============ ============
Balance Sheet Data
Properties under Construction
and Investment in
Undeveloped
Properties -0- $ 11,641,378 $ 2,948,678 $ 1,104,498 $ 5,602,287
Real Estate & Equipment Net 19,192,130 6,555,321 5,269,443 10,974,977 11,404,208
Total Assets 25,122,992 22,876,192 9,788,054 14,415,518 21,159,309
Construction Loans, Notes,
Mortgages Payable and
Finance Obligations 25,729,301 21,829,694 10,147,730 20,091,162 24,692,576
Accounts Payable and Accrued
Liabilities 3,019,427 3,740,021 3,152,503 10,832,085 12,381,880
Shareholders' Deficit $ (5,434,317) $ (4,528,147) $ (4,020,646) $(13,181,161) $(13,661,816)
============================================================================
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Result of Operations
The year ended April 30, 2000 produced a loss of $906,170 or (.29) per
share. This result is comparable to a 1999 loss of $507,501 (.16) net of
non-recurring income of $480,247, .16 per share. Rental income has increased
160% from the year ended April 30, 1999 due mostly from tenants taking occupancy
of stores in our Mt. Olive shopping center. This amount will rise slightly in
the next year. Expenses have risen in line with the rental income, the most
obvious of which is interest. Unfortunately some interest is based upon index
which have risen as the Federal Reserve has increased short term rates.
The year ended April 30, 1998 is not easily comparable to the current
period or the period ended April 30, 1999 because it contains gains from the
sale of Real Estate of $12,696,700 as well as non-recurring gains of $10,610,432
from mortgage transactions. On the expense side there were costs of the
settlement with the Pension Benefit Guarantee Corp. and related legal expenses,
the total cost of which was approximately one million dollars. There were also
substantial rental income and expenses resulting in operating losses.
Capital Resources and Liquidity
In the recent years, the Company has pursued an aggressive path to end
litigation and pay down its debt. Management believes both of those objectives
were met, as there is no material litigation currently on the horizon and debt
has been reduced as follows:
Year ended 1998 Increase (Decrease)
Loans, Notes, Mortgages, etc. $(9,943,000)
Accounts Payable & Accrued Liabilities $ (721,000)
Year ended 1999
Loans, Notes, Mortgages, etc. $11,682,000
Accounts Payable & Accrued Liabilities $ 588,000
Year ended 2000
Loans, Notes, Mortgages, etc. $ 3,900,000
Accounts Payable & Accrued Liabilities $ (721,000)
7
For the years ended April 30, 2000 and April 30, 1999, property assets of
new developments increased by $1,375,000 and $11,602,000 causing almost all of
the increase in the 2000 and 1999 liabilities. To achieve the repayment of debt
from prior years, virtually all of our partnership interests and most of our
developed properties had been sold. The Company is currently on a path to
attempt to rebuild its asset base. Shopping centers have been built in Putnam,
Connecticut and Mount Olive, New Jersey. A Joint Venture (50%) shopping center
is being built by the Company and is almost complete. In the year ended April
30, 2001, the Company expects to begin with two new centers. One or both will be
with Joint Venture partners.
Capital resource and liquidity have always been a major impediment of the
Company. Reputation, industry contacts and capital resources are the key
elements of the real estate development business. Management has continued to
explore new lenders and believes we will continue to find capital resources at
reasonable rates. Cash flow is managed on a daily basis through tight cash
management and the Company believes that will be adequate. In the event that it
is not, the Company will seek to bring a partner into one of the existing
properties or an outright sale.
8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data begin on the following page.
I N D E X
Pages
-----
Independent Auditors' Report 10
Consolidated Balance Sheets - April 30, 2000 and 1999 11-12
Consolidated Statements of Operations
April 30, 2000, 1999 and 1998 13
Consolidated Statements of Shareholders' Deficit
for the Years Ended April 30, 2000, 1999 and 1998 14
Consolidated Statement of Cash Flows for the Years Ended
April 30, 2000, 1999 and 1998 15-16
Notes to Consolidated Financial Statements 17-26
There are no Supplementary Data Schedules necessary.
Schedule IX Short Term Borrowings 36
Schedule XI Real Estate and Accumulated Depreciation 37
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As of January 1999, the Company has engaged Kostin, Ruffkess Company, LLC
as accountants. The Company has filed a Form 8-K with the Commission reflecting
the engagement of accountants. There are no disagreements of any matters of
accounting principles or practices or financial statement disclosure and none
are contemplated.
9
[LOGO] [LETTERHEAD OF KOSTIN RUFFKESS & COMPANY, LLC]
To The Shareholders of
First Hartford Corporation and Subsidiaries
Manchester, Connecticut
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of First Hartford
Corporation and Subsidiaries as of April 30, 2000 and 1999, and the related
consolidated statements of operations, shareholders' deficit, and cash flows,
and the related schedules listed in Item 14(a)(2) of the annual report on Form
10-K for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and related schedules based
on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements and
related schedules are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements and related schedules. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Hartford
Corporation and Subsidiaries as of April 30, 2000 and 1999, and the results of
its consolidated operations and consolidated cash flows for the years then
ended, in conformity with generally accepted accounting principles. Further, it
is our opinion that the schedules referred to above present fairly, in all
material respects, the information set forth therein in compliance with the
applicable accounting regulation of the Securities and Exchange Commission.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency, which raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters are also described in Note 9. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Kostin, Ruffkess & Company, LLC
West Hartford, Connecticut
July 7, 2000
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND 1999
ASSETS
2000 1999
---- ----
Real estate and equipment:
Developed properties $20,374,092 $ 7,379,545
Equipment and leasehold improvements 121,967 117,311
----------- -----------
20,496,059 7,496,856
Less accumulated depreciation
and amortization 1,303,929 941,535
----------- -----------
19,192,130 6,555,321
Properties under construction and
investment in undeveloped properties -0- 11,641,378
----------- -----------
19,192,130 18,196,699
Cash 146,405 106,017
Accounts and notes receivable, less allowance
for doubtful accounts of $96,000 in 2000
And $46,000 in 1999 165,189 69,953
Deposits, escrows and prepaid and
deferred expenses 1,111,735 1,167,942
Due from related parties and affiliates 2,807,533 1,729,140
Deferred Tax Assets (net of valuation
allowance of $1,700,000 in 2000 and
$1,606,442 in 1999) 1,700,000 1,606,441
----------- -----------
$25,122,992 $22,876,192
=========== ===========
(Continued)
The accompanying notes are an integral part of the consolidated
financial statements.
11
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND 1999
LIABILITIES AND STOCKHOLDERS' DEFICIT
2000 1999
---- ----
Liabilities:
Mortgages and notes payable:
Construction Loan Payable $ -0- $ 10,161,257
Mortgages payable 20,228,142 7,849,778
Notes Payable - Other 5,501,159 3,818,659
------------ ------------
25,729,301 21,829,694
Accounts payable 2,277,685 3,101,020
Accrued liabilities 741,742 639,001
Due to related parties and affiliates 1,808,581 1,834,624
------------ ------------
30,557,309 27,404,339
Commitments and contingencies
Shareholders' deficit
Common stock, $1 par; Authorized 6,000,000
shares; Issued 3,322,213 shares 3,322,213 3,322,213
Capital in excess of par 4,857,645 4,857,645
Deficit (11,546,051) (10,639,881)
------------ ------------
(3,366,193) $ (2,460,023)
Less 232,228 shares of common
stock held in treasury, at cost 2,068,124 2,068,124
------------ ------------
(5,434,317) (4,528,147)
------------ ------------
$ 25,122,992 $ 22,876,192
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
12
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Unaudited)
2000 1999 1998
---- ---- ----
Revenues:
Sale of real estate $ 28,647 $ 472,000 $ 12,696,700
Construction 295,073 200,179 197,081
Rental 3,044,518 1,167,616 2,261,985
Other 536,029 544,702 330,276
Non-Recurring Items -0- 480,247 10,610,432
------------ ------------ ------------
3,904,267 2,864,744 26,096,474
------------ ------------ ------------
Cost and expenses:
Cost of sales,
real estate 12,678 464,005 7,909,043
Construction 176,025 113,483 133,020
Operating 1,070,988 878,323 2,398,474
Interest 1,881,884 761,440 1,254,142
Depreciation and
amortization 388,703 204,655 425,775
Selling, general and
administrative 984,569 926,523 1,029,945
Property taxes 389,149 109 458 71,510
------------ ------------ ------------
4,903,996 3,457,887 13,221,909
------------ ------------ ------------
Income (loss) before income
taxes provision (benefit) (999,729) (593,143) 12,874,565
Income taxes provision
(benefit) (93,559) (85,642) 3,714,050
------------ ------------ ------------
Net income (loss) (906,170) $ (507,501) $ 9,160,515
============ ============ ============
Basic Earning per share $ (.29) $ (0.16) $ 2.96
============ ============ ============
Weighted average number of
shares outstanding 3,089,985 3,089,985 3,089,985
============ ============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
13
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED APRIL 30, 2000, 1999 AND 1998
Capital
in excess Treasury
Common stock of par Deficit stock Total
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1997 (Unaudited) 3,322,213 4,857,645 (19,292,895) (2,068,124) (13,181,161)
Net Income, as restated for 1998 -- -- 9,160,515 -- 9,160,515
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1998 (Unaudited) 3,322,213 4,857,645 (10,132,380) (2,068,124) (4,020,646)
Net Loss -- -- (507,501) -- (507,501)
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1999 3,322,213 4,857,645 (10,639,881) (2,068,124) (4,528,147)
------------ ------------ ------------ ------------ ------------
Net Loss -0- -0- (906,170) -0- (906,170)
------------ ------------ ------------ ------------ ------------
Balance, April 30, 2000 $ 3,322,213 $ 4,857,645 $(11,546,051) $ (2,068,124) $ (5,434,317)
============ ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
14
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Unaudited)
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ (906,170) $ (507,501) $ 9,160,515
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation 367,394 193,595 421,302
Amortization 21,309 11,060 4,473
Deferred tax asset (93,559) 4,250 3,569,081
Forgiveness of accounts payable -0- (480,247) -0-
(Increase) decrease in:
Accounts receivable, net (95,236) 74,162 10,672
Deposits, escrows, prepaid and
deferred expenses 34,898 (421,063) 50,853
Increase (decrease) in:
Accrued liabilities 102,741 (231,831) (7,409,189)
Accounts payable (823,335) 1,299,596 (270,393)
------------ ------------ ------------
Net cash provided by (used in)
operating activities (1,391,958) (57,979) 5,537,314
------------ ------------ ------------
Cash flows from investing activities:
Purchases of equipment and leasehold
improvements (9,656) (22,410) (65,196)
Proceeds from sale of real estate net
of selling expenses -0- 420,664 7,562,594
Additions to developed properties (1,353,169) (12,139,833) (2,289,509)
------------ ------------ ------------
Net cash provided by (used in)
investing activities: $ (1,362,825) $(11,741,579) $ 5,207,889
------------ ------------ ------------
The accompanying notes are an integral part of the consolidated
financial statements.
15
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Unaudited)
2000 1999 1998
---- ---- ----
Cash flows from financing activities:
Proceeds from:
Construction Loan Payable $ 2,438,743 $ 13,960,332 $ 1,575,925
Mortgage Payable 12,600,000 3,725,000 -0-
Notes payable 1,782,500 900,000 819,046
Principal payments on:
Construction loans payable (12,600,000) (5,375,000) -0-
Mortgages payable (221,636) (593,185) (11,748,199)
Notes payable (100,000) (935,183) (1,258,862)
Proceeds from notes payable -0- -0- 668,659
Advances to/from related parties and
affiliated partnerships (1,104,436) 219,493 (1,013,802)
------------ ------------ ------------
Net cash provided by (used in )
financing activities 2,795,171 11,901,457 (10,957,233)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 40,388 101,899 (212,030)
Cash and cash equivalents, beginning of year 106,017 4,118 216,148
------------ ------------ ------------
Cash and cash equivalents, end of year 146,405 $ 106,017 $ 4,118
============ ============ ============
Supplemental data:
Cash paid during the year for interest 1,784,459 $ 720,090 $ 477,144
============ ============ ============
Cash paid during the year for taxes $ 72,243 $ 126,370 $ 114,388
============ ============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
16
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
1. Summary of Significant accounting policies:
Description of business:
First Hartford Corporation (the Company) was incorporated in Maine in
1909, and is engaged in the purchase, development, ownership, management and
sale of real estate. The Company extends credit to companies/tenants throughout
the United States.
Principles of consolidation:
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries, including partnerships in which the Company
is a majority owner. All significant intercompany transactions and accounts have
been eliminated in the consolidated financial statements, including construction
revenues and costs of development for the Company's own use (rental/future
sale). The Company records its investment in partnerships in which it is not a
majority owner on the equity method.
Financial Statement Presentation:
Because the Company is engaged in the development and sale of real estate
in various stages of construction, the operating cycle may extend beyond one
year. Accordingly, following the usual practice of the real estate industry, the
accompanying consolidated balance sheets are unclassified.
Statements of Cash Flows:
For purposes of the statements of cash flows, the Company considers all
highly liquid securities purchased with a maturity of 3 months or less to be
cash equivalents.
Real Estate and Equipment:
Properties under construction and investment in undeveloped properties,
developed properties and equipment and leasehold improvements are recorded at
the lower of cost or net realizable value.
17
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
1. Summary of significant accounting policies (continued):
Real Estate and Equipment (continued):
Properties under construction amounted to $-0- and $11,641,378 at April
30, 2000 and 1999.
Following accounting practices of the real estate industry, interest and
property taxes are capitalized for those projects which have a current
development plan. In addition, properties under construction include revenue and
operating expenses through substantial completion of the property. When property
is substantially completed, the costs of property constructed for the Company's
own use are transferred to developed properties and depreciation commences.
Interest incurred at April 30, 2000 was $2,017,346 of which $135,462 was
capitalized. Interest incurred at April 30, 1999 was $1,176,751 of which
$415,311 was capitalized. Interest incurred at April 30, 1998 was $1,374,572 of
which $120,430 was capitalized. Property Taxes capitalized at April 30, 1999 and
1998 was $44,539 and $-0- respectively.
Depreciation is provided using the straight line method for financial
reporting purposes based on the following estimated useful lives:
Description Range in Years
Developed properties 40
Equipment and leasehold
improvements 3 - 10
Leasing commissions and financing costs (included in deposits, escrows,
and prepaid and deferred expenses in the accompanying balance sheets) are
amortized using the straight-line method over the terms of the related leases
and mortgages, respectively. In addition, the Company capitalizes predevelopment
costs relating to potential new development projects. If the project is
abandoned, the related costs will be expensed.
Maintenance and repairs are charged to operations as incurred; renewals
and betterments are capitalized.
The cost of assets retired or otherwise disposed of and the related
accumulated depreciation is eliminated from the accounts. Income or loss
resulting from the disposal of properties and equipment is included in the
consolidated statements of operations.
18
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
1. Summary of significant accounting policies (continued):
Revenue recognition:
Since the Registrant is primarily involved in development for its own use
(rental/future sale), construction revenue is recorded only upon sale of the
property built for sale to third parties. Revenues from projects built for third
parties are recognized on the percentage-of-completion method of accounting
based on costs incurred to date in relation to total actual costs and estimated
costs to complete. Revisions in costs and profit estimates are reflected in
operations during the accounting period in which the facts become known. The
Registrant provides for estimated losses on contracts in the year such losses
become known. There are no properties built for sale to third parties during the
years ended April 30, 2000, 1999 and 1998.
Rental revenues are recognized as income under the operating method as the
rentals become due. Other income includes management and service fees and
interest income which is recognized over the period in which the service is
provided or the interest is earned.
Off Balance Sheet Risk
During the years ended April 30, 2000 and 1999, the Company had an amount
in excess of $100,000 in a single bank. Amounts over $100,000 are not insured by
the Federal Deposit Insurance Corporation. These balances fluctuate greatly
during the year and can exceed this $100,000 limit. Management regularly
monitors the financial institution, together with its cash balances, and tries
to keep this potential risk to a minimum.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and the
disclosure of contingent assets and liabilities as of the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
19
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
2. Construction loans, mortgages, and notes payable:
2000 1999
---- ----
Construction Loans and
Mortgage notes ranging from 6.625%
to 8.875%. Maturities are at
various dates through 2028.
The loans are secured by the
respective real estate and
guaranteed by the President of
the Company. $20,228,142 $18,011,035
Notes payable, at interest rates
of 1% to 1 1/2% over the prevailing
prime rate and fixed rate of
6% maturing at various dates or
demand. The loans are unsecured
and guaranteed by the President
of the Company. 5,501,159 3,818,659
----------- -----------
$25,729,301 $21,829,694
=========== ===========
Aggregate principal payments due on the above debt during the next five
years are as follows:
Year Ended April 30
-------------------
2001 $ 1,972,816
2002 458,747
2003 489,159
2004 522,174
2005 558,016
Included in notes payable are $2,250,000 of non-interest bearing notes to
an affiliate with no certain date of payment.
3. Pledge of stock of subsidiaries:
During the past ten years the Company has not been able to obtain
financing (secured or unsecured) without the personal guarantees of Neil Ellis,
the president of the Company. To some degree, the Registrant recently has been
able to obtain financing without that guarantee but it continues to be a
necessary component to most loans. In the past, we have disclosed stock pledges
of subsidiaries to protect Mr. Ellis from personal losses due to his guarantees.
These pledges will stay in place until his guarantees are eliminated.
20
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
4. Related party transactions:
Amounts included in revenue resulting from transactions with companies
affiliated by common ownership and/or management are as follows:
2000 1999 1998
Rental Income -- -- 72,000
Management and
service fees 376,726 351,485 49,247
Maintenance/Repairs 14,806 13,555 --
Interest income 28,160 28,160 28,152
Construction Income 116,640 -- --
--------- --------- ---------
$ 536,332 $ 393,200 $ 149,399
========= ========= =========
Amounts due to/from affiliates and related parties represent transactions
between affiliated and related entities under common ownership and/or management
in line with business transactions which generate the revenues noted above. The
Company and its subsidiaries also have received cash advances from other
entities affiliated with Neil Ellis, President of the Company and performed
services for these entities. These advances/loans are non-interest bearing and
have no specific repayment terms.
5. Accrued liabilities:
2000 1999
Accrued:
Federal income taxes $ 42,950 54,950
Taxes-other 170,883 188,494
Interest 365,098 270,978
Other 162,811 124,579
-------- --------
$741,742 $639,001
======== ========
21
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
6. Non-Recurring Items:
Income from non-recurring items are as follows:
2000 1999 1998
Gains on purchase of
mortgage -- -- 9,643,397
Forgiveness of debt -- -- 967,035
Forgiveness of
accts payable -- 480,247 --
------- ----------- -----------
$ -0- $ 480,247 $10,610,432
======= =========== ===========
In the year ended April 30, 1998, the Registrant purchased three mortgages
from a third party who won them at a HUD auction. The three properties (two
wholly owned by the Registrant through subsidiary companies and one only
partially owned) were sold to another third party. The gain represented the
difference between the amount the Registrant received from the mortgage payments
and the purchase price of the mortgages.
7. Employee Retirement Plan:
The Company had a single employer defined benefit non contributory pension
plan. As of January, 1986 the benefits of the plan have been frozen. The Pension
Benefit Guaranty Corporation (PBGC) had started to make the benefit payments to
the participants at January 1, 1994.
In June, 1997 the PBGC had become interim Trustee of the Plan and in July,
1997 notified participants that they would seek to terminate the Plan.
In January, 1997, the Company had come to settlement terms with the
Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL).
Under the settlement, the Company has given the PBGC a 10 year Note of
approximately $670,000 (6% interest payable quarterly) which is guaranteed by a
Bond of an Insurance Company. The Company has given cash to the Insurance
Company which was then invested in a zero coupon bond to yield $670,000 at
maturity.
22
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
8. Commitment and Contingencies:
In August of 1999 the Company entered into a Joint Development and
Ownership Agreement for a shopping center anchored by a Grand Union Supermarket
in Dover Township, New Jersey. The Company was responsible for the supermarket
lease, arrangement of a suitable construction loan and a not to exceed budget
for construction cost. While funds were advanced until the construction loan was
in place, reimbursements were received after loan closings (Nov. 99) or shortly
thereafter. It is not expected at this time that we will exceed the budget.
While the Company will have a minimal investment in the center it will
have a 50% interest after a $1.5 million preferred distribution (limited to
$150,000 yearly from operations) to the other member.
The Company is proposing a shopping center in Cranston, Rhode Island, in
which the Company will have a 25% interest after a third party equity investor
is identified. The loan for this center is expected to be in place at the end of
August, 2000. The Company has $600,000 invested at April 30, which is accounted
for as a receivable from an affiliate, which the Company may or may not get back
at closing.
Another project in Massachusetts will be 100% owned. At April 30, 2000
$411,000 is invested in that site.
9. Going concern:
Since the 1992 - 1994 period when the deficit in equity exceeded
$23,000,000, the Company has achieved substantial improvements that have reduced
the deficit to approximately $5,400,000. The improvements were a result of
selling properties and partnership interests. On a short term basis, it is
unrealistic to expect that the Company can continue to generate sales of any
magnitude on its existing asset base. Unless cash flow can be generated from
other services, conditions raise doubt about the Company's ability to continue
as a going concern and meet its obligations as they become due.
Management is continuing to explore new lenders and refinancing of
outstanding debt and to rebuild its asset basis through new development
projects.
23
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
10. Subsequent events
On May 18, 2000, the Company borrowed $1,575,000 from an affiliated
company owned by Neil Ellis and his wife. These funds which were borrowed by the
lending company at prime plus 1% and then borrowed by Putnam Parkade, Inc. with
interest at the same rate. As an added incentive to make this type of loan, the
lending company is to receive 95% of the operation cash flow of the Putnam
Parkade, as well as 95% of any net proceeds from the sale of the property (not
to include one undeveloped outparcel).
11. Accounting Change
In the year ended April 30, 1999, the Company retroactively applied SFAS
109 (See Note 12) to the beginning of fiscal year 1997. The adoption of SFAS 109
resulted in the recognition of $3,958,432 of net deferred tax assets. The effect
on net income for 1997 was an increase of $1,221,390 while for 1998, the
adoption decreased net income by $3,569,081.
12. Income Taxes
The Company follows the requirements of Statement Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which requires
the use of an asset and liability approach that provides for the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
24
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited)
12. Income Taxes (Cont.)
The income tax provision (benefit) comprised is the following:
2000 1999 1998
Current provision (benefit) $ -0- $ (89,892) $ 144,969
Deferred (93,559) 4,250 3,569,081
----------- ----------- -----------
$ (93,559) $ (85,642) $ 3,714,050
=========== =========== ===========
The components of the net deferred tax asset the following:
2000 1999
Tax effect of net operating
loss carryforwards $ 3,400,000 $ 3,212,883
Valuation allowance (1,700,000) (1,606,442)
----------- -----------
$(1,700,000) $ 1,606,441
=========== ===========
The Company has set up an allowance of fifty percent (50%) against the
deferred tax asset since the likelihood of realization cannot be determined.
The difference in the statutory tax rate of 34% and the Company's
effective tax rate of 10% is due to the increases in the operating loss
carryforwards offset against expiring net operating loss carryforwards.
At April 30, 2000, the Company has net operating loss carryforwards of
approximately $10,700,000. Approximately $4,700,000 expire in 2004, $1,200,000
expire in 2007, $3,600,000 expire in 2012 and $1,200,000 in 2014.
13. Leases
The Company leases commercial real estate under various operating leases
expiring in various years through 2019. The real estate available for lease have
a carrying value of $19,168,985 and accumulated depreciation of $1,205,107.
Minimum future rentals to be received on non-cancellable leases as of
April 30, 2000 for each of the next five years are as follows:
2001 $2,586,546
2002 $2,434,926
2003 $2,400,625
2004 $2,366,159
2005 $2,307,437
25
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited
14. Investments
The Company has performed services for a partnership in exchange for a one
percent general partner interest. The Partnership owns a strip shopping center
in Lubbock, Texas.
The Company is contingently liable for the satisfaction of all liabilities
of the Partnership. Summarized unaudited financial data for the Partnership as
of April 30, 1999 and 1998 is as follows:
2000 1999 1998
(Unaudited) (Unaudited) (Unaudited)
Assets $ 5,070,768 $ 5,235,522 $ 4,264,035
=========== =========== ===========
Liabilities $ 7,783,654 $ 8,011,223 $ 7,038,134
Partners' capital (2,712,886) (2,775,701) (2,774,099
----------- ----------- -----------
$ 5,070,768 $ 5,235,522 $ 4,264,035
=========== =========== ===========
Revenues $ 1,221,098 $ 1,233,758 $ 1,223,868
Expenses (1,158,384) (1,236,360) (1,094,493)
----------- ----------- -----------
Net Income $ 62,714 ($ 2,602) $ 129,375
=========== =========== ===========
The Company has entered into two joint ventures in which it has a 50%
interest. The Company is contingently liable for the satisfaction of all
liabilities for the joint ventures. Summarized financial data for the joint
ventures as of April 30, 2000 is as follows:
Dover, NJ Cranston, RI
---------- ------------
Assets $7,991,784 $1,037,120
========== ==========
Liabilities $7,991,784 $ 665,485
Member's Capital $ -- $ 371,635
---------- ----------
$7,991,784 $1,037,120
========== ==========
26
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000, 1999 AND 1998
(Information with Respect to the Years Ending April 30, 1998 in every page of
notes is unaudited
15. Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
that value:
Cash and other current assets are carried in the accompanying balance
sheet at cost, which is a reasonable estimate for their fair value. Accounts
payable, notes payable and accrued expenses are also carried at cost, which is a
reasonable estimate of their fair value.
Carrying Estimated
Amount Fair Value
Assets:
Cash $ 146,405 $ 146,405
Accounts and notes
receivable 165,189 165,189
Deposits, escrows and prepaid
and deferred expenses 1,111,735 1,111,735
Liabilities:
Accounts payable $2,277,685 $2,277,685
Accrued expenses 741,742 741,742
27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE Company
(a) Identification of Directors
The directors of the corporation, their ages and positions and the periods
during which each has served as such are as follows:
Name Age Position Period of Service
Neil H. Ellis 72 President l966 - Present
Stuart I. Greenwald 58 Treasurer/Secretary 1980 - Present
David B. Harding 55 Director 1992 - Present
There are no arrangements or understandings between any of the foregoing and any
other person pursuant to which such person was or is to be selected director or
officer.
(b) Identification of Executive Officers
The names and ages of all executive officers of the corporation, their
positions and the periods during which each has served as such are as follows:
Name Age Position Period of Service
Neil H. Ellis 72 President 1968 - Present
Stuart I. Greenwald 58 Treasurer/Secretary 1978 - Present
There are no arrangements or understandings between any of the foregoing and any
other person pursuant to which such person was or is to be selected director or
officer.
Leonard E. Seader, a director since 1973, and an officer since 1976 died on
August 30, 1997.
(c) Identification of Certain Significant Employees
There are no significant employees not already mentioned above.
(d) Family Relationships
There are no family relationships among any directors or executive
officers.
28
(e) Business Experience
1. The following is a brief description of the background of each director
or executive officer.
Mr. Ellis has been President of the Company for more than five
years. He is also President and director of Green Manor Corporation, a holding
company, owned by him and his wife.
Mr. Greenwald has been Treasurer of the Company for more than five
years and also holds the position of Secretary. He is also Secretary/Treasurer
of First Hartford Realty Corporation, a subsidiary of the Company, which
position he has held for more than five years.
Mr. Harding has been the President of Richmond Realty, LLC a Real
Estate Management Company since January, 1996. Richmond manages certain
properties of the Company as well as properties of others. Prior to that, he had
worked for the Company in the area of finance for three years.
2. Directorships
No directors hold any other directorships, except directorships in
subsidiaries of the Company and the aforementioned Green Manor Corporation and
Richmond Realty, LLC.
(f) Involvement in Certain Legal Proceedings
No director or executive officer has been involved in any of the following
legal proceedings except as noted:
1. No director or executive officer has been involved in any criminal
proceedings in the last five years.
2. Temporary or permanent injunctions concerning securities dealings or
business practices, except for SEC v. First Hartford Corporation Civil Action
No. 89-3156-NHJ (D.DC. 1989) in which the Company consented to entry of Final
Judgment of Permanent Injunction requiring the Company to file its periodic
reports with the SEC on a timely basis, specifically, its Annual Report on form
10-K for its fiscal year ended April 30, 1989 and its Quarterly Reports on form
10-Q within 120 days from entry of the Judgment on November 30, 1989.
3. Orders, judgments or decrees of State or Federal authority barring,
suspending or otherwise limiting any securities dealing or business practices or
barring association with persons engaged in such activities, except for the
action described in 3. above.
4. Any findings in a civil action or by the SEC that such person violated
any Federal or State securities law, except for the action described in 3.
above.
ITEM 11. REMUNERATION
29
There is set forth below information relating to all direct remuneration
paid by the Company during the year ended April 30, 2000 to each director and
each executive officer of the Company whose aggregate remuneration totaled
$60,000 and to all directors and officers of the Company as a group.
Name or Number of Persons Other
in Group and Capacity Salary Compensation(1)
- ------------------------- ------ ---------------
Neil H. Ellis, President $125,008
Stuart Greenwald, Treasurer $ 82,493
(1) To assist management of the Company in carrying out its
responsibility and to improve job performance, the Company
provides certain of its officers with automobiles. The Company
cannot specifically or precisely ascertain the amount of personal
benefit, if any, derived by those officers from such automobiles.
However, after reasonable inquiry, the Company has concluded that
the amount of any such personal benefit is immaterial and does
not in any event exceed $10,000 as to all officers. No provision
has therefore been made for any such benefit.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth information as of the date hereof with
respect to all persons known to the Company to be beneficial owners of more than
5% of the Company's outstanding shares of common stock:
Title Name & Address of Amount and Nature
of Beneficial Owner or of Beneficial Percent
Class Identity of Group Ownerships of Class
----- ------------------- ----------------- --------
Common Stock Neil H. Ellis 1,324,387 (l) 42.9%
43 Butternut Road
Manchester, CT 06040
(l) Includes 416,483 shares owned by a corporation which is wholly owned
by Mr. & Mrs. Ellis; 17,693 shares owned beneficially and of record by Mr.
Ellis' wife; 53,412 shares held as Trustee for his daughters in which he
disclaims beneficial ownership. Excludes 14,250 shares held as Trustee for the
Jonathan G. Ellis Leukemia Foundation (a charitable foundation).
(b) Security Ownership of Management
The following table sets forth information as of the date hereof with
respect to all shares beneficially owned by all directors and directors and
officers of the Company as a
30
group:
Title Name & Address of Amount and Nature
of Beneficial Owner or of Beneficial Percent
Class Identity of Group Ownerships of Class
----- ------------------- ----------------- --------
Common Neil H. Ellis 1,324,387 (l) 42.9%
43 Butternut Road
Manchester, CT 06040
Common All Directors 1,324,387 (l) 42.9%
and Officers
as a Group
(3 in number)
(c) Changes in Control
The Company is aware of no arrangements which may result at a subsequent
date in change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
Since the filing of the Petition for Reorganization in February of 1981,
and due to the uncertainty surrounding the financial stability of the Company,
lenders, required by the Company to finance the purchase and development of real
estate, have required the personal guarantee of Neil H. Ellis, President and
Director of the Company, on any loans that they make. As consideration for this
personal guarantee, the Company has proceeded in its real estate development by
one of two methods. The first method involves having the loans made to a
corporation owned directly by Mr. Ellis. Mr. Ellis then grants to the Company a
free option to purchase the stock of the corporation to which the loans have
been made, at the lower of cost or market value. Unless the transaction is
beneficial to the Company, it need not exercise the option. The second method
involves lending the money directly to the subsidiaries of the Company which
develop the property, and pledging to Mr. Ellis the stock of the subsidiaries
until such time as the guaranteed loans are satisfied.
The Company and its subsidiaries have received from or made cash advances
to other companies which are owned or controlled by Neil Ellis, President of the
Company. The Company has also purchased from or sold property to, as well as
performed services for these companies.
(b) Certain Business Relationships
Refer to (a) above.
31
(c) Indebtedness of Management
There is none.
(d) Transactions with Promoters
There are none.
32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
Pages
-----
(a)(1) The following financial statements are
included in Part II, Item 8:
Financial Statements:
Report of Independent Auditor 10
Consolidated Balance Sheets - April 30, 2000
and 1999 11-12
Consolidated Statements of Operations -
Years Ended April 30, 2000, 1999 and 1998 13
Consolidated Statements of Shareholders'
Deficit for the years Ended April 30, 2000,
1999 and 1998 14
Consolidated Statement of Cash Flows for the
years ended April 30, 2000, 1999 and 1998 15-16
Notes to Consolidated Financial Statements 17-26
(2) The following financial statement schedules
for the year ended April 30, 2000 are
submitted herewith:
Schedule IX - Short Term Borrowings 36
Schedule XI - Real Estate and Accumulated
Depreciation 37
All other schedules are omitted because they are not required, not
applicable, or the information is otherwise shown in the financial statements or
notes thereto.
(b) Reports on Form 8-K:
A report on Form 8-K dated January 22, 1991 was filed by the Company
reporting the bankruptcy filing of the Company's former Accountants, Laventhol
and Horwath. A report on Form 8-K dated August 4,1999 was filed by the Company
appointing Kostin, Ruffkess & Company, LLC as new accountants.
33
(c) Exhibits
Exhibit Index 32
(3) Articles of Incorporation and by-laws.
Exhibit (3) to Form 10-K for the Fiscal Year ended April 30, 1984,
Pages 1-18 of Exhibits Binder, incorporated by reference to Securities
File Number 0-8862.
(4) Instruments defining the rights of security holders, including
Indentures.
Not Applicable
(9) Voting Trust Agreement.
Not Applicable
(10) Material Contracts.
Not Applicable
(ll) Statement regarding computation of per share earnings.
See Item 6 of this report.
(12) Statement regarding computation of ratios.
Not Applicable
(13) Annual Report to Security Holders, Form 10-Q or Quarterly Report to
Security Holders.
The annual report to security holders consists of this report (Form
10-K) and the President's letter attached as Exhibit 13. 38
(18) Letter regarding change in accounting principle.
Not Applicable
(19) Previously unfiled Documents.
Not Applicable
(22) Subsidiaries of the Registrant. 39
34
(23) Published report regarding matters submitted to vote of Security
Holders.
Not Applicable
(24) Consents of experts and counsel.
Consent of Kostin, Ruffkess & Company, LLC
(25) Power of Attorney.
Not Applicable
(28) Additional Exhibits.
Not Applicable
(29) Information from Reports furnished to State Insurance Regulatory
Authorities.
Not Applicable
(d) Other Financial Statements
Not Applicable
35
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, Thereunto Duly Authorized.
Dated: July 31, 2000
FIRST HARTFORD CORPORATION
By: /s/ Neil H. Ellis
------------------------------
Neil H. Ellis
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
July 31, 2000 /s/ Neil H. Ellis
--------------------------------------
Neil H. Ellis
Principal Executive Officer
President and Director
July 31, 2000 /s/ Stuart I. Greenwald
---------------------------------------
Stuart I. Greenwald
Principal Financial Officer
Principal Accounting Officer
Secretary, Treasurer and Director
36
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
YEARS ENDED APRIL 30, 2000, 1999, 1998 AND 1997
Weighted Maximum Amount Average Amount Weighted Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate End of Interest During the During the During the
Short-Term Borrowings(1) Period Rate Period Period(2) Period(3)
- ---------------------- -------- -------- ---------- ---------- ----------
Year Ended April 30, 2000
Banks $ 2,582,500 10.01% $15,182,500 $12,038,128 8.8%
Year Ended April 30, 1999
Banks $11,061,257 8.45% $11,061,257 $ 7,517,698 8.5%
Year Ended April 30, 1998
Banks $ 2,448,756 10% $ 2,448,756 $ 1,051,097 10%
Year Ended April 30, 1997
Banks $ 150,000 9.77% $ 785,000 $ 2,531,134 9.47%
(1) Notes payable to banks represent obligations payable under credit
agreements to various banks. Borrowings are arranged on an as needed basis at
various terms.
(2) The average amount outstanding during the year represents the average
daily principal balances outstanding during the year.
(3) The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by the average
short-term borrowings.
37
First Hartford Corporation and Subsidiaries
Schedule XI
Real Estate and Accumulated Depreciation
April 30, 2000
Initial
Encumbrances Cost To Company
----------------------- ---------------------
Bldgs
Constr. Mortgage, Notes and
Statement Loans Payable Land Imp.
----- --------------- ---- ----
Developed Properties
- --------------------
Shopping Ctr
Connecticut -0- 7,835,045 582,000 6,902,672
----------- ----------- ----------- -----------
7,835,045 582,000 6,902,672
Shopping Center - NJ -0- $13,090,594 $ 1,992,417 $10,897,003
----------- ----------- ----------- -----------
13,090,594 1,992,417 10,897,003
----------- ----------- -----------
-0- $20,925,639 $ 2,574,417 $17,799,675
=========== =========== =========== ===========
Gross Amount at Which
Carried at Close of Period
--------------------------------
Life On
Which Depr.
Bldgs. In Latest
and Accum. Date of Income
Land Imp. Total Depr. Constr. Is Computed
----- ----- -------- ----------- ------- -----------
Shopping Ctr
Connecticut 582,000 6,902,672 7,484,672 1,022,872 1990-1998 40 Years
----------- ----------- ----------- ----------- --------- --------
582,000 6,902,672 7,484,672 1,022,872 -- --
Shopping Center - NJ $ 1,992,417 $10,897,003 $12,889,420 $ 182,235 1998-1999 40 Years
----------- ----------- ----------- -----------
1,992,417 10,897,003 12,889,420 182,235
----------- ----------- ----------- -----------
$ 2,574,417 $17,799,675 $20,374,092 $ 1,205,107
=========== =========== =========== ===========
38