SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 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, 2002
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, par 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 most recent sales, the aggregate market value of the voting stock
held by non-affiliates of the Company was approximately $1,271,000.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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.
PART I
Cautionary Note Regarding Forward Looking Statements
This Annual Report on Form 10K contains forward looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve risks, uncertainties and
assumptions as described form time to time in registration statements, annual
reports, and other periodic reports and filings of the Company filed with the
Securities and Exchange Commission. All statements, other than statements of
historical facts, which address the Company's expectations of sources of capital
or which express the Company's expectation for the future with respect to
financial performance or operating strategies can be identified as
forward-looking statements. As a result, there can be no assurance that the
Company's future results will not be materially different from those described
herein as "believed," "anticipated," "estimated" or "expected," which reflect
the current views of the Company with respect to future events. We caution
readers that these forward-looking statements speak only as of the date hereof.
The Company hereby expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any such statements to reflect any change
in the Company's expectations or any change in events, conditions or
circumstances on which such statement is based.
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, New Jersey, Texas and Rhode Island.
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.
1
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 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.
2
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 but there is a dependency on supermarkets for strip malls. The
company has Stop & Shop, A&P and Big Y as tenants.
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, 2002, the Company employed approximately 24 persons.
(d) Financial Information About Foreign And Domestic Operations and Export
Sales
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.
3
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
Location or Facilities Ownership
Commercial Properties: Use and Major Tenants Status
- ---------------------- --- ----------------- ------
Lubbock, Strip 162,404 sq. ft. Owned by a partnership
Texas Shopping Walmart 51% in which a subsidiary of the
Center TJ Maxx 15% Company 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% Company. There is an
Center outside equity interest in
connection with the financing
Putnam, Shopping 56,877 sq. ft. Owned by a subsidiary of the
CT Center T. J. Maxx 46% Company and part of a
Shopping Center complex.
Mt. Olive, Shopping 105,274 sq. ft. Owned by a subsidiary of the
New Jersey Center A & P 59% Company.
Kindercare-Land Lease 10%
Dover Township Shopping 97,524 sq. ft. 50% owned by a subsidiary
New Jersey Center Stop & Shop 57% of the Company.
Dollar Tree 10%
Plus Outparcels
Cranston Shopping 259,600 sq. ft. 25% owned by a subsidiary of
Rhode Island Center Kmart 40% the Company.
Stop & Shop 25%
Dollar Tree 5%
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 made claims for 1) Common Law Indemnity; 2) Common Law
Contribution; 3) Continuing Nuisance and 4) Continuing Trespass regarding
alleged violation(s) of environmental laws in connection with property located
in Waterville, Maine. On information and belief, Waterville Industries (or its
affiliates or assigns)is the current owner of property located in Waterville,
Maine, which includes two waste treatment lagoons.FHC, 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.
Recently, First Hartford Corporation ("FHC") made a Form 8-K Filing with
respect to the aforenoted matter. This filing went into some detail regarding
the apparent static nature of this lawsuit and the unexpected simultaneous entry
of state court judgments (on March 7, 2002) against FHC in the respective
amounts (not including pre or post trial interest) of $2,941,000.00 in favor of
Waterville Industries, Inc. ("WPI") and $2,700,000.00 in favor of the Finance
Authority of Maine ("FAME").
4
As noted in the aforesaid 8-K, FHC appealed the entry of said judgments on a
number of grounds. As a result of said appeal (which is still pending as to the
WPI Judgment), the FAME judgment has been deleted and is a nullity. Furthermore,
WPI, together with the DEP for the State of Maine, have agreed with FHC to
settle the case for a lump sum payment of $250,000.00 payable on or before
November 1, 2002. Management feels this settlement is appropriate given the size
of the judgment, the expense of the appeal and the time and expense and
continued exposure of a new trial which would result even if the appeal was
successful. The above settlement will include releases from both WPI and the
State of Maine. If FHC is unable to raise the funds to make the November 1, 2002
payment, it has reserved its rights to continue with the appeal. Based upon
these considerations, FHC believes it is appropriate to accrue a liability of
$250,000.00 with respect to this matter.
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.
Based upon a number of factors, in 2001, FHC determined it was no longer cost
effective or practical to continue to pursue this litigation. As a result, FHC
moved to withdraw as plaintiff on June 13, 2001. The FDIC thereafter consented
to appear as an Involuntary Plaintiff but determined that it would not file a
complaint. FHC also consented to and/or filed motions which would have permitted
certain qualified shareholders of Dollar Dry Dock to continue the litigation
provided they filed to substitute as plaintiff for FHC on or before April 2,
2002. FHC has no knowledge of any such substitution having occurred. As a
practical matter therefore, this case is concluded as to FHC.
5
Wal-Mart Real Estate Business Trust, v. New Hawthorn Management Services, Inc.,
("NHMS") Robert Piermarini, Trustee of A. P. Realty Trust and Ruth Piermarini,
Trustee of R&O Leominster Realty Trust, Third party Defendants.
The above referenced case was originally filed by NHMS against Wal- Mart (and
the Piermarini defendants) in the federal district court of Massachusetts but
was withdrawn due to lack of complete diversity jurisdiction.
After the aforesaid withdrawal, NHMS was preparing to re-file the same complaint
in the state court of Massachusetts. However, Wal-Mart chose to file in the
state court first and is thus the plaintiff in the above referenced matter
styled Superior Court Civil Action No. 01- 0810A. On information and belief,
Wal- Mart claims NHMS breached a purchase and sale agreement by failing to,
inter alia, provide an environmentally clean site and a requested (by Wal-Mart)
clarification of a local planning board approval along with various lien
waivers. Wal-Mart claims these breaches caused it not to purchase the property
and is seeking the return of its $425,000.00 deposit along with reimbursement of
certain expenses allegedly in the low six figure range.
NHMS has filed a counterclaim against Wal-Mart claiming Wal-Mart's allegations
to be without any basis in that the property was environmentally sound and that
any improperly alleged environmental issues could easily have been escrowed for
as provided under the contract. NHMS further asserts the planning board approval
in question was valid without need of further clarification particularly in
light of the numerous assurances given to Wal-Mart by the city of Leominster
regarding such approval and that any required lien waivers were properly
delivered to the title company. In its counterclaim, NHMS is seeking in excess
of $1,200,000.00 damages for lost profits and/or expenses along with additional
damages for unfair trade practices including Wal-Marts admitted efforts to try
to purchase the very same property from the land owners immediately after it
claimed that said property was not suitable for purchase under the terms of its
just terminated agreement with NHMS.
The Piermarini defendants (who are the current land owners of the property which
was to be acquired by Wal-Mart) were named as third party defendants by NHMS
because, to the extent that there might be any merit to the Wal-Mart allegations
regarding the environmental issues, then NHMS could claim that the Piermarini's
may have breached their contract with NHMS. The Piermarini's have filed a
counterclaim against NHMS for economic injury relating to liens filed against
the property and damage to existing buildings. The Piermarini's also assert that
NHMS claims against them regarding any environmental issues constitute an abuse
of process. The estimated value of these claims is unknown.
There is also an intervening broker claim filed against NHMS should NHMS prevail
against Wal-Mart. The estimated value of this broker claim is approximately
$80,000.00.
6
While there is uncertainty and risk in any litigation, NHMS is confident that it
will prevail in its counterclaim against Wal-Mart.
During the pendency of this lawsuit, Wal-Mart has filed a motion for partial
summary judgment against NHMS in an effort to limit its damages, if any, to
$200,000 based upon a liquidated damages clause in the original contract. NHMS
has opposed this motion primarily on the basis that an amendment to the original
contract effectively terminated the liquidated damages provision. A ruling on
this motion is pending. NHMS is confident that it will prevail in its opposition
to Wal-Marts motion.
OTHER PROCEEDINGS
For proceedings involving officers and directors, see Item 10(f). on
page 30.
The Company is also involved in other legal proceedings which have arisen
during the normal course of its business, 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.
7
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) or online at www.pinksheets.com
- - symbol FHRT.
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 .25 to .85.
The number of shareholders of record for the Company's common stock as of
April 30, 2002, is approximately 900.
8
ITEM 6. SELECTED FINANCIAL DATA
For the Years Ended April 30, 2002, 2001, 2000, 1999 and 1998
The selected financial data set forth below for the years ended April 30,
2002, 2001, 2000, 1999 and 1998 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)
2002 2001 2000 1999 1998
------------ ------------ ------------ ------------ ------------
Revenues, net $ 6,281,489 $ 5,880,747 $ 3,904,267 $ 2,864,744 $ 26,096,474
Net Income (Loss) (187,458) (381,536) (906,170) (507,501) 9,160,515
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 ($.06) ($.12) ($.29) ($.16) ($2.96
===== ===== ===== ===== ======
Balance Sheet Data
Properties under Construction
and Investment in
Undeveloped
Properties $ 6,500 $ 19,048 -0- $ 11,641,378 $ 2,948,678
Real Estate&Equipment Net 18,557,736 18,990,262 19,192,130 6,555,321 5,269,443
Total Assets 25,832,088 27,218,819 25,122,992 22,876,192 9,788,054
Construction Loans, Notes,
Mortgages Payable and
Finance Obligations 26,925,990 26,501,558 25,729,301 21,829,694 10,147,730
Accounts Payable and Accrued
Liabilities 2,243,256 3,594,192 3,019,427 3,740,021 3,152,503
Shareholders' Deficit $ (6,003,311) $ (5,815,853) $ (5,434,317) $ (4,528,147) $ (4,020,646)
============ ============ ============ ============ ============
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Result of Operations 2002 2001 2000
Income (Loss) before
income tax (181.458) (381,536) (999,729)
Less non-recurring income -0- 971,698 --
Add non-recurring expense 250,000 470,456 --
Operating results 68,542 (882,778) (999,729)
Per share .02 (.29) (.32)
The year ended April 30, 2002 produced a Pretax Gain from operations prior
to Non-recurring items of $68,542 (.02) which compares to a loss of $882,778
(.29) and $999,729 (.32) in years ended April 30, 2001 and 2000. The increase in
income is mostly attributable to the sale of miscellaneous parcels of Real
Estate. For the years ended April 30, 2002, 2001 and 2000 the Company earned
$753,000, $123,000 and $16,000 respectively from the sale of Real Estate. During
the current year, the company earned $513,000 for service and development fees
from properties which the Company has a minority interest which compares to
$687,000 in the prior year. Related costs are carried in expenses.
Capital Resources and Liquidity
In 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 to manageable levels.
New properties have equity partners and the Company does not have control
of operations as a result of which these properties are not carried in the
balance sheet or statement of operations (see note for details) and we reported
in the statement of operations as Income(Loss) from minority operations.
Capital resource and liquidity have always been major impediments of the
Company. Reputation, industry contacts and capital resources are the key
elements of the real estate development business. Management has continued to
seek out new lenders and believes the Company 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.
10
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 12
Consolidated Balance Sheets - April 30, 2002 and 2001 13-14
Consolidated Statements of Operations For Years Ended
April 30, 2002, 2001 and 2000 15
Consolidated Statements of Shareholders' Deficit
for the Years Ended April 30, 2002, 2001 and 2000 16
Consolidated Statement of Cash Flows for the Years Ended
April 30, 2002, 2001 and 2000 17-18
Notes to Consolidated Financial Statements 19-28
Schedule III Real Estate and Accumulated Depreciation 43
Schedule IV Mortgage Loans on Real Estate 44
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.
11
[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, 2002 and 2001, 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 ended April 30, 2002, 2001 and 2000. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the results of
its consolidated operations and consolidated cash flows for the years ended
April 30, 2002, 2001 and 2000 in conformity with accounting principles generally
accepted in the United States of America. 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 8 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 8. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Kostin, Ruffkess & Company, LLC
Farmington, Connecticut
September 10, 2002
12
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2002 AND 2001
ASSETS
2002 2001
---- ----
Real estate and equipment:
Developed properties $20,630,451 $20,627,572
Equipment and leasehold improvements 135,869 111,468
----------- -----------
20,766,320 20,739,040
Less accumulated depreciation
and amortization 2,208,584 1,748,778
----------- -----------
18,557,736 18,990,262
Properties under construction and
investment in undeveloped properties 6,500 19,048
----------- -----------
18,564,236 19,009,310
Cash 67,748 91,371
Accounts and notes receivable, less allowance
for doubtful accounts of $130 in 2002
And $50,129 in 2001 227,911 1,710,243
Deposits, escrows and prepaid and
deferred expenses 1,769,745 706,898
Investment in affiliates 547,592 847,500
Due from related parties and affiliates 2,954,856 3,153,497
Deferred Tax Assets (net of valuation
allowance of $2,400,000 in 2002 and
$1,700,000 in 2001) 1,700,000 1,700,000
----------- -----------
$25,832,088 $27,218,819
=========== ===========
(Continued)
The accompanying notes are an integral part of the consolidated financial
statements.
13
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2002 AND 2001
LIABILITIES AND STOCKHOLDERS' DEFICIT
2002 2001
------------ ------------
Liabilities:
Mortgages and notes payable:
Mortgages payable $ 23,507,331 $ 21,710,399
Notes Payable - Other 3,418,659 4,791,159
------------ ------------
26,925,990 26,501,558
Accounts payable 1,572,972 2,863,259
Accrued liabilities 670,284 730,933
Deferred income 331,438 658,911
Other liabilities 632,500 -0-
Due to related parties and affiliates
1,702,215 2,280,011
------------ ------------
31,835,399 33,034,672
------------ ------------
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 (12,115,045) (11,927,587)
------------ ------------
(3,935,187) (3,747,729)
Less 232,228 shares of common
stock held in treasury, at cost 2,068,124 2,068,124
------------ ------------
(6,003,311) (5,815,853)
------------ ------------
$ 25,832,088 $ 27,218,819
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
14
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED APRIL 30, 2002, 2001 AND 2000
2002 2001 2000
----------- ----------- -----------
Revenues:
Sale of real estate $ 860,000 $ 148,367 $ 28,647
Construction 130,376 159,918 295,073
Rental 3,577,434 3,494,896 3,044,518
Other 1,713,679 1,105,868 536,029
Non-Recurring Items -0- 971,698 -0-
----------- ----------- -----------
6,281,489 5,880,747 3,904,267
----------- ----------- -----------
Cost and expenses:
Cost of sales,
real estate 102,511 25,356 12,678
Construction 97,643 88,337 176,025
Operating 1,635,093 1,486,697 1,070,988
Interest 2,014,251 2,156,037 1,881,884
Depreciation and
amortization 503,975 493,404 388,703
Selling, general and
administrative 1,221,546 979,750 984,569
Property taxes 535,520 562,246 389,149
Non-Recurring Expense 250,000 470,456 -0-
----------- ----------- -----------
6,360,539 6,262,283 4,903,996
----------- ----------- -----------
Net Loss from Operations 79,050 (381,536) 999,729
Minority Interest (102,408) -0- -0-
----------- ----------- -----------
Loss before income tax
provision (benefit) (181,458) (381,536) (999,729)
Income tax provision (benefit) 6,000 -0- (93,559)
----------- ----------- -----------
Net loss ($ 187,458) ($ 381,536) ($ 906,170)
=========== =========== ===========
Basic Earning per share ($.06) $(0.12) $(0.29)
===== ====== ======
Weighted average number of
shares outstanding 3,089,985 3,089,985 3,089,985
========= ========= =========
15
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Capital
in excess Treasury
Common stock of par Deficit stock Total
------------- ------------ ------------- ----------- -----------
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)
============= ============ ============= =========== ===========
Net Loss -0- -0- (381,536) -0- (381,536)
------------- ------------ ------------- ----------- -----------
Balance, April 30, 2001 3,322,213 4,857,645 (11,927,587) (2,068,124) (5,815,853)
============= ============ ============= =========== ===========
Net Profit -0- -0- (187,458) -0- (187,458)
------------- ------------ ------------- ----------- -----------
Balance, April 30, 2002 $ 3,322,213 $ 4,857,645 ($ 12,115,045) ($2,068,124) ($6,003,311)
============= ============ ============= =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
16
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Cash flows from operating activities: 2002 2001 2000
----------- ----------- -----------
Net profit or (loss) ($ 187,458) ($ 381,536) ($ 906,170)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation 463,406 459,120 367,394
Amortization 40,579 34,284 21,309
Deferred tax asset -0- -0- (93,559)
Deferred income (327,473) 658,911 -0-
Non-recurring income -0- (971,698) -0-
(Increase) decrease in:
Accounts receivable, net 1,482,332 (1,545,054) (95,236)
Deposits, escrows, prepaid and
deferred expenses (1,103,426) 370,553 34,898
Increase (decrease) in:
Accrued liabilities (60,649) 120,006 102,741
Other liabilities 632,500 -0- -0-
Accounts payable (1,290,287) 1,251,454 (823,335)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (350,476) (3,960) (1,391,958)
----------- ----------- -----------
Cash flows from investing activities:
Investment in affiliates 299,908 (847,500) -0-
Purchases of equipment and leasehold
improvements (30,879) (3,772) (9,656)
Reduction in prior development cost 232,000 -0- -0-
Additions to developed properties (219,453) (272,528) (1,353,169)
----------- ----------- -----------
Net cash used in
investing activities: $ 281,576 ($1,123,800) ($1,362,825)
----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial
statements.
17
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Cash flows from financing activities: 2002 2001 2000
---- ---- ----
Proceeds from:
Construction Loan Payable $-0- $ 419,545 $2,438,743
Mortgage Payable 2,297,858 1,994,546 12,600,000
Notes payable 170,000 500,000 1,782,500
Principal payments on:
Construction loans payable -0- (419,545) (12,600,000)
Mortgages payable (500,926) (337,286) (221,636)
Notes payable (1,542,500) (1,210,000) (100,000)
Advances to/from related parties and
affiliated partnerships (379,155) 125,466 (1,104,436)
----------- ----------- ------------
Net cash provided by
financing activities 45,277 1,072,726 2,795,171
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents (23,623) (55,034) 40,388
Cash and cash equivalents, beginning of year 91,371 146,405 106,017
----------- ----------- ------------
Cash and cash equivalents, end of year $ 67,748 $ 91,371 $ 146,405
=========== =========== ============
Supplemental data:
Cash paid during the year for interest $ 2,001,227 $ 1,993,998 $ 1,784,459
=========== =========== ============
Cash paid during the year for income
taxes -0- $-0- $-0-
=========== =========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
18
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
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 or has substantial control. 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.
Construction revenue and cost for minority interests are also eliminated.
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.
19
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
1. Summary of significant accounting policies (continued):
Real Estate and Equipment (continued):
Properties under construction amounted to $6,500 and $19,048 at April 30,
2002 and 2001.
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.
Because the Company has not built for its own account in the last two years,
there has not been any capitalization of interest or Real Estate taxes for years
ended 2002 and 2001. For the year ended April 30, 2000, $135,462 of interest and
$44,539 of Real Estate taxes were capitalized.
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 pre-
development 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.
Concentration of Credit Risk
The Company has a dependency on supermarkets for strip malls.
Approximately 20% of the Company's revenue is from A&P, in 2002, 21% in 2001 and
28% in 2000.
20
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
1. Summary of significant accounting policies (continued):
Revenue recognition:
Since the Company 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
Company 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
reporting period.
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, 2001 and 2000, 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 accounting
principles generally accepted in the United States of America 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.
21
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
2. 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 $6,000,000. 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 without negatively impacting its current
cash flow. 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. That being said the Company has
significantly increased its development team. While this will result in higher
operating expenses, it hopefully will lead to new projects.
3. Construction loans, mortgages, and notes payable:
2002 2001
---- ----
Construction Loans and
Mortgage notes ranging from 7.00%
to 8.87% and 1 1/2% over the
prevailing Prime Rate. Maturities
are at various dates through 2028.
The loans are secured by the
respective real estate and
guaranteed by the President of
the Company. $23,507,331 $21,710,399
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. 1,168,659 2,541,159
Notes payable,non-interest
bearing to an affiliate with no
specific repayment terms. 2,250,000 2,500,000
--------- ----------
$26,925,990 $26,501,558
=========== ===========
22
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Aggregate principal payments due on the above debt during the next five
years are as follows:
Year Ended April 30
2003 $ 535,145
2004 933,637
2005 973,811
2006 1,017,381
2007 3,535,047
4. 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 Company 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 Mr. Ellis as protection from personal losses due to his
guarantees. These pledges will stay in place until his guarantees are
eliminated.
5. Related party transactions:
Amounts included in revenue resulting from transactions with companies
affiliated by common ownership and/or management are as follows:
2002 2001 2000
Management and
service fees 1,468,495 1,005,248 376,726
Maintenance/Repairs -- -- 14,806
Interest income 28,160 28,160 28,160
Construction Income -0- -0- 116,640
---------- ---------- --------
$1,496,655 $1,033,408 $536,332
========== ========== ========
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.
23
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
6. Accrued liabilities:
2002 2001
Accrued:
Federal income taxes $ 51,850 45,850
Taxes-other 184,646 181,068
Interest 312,167 331,854
Other 121,621 172,161
-------- --------
$670,284 $730,933
======== ========
7. Non-Recurring Items:
Income from non-recurring items are as follows:
2002 2001 2000
Income
Gain on write off of
prior period liabilities $ -0- $ 971,698 $ -0-
========== ========== ==========
Cost and expense
Loss of investment $ -0- $ 470,456 $ -0-
Settlement of Environmental
Lawsuit $ 250,000 $ -0- $ -0-
========== ========== ==========
Included in 2002 is a $250,000 (.08 per share) expense for settlement of a
lawsuit in Waterville, Maine. Although management believes it would probably be
successful in an appeal, it would be prudent not to risk additional expense and
possibly remain liable for a very significant amount of money.
Included in 2001 is an investment write-off of $470,456 (.15 per share).
The investment is comprised of option payments and development cost related to
property in Leominster, Massachusetts, which was under contract to purchase and
resell to Wal-mart. Wal-mart violated that contract and refused to close. There
is an active lawsuit on this matter. The financial statements do not include any
revenue relating to this litigation.
8. 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
24
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
(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.
9. Subsequent events
Although the business plan between the partners of the Cranston Parkade
had been to sell the property, recoup investments and realize a profit, the plan
has been stalled. The Chapter 11 filing of Kmart and their inability to confirm
leases has negatively impacted the value of the property. Instead of a sale, the
partners entered into a refinancing whereby the construction loan of $22,250,000
was replaced with a $25,350,000 mortgage. From that amount, $1,350,000 was a
hold back concerning the Kmart Chapter 11. Due to the onerous terms that would
have been in effect in the event of a non-sale by August, 2002, a new
partnership agreement was reached. The agreement calls for a matching of equity
to partnership interest which eliminates all preferences. As a result, the
Company investment had to increase by $675,000. Much of these funds came out of
the refinancing and available cash from the partnership.
Cash flow from the Property will be severely restricted for the next year
until a Kmart escrow target is reached. If Kmart confirms the lease and comes
out of Chapter 11, the reserve will be distributed.
10. 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.
The income tax provision (benefit) is comprised of the following:
2002 2001 2000
Current benefit $ 6,000 $ -0- $ -0-
Deferred -0- -0- (93,559)
------- ------- --------
$ 6,000 $ -0- $(93,559)
======= ======= ========
25
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
10. Income Taxes (Continued)
The components of the net deferred tax asset the following:
2002 2001 2000
Tax effect of net operating
loss carry forwards $ 4,100,000 $ 3,400,000 $ 3,400,000
Valuation allowance (2,400,000) (1,700,000) (17000,000)
----------- ----------- -----------
$(1,700,000) $(1,700,000) $(17000,000)
=========== =========== ===========
The Company has set up an allowance of sixty percent (60%) in 2002 and 50%
in 2001 and 2000 against the deferred tax asset since the likelihood of
realization cannot be determined.
At April 30, 2002, the Company has net operating loss carry forwards of
approximately $12,000,000. Approximately $4,700,000 expire in 2004, $1,200,000
expire in 2007, $3,600,000 expire in 2012, $1,200,000 expire in 2014, $1,000,000
expire in 2015 and $300,000 in 2016.
11. Leases
The Company leases commercial real estate under various operating leases
expiring in various years through 2024. The real estate available for lease have
a carrying value of $20,453,033 and accumulated depreciation of $2,101,206.
Minimum future rentals to be received on non-cancellable leases as of
April 30, 2002 for each of the next five years are as follows:
2003 $2,634,756
2004 $2,750,099
2005 $2,769,649
2006 $2,681,295
2007 $2,542,378
12. Investments
The Company has investments in partnerships and joint ventures which own
two shopping centers and is constructing a third shopping center. These
investments are accounted for on the equity method. They are the following:
26
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Dover - New Jersey
Operating property
Operating data - April 30
Company ownership - 50% investment at inception was $147,500
(Unaudited) (Unaudited) (Unaudited)
2002 2001 2000
---- ---- ----
Assets $14,629,989 $ 13,203,924 $7,991,784
Liabilities 16,052,434 13,157,201 7,991,784
Members capital 94,585 46,723 --
Revenue 2,063,047 1,607,725 --
Expenses 1,951,643 1,708,502 --
Net (loss) 111,404 (100,777) --
The property's major tenant is Stop & Shop which provided 50% of the total
revenue in 2002. This tenant started paying rent in July, 2001.
In November 2001, this property was refinanced and each of the partners
received a $632,500 debt financial distribution. This amount is carried as other
liabilities.
Cranston - Rhode Island
Under construction
Operating data - December 31
Company ownership - 25% investment at inception $700,000
Audited Audited Unaudited
2001 2000 1999
---- ---- ----
Assets $ 29,094,595 $10,671,331 $1,037,120
Liabilities 22,029,481 3,171,331 665,485
Partners capital 7,065,114 7,500,000 371,635
Revenue 326,907
Expenses 761,793
Net (loss) (434,886)
The property has two major tenants, Stop & Shop and Kmart. Stop & Shop
will account for approximately 33% of revenue and Kmart 29%.
The Company is a 50% member in another Joint Venture that owns land in
Cranston adjacent to the shopping center. This property is currently under
development.
Lubbock - Texas
The Company has performed services for a partnership in exchange for a one
percent general partner interest.
27
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
Lubbock, Texas (Continued)
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, 2002, 2001 and 2000 is as follows:
2002 2001 2000
(Unaudited) (Unaudited) (Unaudited)
Assets $ 5,218,801 $ 5,271,866 $ 5,070,768
=========== =========== ===========
Liabilities $ 7,651,859 $ 7,759,741 $ 7,783,654
Partners' capital (2,433,058) (2,487,875) (2,712,886)
----------- ----------- -----------
$ 5,218,801 $ 5,271,866 $ 5,070,768
=========== =========== ===========
Revenues $ 1,184,041 $ 1,188,879 $ 1,221,098
Expenses (1,129,224) (963,767) (1,158,384)
----------- ----------- -----------
Net Income $ 54,817 $ 225,112 ($ 62,714)
=========== =========== ===========
13. 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 $ 67,748 $ 67,748
Accounts and notes
receivable 227,911 227,911
Deposits, escrows and prepaid
and deferred expenses 1,769,745 1,769,745
Liabilities:
Accounts payable $ 1,572,972 $ 1,572,972
Accrued expenses 670,284 670,284
Mortgages and notes payable 26,925,990 26,925,990
28
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 74 President l966 - Present
Stuart I. Greenwald 60 Treasurer/Secretary 1980 - Present
David B. Harding 57 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 74 President 1968 - Present
Stuart I. Greenwald 60 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.
(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.
29
(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.
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 2. 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.
30
ITEM 11. REMUNERATION
There is set forth below information relating to all direct remuneration
paid by the Company during the year ended April 30, 2002 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 $135,062
Stuart Greenwald, Treasurer $ 96,491
(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
31
directors and directors and officers of the Company as a 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.
32
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.
(c) Indebtedness of Management
There is none.
(d) Transactions with Promoters
There are none.
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 12
Consolidated Balance Sheets - April 30, 2002
and 2001 13-14
Consolidated Statements of Operations -
Years Ended April 30, 2002, 2001 and 2000 15
Consolidated Statements of Shareholders'
Deficit for the years Ended April 30, 2002,
2001 and 2000 16
Consolidated Statement of Cash Flows for the
years ended April 30, 2002, 2001 and 2000 17-18
Notes to Consolidated Financial Statements 19-28
(2) The following financial statement schedules for
the year ended April 30, 2002 are submitted herewith:
Schedule III - Real Estate and Accumulated
Depreciation 43
Schedule IV - Mortgage loans on Real Estate 44
33
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
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. A report on Form
8-K dated April 10, 2002 was filed by the Company reporting material judgments
against the Company.
(c) Exhibits
Exhibit Index 33
(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.
34
Not Applicable
(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. 45
(18) Letter regarding change in accounting principle.
Not Applicable
(19) Previously unfiled Documents.
Not Applicable
(22) Subsidiaries of the Registrant. 46
(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: September 20, 2002
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.
September 20, 2002 /s/ Neil H. Ellis
-----------------------------------
Neil H. Ellis
Principal Executive Officer
President and Director
September 20, 2002 /s/ Stuart I. Greenwald
-----------------------------------
Stuart I. Greenwald
Principal Financial Officer
Principal Accounting Officer
Secretary, Treasurer and Director
36
CERTIFICATIONS
Certification requirements set forth in Section 302 (a) of the Sarbanes- Oxley
Act.
I, Neil H. Ellis, certify that:
1. I have reviewed this annual report on Form 10K of First Hartford
Corporation.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for the years presented in this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining internal controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
A. designed such internal controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared.
B. evaluated the effectiveness of the registrant's internal controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
C. presented in this annual report our conclusions about the
effectiveness of the internal controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors
37
and the audit committee of registrant's board of directors (or persons
performing the equivalent functions);
A. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
B. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
I am responsible for preparing the Company's consolidated financial statements
and the other information that appears in this Form 10K. I believe that the
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America
appropriate in the circumstances to reflect, in all material respects, the
substance of events and transactions that should be included, and that the other
information in this Form 10K is consistent with those statements. In preparing
the consolidated financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions that are currently
being accounted for.
In meeting its responsibility for the reliability of the consolidated financial
statements, I depend on the Company's system of internal accounting controls.
This system is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with management's
authorization, and are recorded properly to permit the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America.
Date: September 20, 2002
/s/ Neil H. Ellis
- -------------------------------------
Neil H. Ellis
President and Chief Executive Officer
38
CERTIFICATIONS
Certification requirements set forth in Section 302 (a) of the Sarbanes- Oxley
Act.
I, Stuart I. Greenwald, certify that:
1. I have reviewed this annual report on Form 10K of First Hartford
Corporation.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report.
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for the years presented in this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining internal controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
A. designed such internal controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared.
B. evaluated the effectiveness of the registrant's internal controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
C. presented in this annual report our conclusions about the
effectiveness of the internal controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions);
39
A. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
B. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
I am responsible for preparing the Company's consolidated financial statements
and the other information that appears in this Form 10K. I believe that the
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America
appropriate in the circumstances to reflect, in all material respects, the
substance of events and transactions that should be included, and that the other
information in this Form 10K is consistent with those statements. In preparing
the consolidated financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions that are currently
being accounted for.
In meeting its responsibility for the reliability of the consolidated financial
statements, I depend on the Company's system of internal accounting controls.
This system is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with management's
authorization, and are recorded properly to permit the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America.
Date: September 20, 2002
/s/ Stuart I. Greenwald
- -----------------------
Stuart I. Greenwald
Treasurer
40
First Hartford Corporation and Subsidiaries
Schedule III
Real Estate and Accumulated Depreciation
April 30, 2002
Initial Gross Amount at Which
Encumbrances Cost To Company Carried at Close of Period
----------------- ---------------- --------------------------
Life On
Which
Depr. In
Latest
Mortgage, Bldgs. Bldgs. Income
Constr. Notes and and Accum. Date of Is
Statement Loans Payable Land Imp. Land Imp. Total Depr. Constr. Computed
----- --------- ---- ------ ---- ------ ----- ----- ------- --------
Developed Properties
Shopping Centers
Connecticut -0- 8,884,635 582,000 7,161,250 582,000 7,161,250 7,743,260 1,374,231 1990-1998 40 Years
Shopping Center - NJ -0- 14,328,364 1,815,000 10,894,784 1,815,000 10,894,784 12,887,191 726,975 1999 40 Years
Building Lot 294,332 177,407 177,407
----- ----------- ----------- ----------- ----------- ----------- ----------- ----------
-0- $23,507,331 $ 2,574,407 $18,056,034 $ 2,574,407 $18,056,034 $20,630,451 $2,101,206
===== =========== =========== =========== =========== =========== =========== ==========
41
First Hartford Corporation and Subsidiaries
Schedule IV
Mortgage Loans on Real Estate
April 30, 2002
Principal
Amount of
Loans
Subject to
Final Periodic Face Carrying Delinquent
Interest Maturity Payment Prior Amount of Amount of Principal or
Description Rate Date Terms Liens Mortgage Mortgage Interest
Mortgage Loans
Mt. Olive, NJ 8.375% 2027 $113,621 None $14,408,130 $14,328,364 -
Principal
& Interest
Monthly
Mt. Olive, NJ 7% 2006 $3,458 None 297,858 294,332
Principal
& Interest
Monthly
Putnam
Parkade, CT 7% 2009 31,517 None 4,009,489 3,861,599 -
Principal
& Interest
Monthly
Putnam
Parkade, CT Prime +1 2003 Interest None 1,575,000 1,450,000 -
Only
Plainfield
Parkade, CT 8.875% 2006 34,343 None 3,797,115 3,128,534 -
Principal
& Interest
Monthly
$2,388,949
Final
Payment
Plainfield
Parkade, CT 8.70% 2006 10,000 None 500,000 444,502 -
Quarterly
Interest
-----------
$23,507,331
===========
Balance at April 30, 1999 18,011,035
New Mortgage Loans 15,038,743
Principal Payments (12,821,636)
Balance at April 30, 2000 20,228,142
-----------
New Mortgage Loans 2,414,091
Principal Payments (756,831)
Principal Reductions (175,003)
Balance at April 30, 2001 $21,710,399
===========
New Mortgage Loans 2,297,858
Principal Payments (375,926)
Principal Reduction (125,000)
-----------
Balance at April 30, 2002 $23,507,331
===========
42