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

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Nature of Business and Significant Accounting Policies:

Description of Business

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

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of First Hartford Corporation, its wholly owned subsidiaries and other controlled subsidiaries (collectively referred to as the "Company").  The Company records minority interest for the non-owned portions of consolidated subsidiaries.  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). 

Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments to previously established loss provisions) considered necessary for a fair presentation have been included.  Operating results for the three months ended July 31, 2009 are not necessarily indicative of the results that may be expected for the year ending April 30, 2010.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended April 30, 2009.

Certain amounts in the statement of cash flows for the three months ended July 31, 2008 have been reclassified to conform to the current period presentation. In addition, the Company has made certain reclassifications to prior-period amounts to conform to the current period presentation of noncontrolling interests as a result of adopting Statement of Financial Accounting Standards (SFAS) No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”.

Because the Company is engaged in the development and sale of real estate at various stages of construction, the operating cycle may extend beyond one year. Accordingly, following the usual practice of the real estate industry, the accompanying condensed consolidated balance sheets are unclassified.

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.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Significant Accounting Policies

There has been no change in the Company's significant accounting policies from those contained in our Annual Report on Form 10-K for the year ended April 30, 2009, except as discussed below.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(revised 2007), “Business Combinations”, which addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. In April 2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, which amended certain provisions of SFAS No. 141(R) related to the recognition, measurement, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies. SFAS No. 141(R) and FSP FAS 141(R)-1 became effective for the Company on May 1, 2009, but did not have any impact on the Company’s Condensed Consolidated Financial Statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”, which addresses the accounting and reporting framework for noncontrolling interests by a parent company. SFAS No. 160 also addresses disclosure requirements to distinguish between interests of the parent and interests of the noncontrolling owners of a subsidiary. The Company adopted SFAS No. 160 effective May 1, 2009. The provisions of SFAS No. 160 require that minority interest be renamed noncontrolling interests and that a company present a consolidated net income measure that includes the amount attributable to such noncontrolling interests for all periods presented. In addition, SFAS No. 160 requires reporting noncontrolling interests as a component of equity in the Company’s Condensed Consolidated Balance Sheets and below income tax expense in the Company’s Condensed Consolidated Statements of Operations. As required by SFAS No. 160, the Company has retrospectively applied the presentation to the Company’s prior year balances in the Condensed Consolidated Financial Statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133”, which requires enhanced disclosures for derivative and hedging activities. SFAS No. 161 became effective for the Company on May 1, 2009, but did not have any impact on the Company’s Condensed Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  The Company adopted SFAS No. 165 for the quarter ended July 31, 2009 and has evaluated and assessed all events occurring subsequent to July 31, 2009 through October 19, 2009, the filing date of the Company’s Form 10-Q. 

 In April 2009, the FASB issued FASB Staff Position No. SFAS 107-1 and APB No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which requires quarterly disclosure of information about the fair value of financial instruments within the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments.” The Company adopted FSP FAS 107-1 and APB 28-1 effective May 1, 2009. See Note 5 for required disclosures.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Net Income (Loss) Per Common Share

Basic net income (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted net income (loss) per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options and warrants (using the "treasury stock"  method).

In the normal course of business, the Company is exposed to the effects of interest rate changes.  To mitigate the exposure to unexpected changes in interest rates, derivatives are used primarily to hedge against rate movements on some of the Company's related debt. Since the Company's interest rate swaps have not been designated as a hedge they must be recognized as an asset or liability and adjusted to fair value through income in the current period.

The Company recognized a gain of $824,565 on derivatives during the quarter ended July 31, 2009.  The aggregate fair value of the Company's swap contracts were in an unfavorable position of $(2,602,950) as of July 31, 2009 and are recorded as a liability in the accompanying condensed consolidated balance sheet.

3.         Investment in Affiliated Partnerships

Investments in entities in which the Company is not the general partner and has less than a 20% interest are carried at cost.  Distributions received from those entities are included in income.  Distributions received in excess of the Company's proportionate share of capital are applied as a reduction of the cost of the investments.  Investments in entities in which the Company has a 20-50% interest but does not control are carried at cost and are subsequently adjusted for the Company's proportionate share of their undistributed earnings or losses, and any distributions (Equity Method).

The Company currently has two unconsolidated operating partnerships accounted for under the Equity Method. The Company has a 50% interest in Cranston Parkade, LLC which in turn has an interest in Cranston/BVT Associates LP which owns a shopping center in Cranston, RI. The Company also has a 50% interest in Dover Parkade, LLC which owns a shopping center in Dover Township, NJ.  Although the Company exercises some influence, the Company does not control the operating and financial policies of these partnerships and, therefore, these partnerships are not consolidated.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.         Investment in Affiliated Partnerships (continued):

OPERATING RESULTS OF NONCONSOLIDATED 50% OWNED SUBSIDIARIES

These investments are recorded at cost and have been subsequently adjusted for gains, losses and distributions such that the carrying value is less than zero.  Although the Company is not liable for the obligations of the two partnerships it had not discontinued applying the Equity Method since the Company considered itself to be committed to providing financial support to the partnerships.  As of July 31, 2009 and April 30, 2009, $4,914,233 and $5,056,659, respectively, is included in other liabilities in the condensed consolidated balance sheets representing the carrying value of these investments.

4.         Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before May 1, 2006. State jurisdictions could remain subject to examination for longer periods.

Deferred tax assets or liabilities are computed based on the difference between the financial statement and  income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the deferred tax assets and liabilities from period to period.

In assessing the need for a valuation allowance, the Company estimates future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards. Valuation allowances related to deferred tax assets can be impacted by the changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event the Company were to determine that it would not be able to realize all or a portion of its deferred tax assets in the future, it would reduce such amounts through a charge to income in the period in which that determination is made. Conversely, if the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of the net carrying amounts, it would decrease the recorded valuation allowance through an increase to income in the period in which that determination is made.

As of July 31, 2009, the Company has concluded that it is more likely than not that the Company will realize $1,238,000 in deferred tax assets.

PART II           OTHER INFORMATION

Item 1.             LEGAL PROCEEDINGS

There have not been any material developments in the legal proceedings we described in our Annual Report on Form 10-K for the year ended April 30, 2009, except for the issuance of a recommendation (Kaplan Suit) by the court appointed Special Master as to terms of payment which are agreeable to the Company but objected to by Richard Kaplan requiring the court to issue a future Special Ruling.

Item 1A.           RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

Item 2.             UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 

                         None

Item 3.             DEFAULTS UPON SENIOR SECURITIES

                        None

Item 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                        None

Item 5.             OTHER INFORMATION

None

Item 6.             EXHIBITS

a)         Exhibits:

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

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

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

Exhibit 32.2      Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.