See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.            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 (the “Company”), its wholly owned subsidiaries, and all other entities in which the Company has a controlling interest, including those where the Company has been determined to be a primary beneficiary of a variable interest entity or meets certain criteria as a sole general partner or managing member in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification. As such, included in the consolidated financial statements are the accounts of Rockland Place Apartments Limited Partnership and Clarendon Hill Somerville Limited Partnership. The Company’s ownership percentage in these variable interest entity partnerships is nominal.  All significant intercompany balances and transactions have been eliminated. 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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 interim periods are not necessarily indicative of the results that may be expected for the entire year. The condensed consolidated balance sheet as of April 30, 2011 was derived from the audited financial statements for the year then ended. 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, 2011.

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.

Change in Accounting Policy

The Company adopted, as required, Accounting Standards Update (“ASU”) 2009-17 Consolidations (Topic 810):  Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities effective May 1, 2010.  Under this ASU, the identification of a primary beneficiary of a variable interest entity (“VIE”) is defined as the enterprise that has both of the following characteristics:  a) the power to direct the activities of a VIE that most significantly impacts the VIE’s economic performance, and b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.  Based on this updated guidance, the Company determined that it is no longer considered to be the primary beneficiary of CP Associates, LLC (“CP Associates”).  As a result of the initial application of this updated guidance, the Company deconsolidated CP Associates as of May 1, 2010 and has measured its 50% retained interest in CP Associates at the carrying amount of the Company’s retained interest had this updated guidance been effective when CP Associates was initially formed. 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.            Business and Significant Accounting Policies (concluded):

Change in Accounting Policy (concluded):

The difference between the net amount derecognized from the Company’s balance sheet and the amount of the Company’s 50% retained interest in CP Associates has been recognized as a cumulative effect adjustment to the Company’s equity as of May 1, 2010.

Currently, there are no ASUs that the Company is required to adopt which are likely to have a material effect on its financial statements.

Net Income (Loss) Per Common Share

Basic net income (loss) per share amounts are determined using the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings (loss) per share amounts include the weighted average outstanding common shares as well as dilutive common stock options of 72,581 and 92,858 shares for the three and six month periods ended October 31, 2011. Common stock options of 103,724 and 116,505 for three and six month periods ended October 31, 2010 were anti-dilutive.

Financial Instruments and Fair Value

The Company’s financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses, and debt. The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying amounts because of their relative short-term nature. In general, the carrying amount of variable rate debt approximates its fair value. Further, the carrying amount of fixed rate debt approximates fair value since the interest rates on the debt approximates the Company’s current incremental borrowing rate. Marketable securities consist of equity securities and are stated at fair value based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1). There were no significant gross unrealized gains or temporary losses on such securities as of either October 31, 2011 or April 30, 2011.  Net unrealized gains of $64,210 are included in accumulated-other comprehensive income.

2.             Consolidated Variable Interest Entities and Investments in Affiliated Partnerships:

The Company has consolidated both Rockland and Clarendon based on the express legal rights and obligations provided to it by the underlying partnership agreements and its control of their business activity. The assets of these partnerships can only be used to settle their obligations and their liabilities for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company are shown parenthetically in the line items of the consolidated balance sheets.  A summary of the assets and liabilities of Rockland and Clarendon included in the Company’s consolidated balance sheets follows:

9

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.            Consolidated Variable Interest Entities and Investments in Affiliated Partnerships (concluded):

The Company accounts for its 50% ownership interest in CP Associates, LLC, Cranston Parkade, LLC and Dover Parkade, LLC under the equity method of accounting.  A summary of the operating results for these entities follows:

For the years prior to May 1, 2009, the Company was committed to provide funding to CP Associates, LLC, Cranston Parkade LLC and Dover Parkade LLC. Although the Company no longer considers itself liable for their obligations it had not previously discontinued applying the equity method on these investments since the Company had previously considered itself to be committed to providing financial support to them. The Company’s investment in them was recorded at cost and subsequently adjusted for their gains, losses and distributions. The resulting carrying value of these investments is ($4,054,850) as of October 31, 2011 and ($4,387,981) as of April 30, 2011 is included in other liabilities.

3.            Income Taxes:

As of October 31, 2011, the Company has concluded that it is more likely than not that it will realize $843,000 in deferred income tax assets. The effective income tax rate for the three and six months ended October 31, 2011 differs from the customary expected Federal statutory rate primarily because the Company does not obtain any income tax benefit for the losses attributable to the noncontrolling interests in Rockland and Clarendon.

4.            Litigation:

In connection with a court order, on November 29, 2010, the Company purchased 591,254 shares of common stock beneficially owned by Richard E. Kaplan.  Under the terms set by the court, the Company made a cash payment of $500,000 and issued a secured note for $2,879,407.  The note is payable in quarterly installments of  $118,970 plus interest through November 1, 2015.  The accrual for this matter was recorded prior to May 1, 2009.  In addition, the Company was also required to pay “pre-judgment interest” from September 13, 2005 through November 29, 2010 of approximately $790,000 which is due November 1, 2015. 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.            Litigation (concluded):

Such interest has been accrued as the litigation proceeded.  The Company has pledged the aforementioned 591,254 shares of repurchased common stock and a security interest in certain of the Company’s other assets as collateral. On December 14, 2010, the Company filed an appeal with the United States Court of Appeal for the First Circuit, but the Court’s verdict was affirmed.  The Company has filed an appeal for rehearing which was denied. On December 16, 2011, Kaplan filed a suit to recover approximately $140,000 in legal fees. The Company does not believe it will ultimately be liable to Kaplan for these fees.

Item 2.                    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of the Company’s financial position and results of operations.  This financial and business analysis should be read in conjunction with the condensed consolidated financial statements and related notes.

The following discussion and certain other sections of this Report on Form 10-Q contain statements reflecting the Company’s views about its future performance and constitutes “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  These views may involve risks and uncertainties that are difficult to predict and may cause the Company’s actual results to differ materially from the results discussed in such forward-looking statements.  Readers should consider how various factors including changes in general economic conditions, cost of materials, interest rates and availability of funds, and the nature of competition and relationships with key customers may affect the Company’s performance.  The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or other.

Critical Accounting Policies

Results of Operations

Rental Income

Rental income increased approximately $220,000 and $443,000 for the three and six month periods ended October 31, 2011 compared to the three and six periods ended October 31, 2010.  The increase is mainly from Clarendon Towers as a result of having fewer apartments unoccupied for renovations.

Item 2.                   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (continued):

Service Income

Service income increased approximately $1,625,000 and $1,767,000 for the three and six month periods ended October 31, 2011 as compared to the same periods in 2010. Of the increase, $1,530,000 was due to a development fee received by Connolly and Partners, LLC (a 75% owned subsidiary of the Company). The fee is related to arranging a purchase, financing and renovation for a partnership in which a subsidiary of the Company has a nominal, non-controlling interest as a limited partner.

Real Estate Transactions

On October 5, 2011, the Company purchased an 18.46 acre parcel of land in Del Valle, Texas for $2,412,875 and immediately sold a 2.26 acre parcel for approximately $1,560,000. The three and six month periods ended October 31, 2010 did not have any sales of real estate. The Company realized a gain of $591,597 on the sale.

Interest Expense

Increases in interest expense for the three and six month periods ended October 31, 2011, as compared to the three and six month periods ended October 31, 2010, are due to additions to the mortgage in finishing the Clarendon project. 

Equity in Earnings of Unconsolidated Subsidiaries.

The equity in earnings of unconsolidated subsidiaries increased approximately $71,000 and $648,000 for the three and six month periods ended October 31, 2011 compared to the periods ended October 31, 2010.  Included in the increases are income from operations of approximately $175,000 and $111,000, respectively. The larger variances are due to additional changes in derivatives compared to prior periods, as well as certain distributions.

Capital Resource and Liquidity

The Company ended the period with approximately $854,000 of unrestricted cash and cash equivalents.  The unrestricted cash and cash equivalent including approximately $476,000 belonging to less than wholly owned consolidated partnerships (Rockland Place, LP - $160,000 and Clarendon Hill Somerville, LP - $316,000).  Funds received from CVS Pharmacy, which are to be paid out in connection with CVS developments amounted to approximately $536,000 and is included in restricted cash and cash equivalents.

In the April 30, 2011 10-K the Company recited a list of items that supports the Company’s contention that it believes that it has sufficient liquidity without any need to borrow funds to fund operations.

As of October 31, 2011, the Company has $143,831,969 of mortgages and notes payable outstanding.  Maturities thereon which require cash payments over the next twelve months approximate those as of April 30, 2011.  Expenditures for renovation construction projects during that same time frame will continue to be funded from proceeds under existing borrowing arrangements and from capital contribution commitments from limited partners in the Company’s VIEs.  Further, the Company expects that cash provided by operating activities along with its available cash resources as of October 31, 2011 will be sufficient to fund other activities.

Item 3.             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 4.           CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Treasurer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our President and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15b of the Exchange Act. Based on this Evaluation, our President and Treasurer concluded that because of weaknesses in our control environment, our Disclosure Controls were not effective as of the end of the period covered by this report. Notwithstanding weaknesses in our control environment, as of October 31, 2011, we believe that the condensed consolidated financial statements contained in this report present fairly the Company’s financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

PART II           OTHER INFORMATION

Item 1.             LEGAL PROCEEDINGS

In connection with a court order, on November 29, 2010, the Company purchased 591,254 shares of common stock beneficially owned by Richard E. Kaplan.  Under the terms set by the court, the Company made a cash payment of $500,000 and issued a secured note for $2,879,407.  The note is payable in quarterly installments of $118,970 plus interest through November 1, 2015.  The accrual for this matter was recorded prior to May 1, 2009.  In addition, the Company was also required to pay “pre-judgment interest” from September 13, 2005 through November 29, 2010 of approximately $790,000 which is due November 1, 2015.  Such interest has been accrued as the litigation proceeded.  The Company has pledged the aforementioned 591,254 shares of repurchased common stock and a security interest in certain of the Company’s other assets as collateral.  On December 14, 2010, the Company filed an appeal with the United States Court of Appeal for the First Circuit, but the Court’s verdict was affirmed.  The Company has filed an appeal for rehearing which was denied. On December 16, 2011, Kaplan filed a suit to recover approximately $140,000 in legal fees. The Company does not believe it will ultimately be liable to Kaplan for these fees.

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.             REMOVED AND RESERVED

Item 5.             OTHER INFORMATION

                        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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.