UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2013.

[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE ACT OF 1934

For the transition period from

to

Commission File Number:	0-8862

 

First Hartford Corporation
(Exact name of registrant as specified in its character)
Maine	01-0185800
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
149 Colonial Road, Manchester, CT	06042
(Address of principal executive offices)	(Zip Code)
(860) 646-6555
(Registrant’s telephone number including area code)
(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                                                                                                                                                                                                                Yes        No X 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

                                                                                                                                                                                                                Yes        No X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)	Smaller reporting company X

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

                                                                                                                                                                                                                Yes          No X

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

2,412,611 as of April 25, 2014

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES

INDEX

PART I.	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets –                 July 31, 2013 and April 30, 2013	3 - 4
	Condensed Consolidated Statements of Operations for the                 Three Months Ended July 31, 2013 and 2012	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended July 31, 2013 and 2012	6
	Condensed Consolidated Statements of Cash Flows for the                 Three Months Ended July 31, 2013 and 2012	7 - 8
	Notes to Condensed Consolidated Financial Statements	9 - 13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13 - 15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	16
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	17
Item 6.	Exhibits	17
	Signatures	18
	Exhibits	19 - 22

 

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)

	July 31, 2013		April 30, 2013
Real estate and equipment:
Developed properties (including $70,916,224 in July and $70,735,840 in April for VIEs)	$201,144,545		$202,050,054
Equipment and tenant improvements (including $2,168,750 in July and $2,084,461 in April for VIEs)	3,567,196		3,458,587
	204,711,741		205,508,641
Less accumulated depreciation and amortization (including $8,275,328 in July and $7,781,281 in April for VIEs)	32,935,168		31,695,129
	171,776,573		173,813,512
Property under construction (including $391,905 in July and April for VIEs)	616,490		613,200
	172,393,063		174,426,712
Cash and cash equivalents (including $760,512 in July and $2,052,427 in April for VIEs)	6,660,115		8,346,956
Cash and cash equivalents – restricted (including $425,574 in July and $412,518 in April for VIEs)	826,525		1,272,924
Marketable securities (including $2,491,205 in July and $1,424,072 in April for VIEs)	5,431,945		4,846,778
Accounts and notes receivable, less allowance for doubtful accounts of $451,900 as of July 31, 2013 and $508,700 as of April 30, 2013 (including $75,960 in July and $126,408 in April for VIEs)	3,856,413		3,684,774
Other receivables	8,174,938		8,744,470
Deposits and escrows (including $2,710,095 in July and $2,824,785 in April for VIEs)	5,371,831		5,222,827
Prepaid expenses (including $306,570 in July and $178,762 in April for VIEs)	848,660		571,775
Deferred expenses (including $1,082,186 in July and $1,091,734 in April for  VIEs)	3,233,011		2,983,819
Investments in affiliates	100		100
Due from related parties and affiliates	165,106		165,188
Total Assets	$206,961,707		$210,266,323

 

See accompanying notes.

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND EQUITY (DEFICIENCY)
(Unaudited)

 

	July 31, 2013		April 30, 2013
Liabilities:
Mortgages and notes payable:
Construction loans payable	$52,285,394		$52,847,132
Mortgages payable (including $54,112,980 in July and $54,335,209 in April for VIEs)	145,664,093		146,327,723
Notes payable (including $1,704,697 in July and in April for VIEs)	3,285,195		3,534,301
	201,234,682		202,709,156
Accounts payable (including $617,635 in July and $434,309 in April for VIEs)	1,766,604		1,853,976
Other payables	6,315,198		6,832,367
Accrued liabilities (including $2,684,387 in July and $2,648,075 in April for VIEs)	4,730,018		4,866,430
Accrued cost of derivatives	2,931,591		3,656,380
Deferred income (including $247,856 in July and in April for VIEs)	478,722		455,475
Other liabilities	2,078,094		2,198,045
Due to related parties and affiliates (including $383,544 in July and $377,775 in April for VIEs)	455,444		449,757
	219,990,353		223,021,586
Equity (Deficiency):
First Hartford Corporation:
Preferred stock, $1 par value; $.50 cumulative and convertible; authorized     4,000,000 shares; no shares issued and outstanding	-0-		-0-
Common stock, $1 par value; authorized 6,000,000 shares; issued 3,298,609     Shares; outstanding 2,414,925 shares as of  July 2013 and 2,416,825 as of April 2013	3,298,609		3,298,609
Capital in excess of par	5,198,928		5,198,928
Accumulated deficit	(22,008,917)		(22,553,780)
Accumulated other comprehensive income (loss)	(27,886)		146,666
Treasury stock, at cost, 883,684 and 881,784 shares as of July 31, 2013 and     April 30, 2013, respectively	(4,957,859)		(4,952,574)
Total First Hartford Corporation	(18,497,125)		(18,862,151)
Noncontrolling interests	5,468,479		6,106,888
Total Shareholders' Equity (Deficiency)	(13,028,646)		(12,755,263)
Total Liabilities and Shareholders' Equity (Deficiency)	$206,961,707		$210,266,323

 

 

 

See accompanying notes.

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended
	July  31, 2013		July  31, 2012
Operating revenues:			(Restated)
Rental income	$6,906,652		$6,944,501
Service income	995,514		2,086,471
Sales of real estate	1,812,596		-0-
Other income	325,160		243,471
	10,039,922		9,274,443
Operating costs and expenses:
Rental expenses	4,556,621		4,407,640
Service expenses	730,744		1,440,058
Cost of real estate sales	1,199,901		-0-
Selling, general and administrative expenses	1,163,187		1,009,073
	7,650,453		6,856,771
Income from operations	2,389,469		2,417,672
Non-operating income (expense):
Interest expense	(2,705,143)		(2,733,315)
Other income	80,000		79,780
Gain (loss) on derivatives	724,789		(445,441)
Equity in earnings (losses) of unconsolidated subsidiaries	164,951		108,634
	(1,735,403)		(2,990,342)
Income (loss) before income taxes	654,066		(572,670)
Income taxes	23,422		8,517
Consolidated net income (loss)	630,644		(581,187)
Net (income) loss attributable to noncontrolling interests	(85,781)		201,809
Net income (loss) attributable to First Hartford Corporation	$544,863		$(379,378)
Net income (loss) per share – basic	$0.23		$(0.16)
Net income (loss) per share – diluted	$0.21		$(0.16)
Shares used in basic per share computation	2,414,925		2,419,802
Shares used in diluted per share computation	2,572,333		2,419,802

 

See accompanying notes.

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 

 

	Three Months Ended
	July  31, 2013		July 31, 2012
			(Restated)
Consolidated net income (loss)	$630,644		$(581,187)
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on marketable securities	(448,390)		82,062
Other comprehensive income (loss)	182,254		(499,125)
Amounts attributable to noncontrolling interests:
Net (loss) income	(85,781)		178,989
Unrealized gain on marketable securities	273,839		27,137
	188,058		206,126
Comprehensive income (loss)  attributable to First Hartford Corporation	$370,312		$(292,999)

 

 

 

 

 

See accompanying notes.

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

	Three Months Ended
	July 31, 2013		July 31, 2012
			(Restated)
Operating activities:
Consolidated net income (loss)	$630,644		$(581,187)
Adjustments to reconcile consolidated net loss to net cash provided  by operating activities:
Equity in earnings of unconsolidated subsidiaries, net of distributions of            $45,000 in 2013 and $43,500 in 2012	(119,951)		(65,135)
Gain on sale of property	(612,695)		-0-
Depreciation	1,276,773		1,305,730
Amortization	111,692		132,543
Changes in operating assets and liabilities:
Accounts, notes and other receivables	397,893		1,783,385
Deposits and escrows	(149,004)		(295,049)
Prepaid expenses	(276,885)		(201,446)
Deferred expenses	(360,884)		(237,964)
Cash and cash equivalents – restricted	446,399		112,475
Accrued liabilities	(136,412)		(362,634)
Accrued cost of derivatives	(724,789)		445,441
Deferred income	23,247		174,305
Accounts and other payables	(604,539)		(2,979,063)
Net cash provided by operating activities	(98,511)		(768,599)
Investing activities:
Investments in marketable securities	(1,033,557)		(666,734)
Purchase of equipment and tenant improvements	(108,609)		(300,790)
Proceeds from sale of real estate	1,812,596		-0-
Consolidation of formerly nonconsolidated entity	-0-		(11,409)
Additions to developed properties and properties under construction	(334,416)		(1,441,767)
Net cash used by investing activities	336,014		(2,420,700)

 

 

See accompanying notes.

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

	Three Months Ended
	July 31, 2013		July 31, 2012
			(Restated)
Financing activities:
Distributions to noncontrolling interests	$(450,354)		$(198,569)
Purchase of treasury stock	(5,285)		(4,692)
Proceeds from:
Construction loans payable	-0-		2,414,880
Principal payments on:
Construction loans payable	(561,738)		(32,298)
Mortgage loans payable	(663,630)		(593,459)
Notes payable	(249,106)		(117,597)
Advances to related parties and affiliates, net	5,769		5,044
Net cash provided by financing activities	(1,924,344)		1,473,309
Net change in cash and cash equivalents	(1,686,841)		(1,715,990)
Cash and cash equivalents, beginning of period	8,346,956		6,599,325
Cash and cash equivalents, end of period	$6,660,115		$4,883,335
Cash paid during the period for interest	$2,696,086		$2,329,781
Cash paid during the period for income taxes	$183,329		$12,895

 

 

 

 

 

See accompanying notes.

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Business and Significant Accounting Policies:

 

Business

 

First Hartford Corporation was incorporated in Maine in 1909 and is engaged in the purchase, development, ownership, management and sale of real estate, all of which is considered a single segment.  The Company has a second segment “Fee for Service” in which the Company is engaged as a preferred developer for CVS. (see Service Income to follow).

 

Principles of Consolidation

 

The accompanying unaudited 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 financial 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 unaudited condensed 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 8.03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments to previously accrued 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, 2013 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, 2013.

 

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.

 

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

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Business and Significant Accounting Policies (concluded):

 

Net Income (Loss) Per Common Share

 

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).  Net unrealized loss of $(27,886) as of July 31, 2013 (gains of $146,666 as of April 30, 2013) are included in accumulated other comprehensive (loss) income.

 

2.   Restatement

 

The Company has restated its July 31, 2012 consolidated financial statements by adding three joint ventures into its consolidated results.  Upon reanalyzing its agreements, it was determined that the Company was the controlling partner of the ventures which triggers a requirement to consolidate.  The ventures are:

 

(1) Cranston Parkade, LLC which owns a retail shopping center 259,600 sq. ft.

(2) CP Associates, LLC which owns two 60,000 sq. ft commercial buildings plus land leased to a third party.

(3) Hartford Lubbock Limited Partnership which owns a retail shopping center 160,555 sq. ft.

(4) Trolley Barn Associates which owns approximately 7 acres of vacant land.

 

The Company owns 50% of (1), (2) & (4) and 2% of (3) and formerly accounted for them on the equity method. Previously, the investment in Trolley Barn Associates, which is 50% supported by the Company, was not considered material and was not consolidated.  The advances were considered loans.  The Company has determined that Trolley Barn qualifies as a Variable Interest Entity (VIE) and is consolidated as required.

 

 

 

 

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.   Restatement

 

The effects on the Company’s previously issued financial statements are summarized as follows:

Balance Sheet July 31, 2012

 

	Previously Reported		Increase (Decrease)		Restatement
Real Estate and Equipment Net	$133,853,206		$42,061,785		$175,914,991
Cash	2,205,525		3,415,226		5,620,751
Investment in Marketable Securities	978,642		1,777,117		2,755,759
Accounts and notes receivable	2,281,215		2,087,651		4,368,866
Other receivable	6,386,053		-0-		6,386,053
Deposits, escrows & prepaid & deferred expenses net	10,115,867		2,568,475		12,684,342
Investment in affiliate	9,665		(9,665)		-0-
Due from related parties and affiliates	524,513		(357,254)		167,259
Total Assets	$156,354,686		$51,543,335		$207,898,021
Mortgage & notes payables	$144,534,385		$62,955,131		$207,489,516
Payables and accrued liabilities	9,550,780		1,261,146		10,811,926
Accrued cost of derivatives	-0-		4,458,483		4,458,483
Deferred income	665,328		(10,345)		654,983
Other liabilities	3,873,516		(1,484,733)		2,388,783
Due  to related parties	104,552		329,536		434,088
Total liabilities	158,728,561		67,509,218		226,237,779
Stockholders Deficit	(2,373,875)		(15,965,883)		(18,339,758)
Total Liabilities and Shareholder Deficit	$156,354,686		$51,543,335		$207,898,021
Statement of Operations – Three Months Ended July 31, 2012
	Previously Reported		Increase  (Decrease)		Restatement
Revenues	$6,969,687		$2,304,756		$9,274,443
Operating cost	5,891,838		964,933		6,856,771
Income from operations	1,077,849		1,339,823		2,417,672
Interest expenses	(1,776,099)		(957,216)		(2,733,315)
Other Income	79,780		-0-		79,780
Gain (Loss) on Derivatives	-0-		(445,441)		(445,441)
Equity in earnings of unconsolidated subsidiaries	365,720		(257,086)		108,634
Loss before income tax	(252,750)		(319,920)		(572,670)
Income Taxes	8,017		500		8517
Consolidated Net Loss	(260,767)		(320,420)		(581,187)
Net (income) loss attributable to non-controlling interest	235,445		(33,636)		201,809
Net Loss attributable to First Hartford	$(25,322)		$(354,056)		$(379,378)

 

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.   Restatement  (concluded):

 

The increased loss attributable to the Company for the three months ended July 31, 2012 was mainly due to differences in accounting between equity method and consolidation.

 

3.   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 that 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 condensed consolidated balance sheets follows:

 

The Company accounts for its 50% ownership interest in Dover Parkade, LLC under the equity method of accounting.  A summary of the operating results for this entity follows:

 

 

 

4.   Income Taxes:

As of July 31, 2013 the Company has Federal net operating loss carryforwards totaling approximately $15,400,000 that are available to offset future Federal taxable income through various periods expiring between 2016 and 2028. The Company has concluded that it is more likely than not that it will not realize any deferred income tax assets in the near term.

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 FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

5.   Litigation:

 

There has been no change in Litigation since April 30, 2013.