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 October 31, 2015.

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

For the transition period from                                                                          to                                                                                           

Commission File Number:                  0-8862                                                                                                                                                  

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 X       No     

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.

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.

2,407,840 as of December 9, 2015

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

INDEX

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

ASSETS

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

LIABILITIES AND EQUITY (DEFICIENCY)

See accompanying notes.

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

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

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies:

Business

First Hartford Corporation, which was incorporated in Maine in 1909, and its subsidiaries (the Company), is engaged in two business segments: 1) the purchase, development, ownership, management and sale of real estate and 2) providing preferred developer services for two corporate franchise operators (i.e., “Fee for Service”).

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of 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) 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, 2015 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, 2015.

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 Updates (ASUs) that the Company is required to adopt which are likely to have a material effect on its financial statements. For further discussions on Accounting Standard Updates, refer to the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies (continued):

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). Accumulated other comprehensive (loss) income consists solely of unrealized gains (losses) on marketable securities.

Segment Information

The factors used by the Company to identify reportable segments include differences in products and services and segregated operations within the Company. The first segment, “Real Estate Operations” participates in the purchase, development, management, ownership and sale of real estate. Within its second segment, “Fee for Service”, the Company provides preferred developer services to CVS and Cumberland Farms Inc. in certain geographic areas. Summary financial information for the two reportable segments is as follows:

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies (concluded):

Segment Information (concluded):

All costs after operating expenses are costs of the real estate operation.

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $1,891,664 on October 31, 2015 and $530,611 on April 30, 2015 and receivables of $12,198,073 on October 31, 2015 and $12,080,979 on April 30, 2015.

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 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:

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3.       Income Taxes:

In the three and six months ended October 31, 2015, the Company had taxable income in excess of the remaining loss carryforwards remaining as of April 30, 2015, resulting in current income tax expense.  The first quarter gain on the voluntary foreclosure of the Putnam, CT shopping center was not taxable as the associated cancellation of debt income would have been reduced by the company’s tax attributes. This reduction of tax attributes along with operating results and the use of an Alternative Minimum tax credit resulted in a minimal income tax expense. Operating results in the second quarter have generated taxable income in excess of the Company’s tax attributes, thus resulting in a higher income tax expense.

In the three and six months ended October 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.  However, as a result of a forgiveness of debt by the mortgage holder of the Main Street NA Parkade LLC, the Company recorded a gain through debt forgiveness of $5,315,423.  As a result, the Company recorded tax expense of $250,000, which included an Alternative Minimum Tax of $100,000 and state income tax of $150,000. 

4.       Litigation:

There has been no change in litigation since April 30, 2015.

5.       Refinancings:

West Springfield, MA – Refinance: On August 15, 2014, the Company refinanced the mortgage on their shopping center in West Springfield, MA in the amount of $10,500,000.  A prior mortgage with a remaining balance of $7,794,014 with an interest rate of 5.52% was paid from the proceeds.  The new mortgage has an interest rate of 4.60% with a 30 year amortization and duration of 10 years, calls for interest only payments for the first two years.  Transaction costs of approximately $110,000 will be amortized over the life of the loan.

Cranston, RI – Refinance: On May 28, 2015, the Company refinanced the mortgage on their shopping center in Cranston, RI in the amount of $33,500,000.  A prior mortgage with a remaining balance of $30,235,368 with an interest rate of 5.603% was paid from the proceeds.  The new mortgage has a variable interest rate of 30 day LIBOR plus 1.90% (2.09% at October 31, 2015) and calls for 119 monthly principal payments of $57,279 (along with interest) and one final lump-sum payment of $26,683,779 in May 2025.  Simultaneously, the Company entered into a floating-to-fixed interest rate swap agreement with the bank fixing the interest rate at 4.15%.

CP Associates – Refinance: On June 9, 2015, the Company refinanced a mortgage on their Career Education building in Cranston, RI in the amount of $5,500,000.  A prior mortgage with a remaining balance of $9,442,011 with an interest rate of 1.25% plus 30 day LIBOR (fixed at an effective interest rate of 6.11% through a floating-to-fixed interest rate swap agreement that was also retired) was paid from the proceeds and cash on-hand.  The new mortgage has a fixed interest rate of 3.00% through November 8, 2018, after which it adjusts to be a variable rate equal to 2.50% plus 30 day LIBOR.  Principal payments of $250,000 are due quarterly, with interest payable monthly.  The final payment is due on June 9, 2020, if not sooner paid (there is no prepayment penalty).

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6.       Gain on Forgiveness of Debt:

During the three and six months ended October 31, 2014, a 100% owned subsidiary of the Company, Main Street NA Parkade, LLC signed an agreement that the Mortgage loan secured by the property of Main Street NA Parkade located in North Adams, would be reduced from $12,575,423 to $7,260,000.  As of the date hereof, the Note reflects an outstanding principal balance of $7,260,000 due to a reduction of principal indebtedness through debt forgiveness by Lender, which resulted in a gain in the amount of $5,315,423 during the year ended April 30, 2015. During the year ended April 30, 2014, the Company recorded an impairment loss of $4,027,053 on this property.  This impairment reflected the continuing overall economic decline in the geographical area and retail industry that thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center.

TERMS:

Commencing October 1, 2014 through and including January 1, 2020.  Interest shall be 200 basis points in excess of the thirty day LIBOR rate.

Amortization commencing February 1, 2020 through October 1, 2030 (“Maturity Date”) on the basis of a 25 year schedule of amortization with a balloon payment due on October 1, 2030.  Interest during this period shall be 5.5% per annum. 

Call Option – Lender may elect to accelerate this Note and require the Company to prepay without premium the entire unpaid principal balance at any time after March 1, 2017.

The Note is non-recourse.

Amended and Restated Escrow and Security Agreement

Beginning October 1, 2014 and including September 30, 2015 all net cash flow of the property shall be deposited in the Escrow account.

Additional Interest Agreement (AIA) was amended as follows:

Commencing on October 1, 2015 and continuing through September 30, 2019 the Company will remit 50% of the cash flow of the property to Lender.  Lender will apply all such payments received to the outstanding amount due on the date of the next installment due under the loan.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7.       Purchase of Land:

New Orleans, LA – Land Purchase: On May 29, 2015, the Company purchased a parcel of land in New Orleans, LA, for $7,999,901 including closing costs.  The Company plans to subdivide this lot and oversee construction of a shopping plaza with the goal of either leasing or selling these parcels shortly after construction is completed.  This purchase was financed with advances from new promissory notes of $4,383,502 and working capital of $3,616,399.  Key terms of the construction loans, which in total amount to $13,210,000, are as follows:

Austin, TX – Land Purchase: On July 30, 2015, the Company purchased a parcel of land in Austin, TX for $1,874,309 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with a loan of $1,312,500 and working capital of $561,809.  Key terms of the mortgage loan are as follows:

Vernon, NJ – Land Purchase: On September 8, 2015, the Company purchased a parcel of land in Vernon, NJ, for $4,175,985 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with an advance from a new construction loan of $2,959,018 and working capital of $1,216,967.  Key terms of the construction loan are as follows:

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7.       Purchase of Land (continued):

8.       Gain on Voluntary Foreclosure:

Putnam, CT – Transfer to Lender: On November 1, 2014, a payment was due for the mortgage of the shopping center in Putnam, Connecticut in the amount of approximately $4,700,000.  The rentable space of the shopping center is 57,529 square feet, 46% of which was leased to one store.  That store informed the Company that they were not renewing their lease, which expired on January 31, 2015, and, as a result, the Company found it impossible to refinance the mortgage without finding a replacement tenant.  Therefore, on June 5, 2015, the Company agreed to transfer title of the property to the lender.  The Company recognized a gain of $2,649,850 since the mortgage was non-recourse and was in excess of the book value.  Pre-tax income for this shopping center was $44,645 for the three and six months ended October 31, 2015 and $35,852 and $87,689 for the three and six months ended October 31, 2014, respectively.

9.       Subsequent Events:

On December 7, 2015, the Company entered into a $2,000,000 revolving demand loan agreement (“line of credit”) with a regional bank.  There were no borrowings made at inception.  The interest rate on this loan is Wall Street Journal Prime, with a floor of 3.25%.  The loan is unsecured and there are no guarantors.  Interest is to be paid monthly; principal is to be repaid within twelve months or on demand, at the bank’s discretion.  There are no prepayment penalties.  This line of credit will primarily be used from time to time to fund initial investments related to development opportunities.

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, results of operations and cash flows.  This 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 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  These views may involve risk 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 relationship with key tenants 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

There have been no significant changes in the Company’s critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2015 under the subheading “Critical Accounting Policies and Estimates”. 

Results of Operations:

Rental Income

Rental income for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

The increase in residential rental income for the three and six months ended October 31, 2015 compared with the prior year was primarily caused by an increase in the subsidy received for the Rockland, MA property, partially offset by increases in concessions and vacancies.

 There were no individually significant variances in commercial residential income in the three and six months ended October 31, 2015 compared with the prior year.  Normal rent rate increases were offset by the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 (see Note 8 of the Financial Statements included within for discussion.)

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

Service Income

Service income for the three and six months ended October 31, 2015 and 2014 follows:

The increase in preferred developer fees in the three months ended October 31, 2015 compared to the prior year was related to higher fees received from Cumberland Farms; CVS fees were in line with the prior year.  The decrease in preferred developer fees for the six months ended October 31, 2015 compared to the prior year reflected lower fees received from CVS; higher fees received from Cumberland Farms were a partial offset. 

Sales (and Cost of Sales) of Real Estate

On May 28, 2015, the Company sold a parcel of land in Pearland, TX for $1,104,161 (cost of $747,610). 

On August 6, 2015, the Company sold a property in Austin, TX for $10,246,021 (cost of $7,728,203).  A construction loan with a balance of $6,106,437 was paid off with the proceeds.

There were costs related to property sales that occurred in the second half of the fiscal year ended April 30, 2015 totaling $199,077 that were recorded in the six months ended October 31, 2015 as they were not anticipated as of the prior fiscal year end.

The Company did not sell any real estate in the three and six months ended October 31, 2014.

Other Income

The increase in other income for the three and six months ended October 31, 2015 compared to the prior year was primarily at the liquor store, which obtained a liquor license in December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine. 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

Operating Costs and Expenses:

Rental Expenses

Rental expenses for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

The decrease in residential rental expenses for the three and six months ended October 31, 2015 from the prior year were mainly from lower asbestos remediation expenses at the Clarendon property as these costs, which are ongoing, were capitalized in the first half of fiscal year 2016 as they were determined to improve the condition and safety of the property and mitigate and prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities.  Also contributing to the decrease were non-recurring sprinkler and fire damage-related expenses at Clarendon in the prior year.  Partially offsetting this decrease were higher voucher incentive payments made to Rockland’s tenants in an effort to maximize subsidy income.  

The increase in commercial rental expenses for the three and six months ended October 31, 2015 from the prior year were mainly due to increased costs related to the expansion of our shopping center in Edinburg, TX, partially offset by the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015.  Also impacting the six month comparison were professional and legal expenses incurred as part of the initial effort to refinance the debt at the Cranston, RI shopping center (the refinancing ultimately happened via another lender - see Note 5 of the Financial Statements included within for discussion).

Service Expenses

The increase in service expenses for the three and six months ended October 31, 2015 and 2014 compared to the prior year reflected higher preferred developer expenses and fees reflecting the ramp-up to full staffing that occurred in the second half of fiscal year 2015 and into fiscal year 2016, as well as salary increases. 

Selling, General and Administrative (“SG&A”) 

The decrease in SG&A expenses for the three months ended October 31, 2015 compared to the prior year was the result of several employees now focused on the Preferred Developer program and thus no longer performing SG&A duties, partially offset by higher expenses at the liquor store in North Adams, MA, which did not obtain a liquor license until December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine.  For the six months ended October 31, 2015, SG&A was essentially flat compared to the prior year due to these same factors.  Also factoring into these variances is the proportion of certain employees’ time allocated to asbestos abatement at Clarendon versus SG&A activities.

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

Non-Operating Income (Expense):

Interest Expense

Interest expense for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

The decrease in commercial interest expense for the three and six months ended October 31, 2015 compared to the prior year was primarily the result of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 and savings from the refinancings at Cranston and CP Associates (see Note 5 of the Financial Statements included within for discussion).

The decrease in residential interest expense for the three and six months ended October 31, 2015 compared to the prior year was the result of the refinancings at Rockland and Clarendon that occurred in December 2014 and February 2015, respectively.

Gain on Voluntary Foreclosure

See Note 8 of the Financial Statements included within for discussion.

Other Income

Other income for the three and six months ended October 31, 2015 and 2014 follows:

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

Gain on Forgiveness of Debt

During the three and six months ended October 31, 2014, a 100% owned subsidiary of the Company, Main Street NA Parkade, LLC signed an agreement that the Mortgage loan secured by the property of Main Street NA Parkade located in North Adams, would be reduced from $12,575,423 to $7,260,000.  As of the date hereof, the Note reflects an outstanding principal balance of $7,260,000 due to a reduction of principal indebtedness through debt forgiveness by Lender, which resulted in a gain in the amount of $5,315,423 during the year ended April 30, 2015. During the year ended April 30, 2014, the Company recorded an impairment loss of $4,027,053 on this property.  This impairment reflected the continuing overall economic decline in the geographical area and retail industry that thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center.

TERMS:

Commencing October 1, 2014 through and including January 1, 2020.  Interest shall be 200 basis points in excess of the thirty day LIBOR rate.

Amortization commencing February 1, 2020 through October 1, 2030 (“Maturity Date”) on the basis of a 25 year schedule of amortization with a balloon payment due on October 1, 2030.  Interest during this period shall be 5.5% per annum. 

Call Option – Lender may elect to accelerate this Note and require the Company to prepay without premium the entire unpaid principal balance at any time after March 1, 2017.

The Note is non-recourse.

Amended and Restated Escrow and Security Agreement

Beginning October 1, 2014 and including September 30, 2015 all net cash flow of the property shall be deposited in the Escrow account.

Additional Interest Agreement (AIA) was amended as follows:

Commencing on October 1, 2015 and continuing through September 30, 2019 the Company will remit 50% of the cash flow of the property to Lender.  Lender will apply all such payments received to the outstanding amount due on the date of the next installment due under the loan.

Gain (Loss) on Derivatives

The Company, through its 50% owned consolidated subsidiaries, has entered into two separate floating-to-fixed interest rate swap agreements with banks that expire in May 2025 and July 2031.  The Company has determined that these derivative instruments do not meet the requirements of hedge accounting and have therefore recorded the change in fair value of these derivative instruments through income.

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

Equity in Earnings of Unconsolidated Subsidiary

The equity in earnings of unconsolidated subsidiary for the three and six months ended October 31, 2015 and 2014 follows:

The Company has an investment in an affiliated limited liability entity Dover Parkade, LLC, (Dover).  The Company has a 50% interest in Dover which owns a shopping center in Dover Township, NJ.  The operating and financial policies of Dover are not controlled by the Company.  For the years prior to May 1, 2009, the Company was committed to providing funding to this equity method investee.  The Company’s investment was recorded at cost and subsequently adjusted for its share of their net income and losses and distributions. To 2009, losses and distributions from Dover exceeded the Company’s investment.  Since then, distributions from Dover have been credited to income.  The Company does not control the rate of distributions of Dover.  Such distributions are in excess of Dover’s net assets since its accumulated net losses (including significant amounts for depreciation and amortization) have exceeded capital contributions.

During the six months ended October 31, 2014, the equity in earnings of Dover were charged $399,656, which represented 50% of the direct costs of defeasance on the refinancing of the prior mortgage plus some additional defeasance cost.  As a result of the refinancing, the Company received a distribution of $600,000.

Income Taxes

In the three and six months ended October 31, 2015, the Company had taxable income in excess of the remaining loss carryforwards remaining as of April 30, 2015, resulting in current income tax expense.  The first quarter gain on the voluntary foreclosure of the Putnam, CT shopping center was not taxable as the associated cancellation of debt income would have been reduced by the company’s tax attributes. This reduction of tax attributes along with operating results and the use of an Alternative Minimum tax credit resulted in a minimal income tax expense. Operating results in the second quarter have generated taxable income in excess of the Company’s tax attributes, thus resulting in a higher income tax expense.

In the quarter and six months ended July 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.  However, as a result of a forgiveness of debt by the mortgage holder of the Main Street NA Parkade LLC, the Company recorded a gain through debt forgiveness of $5,315,423.  As a result, the Company recorded tax expense of $250,000, which included an Alternative Minimum Tax of $100,000 and state income tax of $150,000. 

Capital Resource and Liquidity

At October 31, 2015, the Company had $6,295,715 of unrestricted cash and cash equivalents. This includes $4,064,066 belonging to partnership entities in which the Company’s financial interests range from .01% (VIEs) to 50%.  Funds received from CVS, which are to be paid out in connection with CVS developments, amounted to $1,891,664 and tenant security deposits held by VIEs of $412,836, are included in restricted cash and cash equivalents.

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
              OPERATIONS (continued):

At October 31, 2015, the Company had $1,256,413 of investments in marketable securities, all of which belongs to partner entities.

The Company believes it has sufficient cash and cash resources to fund operations and debt maturities in the next fiscal year without any new bank borrowings through October 31, 2016. Borrowings for new construction loans or property purchases are unclear at this time.  On December 7, 2015, the Company entered into a $2,000,000 revolving demand loan agreement (“line of credit”) with a regional bank.  There were no borrowings made at inception.  The interest rate on this loan is Wall Street Journal Prime, with a floor of 3.25%.  The loan is unsecured and there are no guarantors.  Interest is to be paid monthly; principal is to be repaid within twelve months or on demand, at the bank’s discretion.  There are no prepayment penalties.  This line of credit will primarily be used from time to time to fund initial investments related to development opportunities.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4.  CONTROLS AND PROCEDURES 

Evaluation of Disclosure 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 Chairman 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 Chairman 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 the Evaluation, our Chairman 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, 2015, 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

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period covered by this report, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.