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, 2009.

[  ]  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: _______________________________________________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required 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 X Yes    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

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. (Check one):

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

                                                                                                                                                 Yes   X No

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.

3,027,965 as of January 8, 2010   

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

INDEX

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

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 reflects noncontrolling interest for the non-owned portions of consolidated subsidiaries.  All significant intercompany transactions and accounts have been eliminated in the condensed 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 and six months ended October 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.

These accompanying unaudited interim condensed consolidated financial statements recognize the effects of all subsequent events that provide additional evidence about conditions that existed at October 31, 2009, including the estimates inherent in the process of preparing financial statements. We have evaluated such subsequent events through January 13, 2010, which is the date the accompanying unaudited interim condensed consolidated financial statements were issued.

Certain amounts in the statement of cash flows for the six months ended October 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 new guidance issued by the Financial Accounting Standards Board.

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.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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.

Effective July 1, 2009, the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) became the single official source of authoritative, nongovernmental generally accepted accounting principles (“GAAP”) in the United States. The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other then guidance issued by the Securities and Exchange Commission. The Company’s accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to the Company’s consolidated financial statements have been changed to refer to the appropriate ASC topics.

The Company has adopted updated guidance included in ASC 805, Business Combinations effective May 1, 2009. The updated guidance requires an acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. The updated guidance changed the accounting treatment and disclosure for certain specific items and addresses application issues on the accounting for contingencies in a business combination.

The Company has adopted updated guidance included in ASC 810, Consolidation effective May 1, 2009. The updated guidance establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The updated guidance requires that noncontrolling interests be presented as a component of consolidated stockholders’ equity, eliminates minority interest accounting such that the amount of net income attributable to the noncontrolling interests is presented as part of consolidated net income in the accompanying consolidated statements of operations and not as a separate component of income and expense, and requires that upon any changes in ownership that result in the loss of control of the subsidiary, the noncontrolling interest be re-measured at fair value with the resultant gain or loss recorded in net income. The adoption of the requirements of the updated guidance had an impact on the presentation and disclosure of noncontrolling (minority) interests in the condensed consolidated financial statements. As a result of the retrospective presentation and disclosure requirements of the updated guidance, the Company has reflected the change in presentation and disclosure for all periods presented.

In March 2008, the FASB issued guidance to amend the requirements of ASC 815, Derivatives and Hedging. The requirements of the updated guidance are intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures for derivative and hedging activities. The adoption of the requirements of the updated guidance became effective for the Company on May 1, 2009, but did not have a material impact on the Company’s condensed consolidated financial statements.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Significant Accounting Policies (continued):

In April 2009, the FASB issued guidance to amend the requirements of ASC 825, Financial Instruments. The updated guidance relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. The updated guidance requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The adoption of the requirements of the updated guidance became effective on May 1, 2009, but did not have a material impact on the Company’s condensed consolidated financial statements. 

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).

2.         Fair Value of Derivative Instruments

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 loss on derivatives of $207,652 for the quarter ended October 31, 2009 and a gain on derivatives for the six month period ended October 31, 2009 of $616,913.  The aggregate fair value of the Company's swap contracts were in an unfavorable position of $2,810,601 as of October 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 October 31, 2009 and April 30, 2009, $4,830,127 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 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 October 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.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

period.  Actual results could differ from those estimates.

The discussion included in Item 7 of our Annual Report on Form 10-K for the year ended April 30, 2009 under the subheading "Critical Accounting Policies and Estimates" is still considered current and applicable, and is hereby incorporated into this Quarterly Report on Form 10-Q.

Results of Operations:

Sale of real estate during the three and six month periods ended October 31, 2009 were solely from the sale of the Company’s leasehold interests in and improvements made to Triangle Center in Bangor, Maine.  The sale of real estate in the three and six months period ended October 31, 2008 were solely from the sale of an outparcel in Edinburg, Texas.

Increases in rental income are almost exclusively from stores which opened in Edinburg, Texas subsequent to October 31, 2008.

During the three and six month periods ended October 31, 2009, service income increased by approximately $556,000 and $1,784,000 from the three and six month periods ended October 31, 2008.  This increase was almost exclusively from our CVS Pharmacy business.

Increases in rental expenses are almost exclusively from the shopping center in Edinburg, Texas, which had minimal expenses for the periods ended October 31, 2008.  The largest increases specifically related to real estate taxes and depreciation.  Due to the current low level of construction, the Company has been expensing all the real estate taxes, including those related to parcels that are currently not being worked on.

Increases in service expenses are directly attributed to the increased service income from our CVS Pharmacy business.

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

Results of Operations (continued):

For the three and six month periods ended October 31, 2009, $711,000 and $1,409,000, respectively, was charged to interest expense on construction loans related to the Edinburg, Texas shopping center. Approximately $301,000 and $587,000 of interest during these periods is attributable to interest on construction loans for additional phases of construction pertaining to expansion of the shopping center. The interest is currently being expensed due to the current low level of construction activity which is attributable to the current challenge of securing tenants. In addition, interest expense for the three and six months ended October 31, 2009 includes $150,922 for pre-judgment interest relating to the Kaplan matter.

Capital Resources and Liquidity

Item 3.             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 4T.         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 fully effective as of the end of the period covered by this report. Notwithstanding weaknesses in our control environment, as of October 31, 2009, 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