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

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

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

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE (LOSS) INCOME

(Unaudited)

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

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

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

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.         Nature of Business and Significant Accounting Policies:

Description of Business

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

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of First Hartford Corporation, its wholly owned subsidiaries and other controlled subsidiaries (collectively referred to as the “Company”).  The Company 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 nine months ended January 31, 2011 are not necessarily indicative of the results that may be expected for the year ending April 30, 2011.  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, 2010.

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

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

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, 2010, except as discussed below.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued consolidation guidance, which amended the previous consolidation guidance applicable to variable interest entities.  Under the updated

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

guidance, 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.  The application of this updated guidance was effective for the Company as of May 1, 2010.  Based on this updated guidance, the Company determined that it is no longer considered to be the primary beneficiary of the Company’s joint venture, CP Associates, LLC (“CP Associates”).  As a result of the initial application of this updated guidance, the Company has 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.  The difference between the net amount removed 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 beginning equity as of May 1, 2010 (see Note 2).

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.         Investments in Affiliated Partnerships:

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.         Investments in Affiliated Partnerships (continued):

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.         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, 2007. 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.

The Company accounts for uncertain income tax positions in accordance with the accounting guidance in FASB ASC topic 740, Income Taxes. Using that guidance, tax positions are initially recognized by the Company in the consolidated financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. The Company’s policy is to recognize interest and penalties accrued on any uncertain income tax positions as a component of income tax expense.

The Company will only recognize a deferred tax asset when, based upon available evidence, realization is more likely than not. In making this determination, the Company has considered both available positive and negative evidence including, but not limited to, cumulative losses in recent years, future taxable income and prudent and feasible tax planning strategies. As of January 31, 2011 and April 30, 2010, the Company concluded that it was more-likely-than-not that the Company would realize $1,238,000 in deferred tax assets. Accordingly, the Company increased its valuation allowance by approximately $556,000 during the nine months ended January 31, 2011. The Company has federal net operating loss carry-forwards totaling approximately $15 million at January 31, 2011 that are available to offset future federal taxable income through various periods expiring between 2012 and 2026.

4.         Legal:

On November 29, 2010, the Company purchased 591,254 shares of common stock beneficially owned by Richard Kaplan.  The terms of repayment as set by the court consisted of a $500,000 initial payment made on November 23, 2010 and a secured note for the balance.  There will be 20 quarterly payments of approximately $119,000 each plus interest at the statutory rate (approximately .05%) for the first 12 months and thereafter based on the average rate First Hartford pays to its first mortgage creditors.  There will be a balloon payment of approximately $790,000 for pre-judgement interest from September 15, 2005 through November 29, 2010.

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

The discussion included in Item 7 of our Annual Report on Form 10-K for the year ended April 30, 2010 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.

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

                        CONDITION AND RESULTS OF OPERATIONS (continued):

Results of Operations

Rental Income

Increase in rental income for the three and nine month periods ended January 31, 2011 compared to the three and nine month periods ended January 31, 2010 was mainly due to the acquisition of Clarendon Tower’s, a low income residential apartment complex during April 2010, offset partially by the deconsolidation of CP Associates as of May 1, 2010.

Service Income

Decrease in service income (approximately $640,000 and $1,704,000) for the three and nine month periods ended January 31, 2011 compared to the three and nine month periods ended January 31, 2010 was mainly due to a slowdown in our CVS Pharmacy business.  Additionally, management fees from Clarendon Towers for the current periods were eliminated in consolidation.  Prior to acquisition such management fees were included in service income.

Rental Expense

The increase in rental expense for the three and nine month periods ended January 31, 2011 was a direct result of the inclusion of Clarendon Towers less the deconsolidation of the rental expense of C P Associates.

Service Expense

Service expense decreased approximately $179,000 and $362,000 for the three and nine months period ended January 31, 2011.  This reduction is mostly from a decline in activity related to our CVS Pharmacy business, which is consistent with the decline in our income generated from this business.

Gain (Loss) on Derivative 

The gain (loss) on derivatives relates to the change in fair value of interest rate swaps held by CP Associates, which was deconsolidated as of May 1, 2010.

Interest Expense

The increase in interest expense for the three and nine months ended January 31, 2011 is due to the deconsolidation of C P Associates offset by the addition of Clarendon Towers.

Capital Resource and Liquidity

The Company ended the period with approximately $1,136,000 of unrestricted cash and cash equivalents.  Unrestricted cash and cash equivalents include approximately $816,000 belonging to less than wholly-owned consolidated partnerships (Rockland Place, LP, and Clarendon Hill Somerville, LP).  Funds received from CVS Pharmacy, which are to be paid out in connection with CVS developments amounted to approximately $645,000 and is included in restricted cash and cash equivalents.

At April 30, 2010, the Company reported approximately $1,892,000 of unrestricted cash and cash equivalents belonging to CP Associates, LLC.  Due to the deconsolidation, it is no longer included in the Company’s balance sheets.

Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

                        CONDITION AND RESULTS OF OPERATIONS (continued):

Capital Resource and Liquidity (continued):

The following schedule outlines our long-term obligations.

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 January 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

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

(a)    The annual meeting of the Company was held on November 9, 2010.

(b)    Elected as Directors:       Neil H. Ellis, David Harding and Stuart Greenwald

(c)

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.