15

---

---

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011
(continued)

 

	2012		2011
Financing activities:
Contributions from noncontrolling interests – limited partners	$5,557,738		$1,553,927
Purchase of treasury stock	(19,453)		-0-
Distribution to noncontrolling interests	(200,000)		-0-
Proceeds from:
Construction loans	8,235,550		20,444,074
Mortgages	550,000		-0-
Other notes	25,000		-0-
Principal payments on:
Construction loans	(6,687,971)		(648,580)
Mortgages	(1,668,799)		(1,021,367)
Other notes	(359,481)		(1,223,565)
Advances to related parties and affiliates, net	(32,825)		(7,375)
Net cash provided by financing activities	5,399,759		19,097,114
Net change in cash and cash equivalents	2,199,561		(4,320,989)
Cash and cash equivalents, beginning of year	858,175		5,179,164
Cash and equivalents, end of year	$3,057,736		$858,175
Cash paid during the year for interest	$7,389,980		$6,272,726
Cash paid during the year for income taxes	$80,092		$87,902
Non cash investing and financing activities:
Transfer from accrued liabilities to notes payable – other for
litigation settlement	-0-		$3,676,379

 

 

 

 

 

See accompanying notes.

 

18

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

1.    Summary of 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 which is considered a single segment.

Principles of Consolidation

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

Estimates

The preparation of consolidated 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 amounts of assets and liabilities, 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.

Financial Statement Presentation

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 consolidated balance sheets are unclassified.

Statements of Cash Flows

For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

Construction Revenue - The Company primarily develops real estate for its own use.  However, revenues from projects built for third parties are recognized on the percentage-of-completion method of accounting based on costs incurred to date in relation to total actual costs and estimated costs to complete.  Revisions in costs and profit estimates are reflected in operations during the accounting period in which the facts become known.  The Company provides for estimated losses on contracts in the year such losses become known.  The Company did not build any projects for third parties in the year ended April 30, 2011. Construction revenues were approximately $1,342,000 for the year ended April 30, 2012. Such revenues are included in service income and relate primarily to a single contract.

 

19

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

1.     Summary of Significant Accounting Policies (continued):

 

Revenue Recognition (concluded):

 

Sales of Real Estate – The Company recognizes sales of real estate as revenue upon the transfer of title and when substantially all performance requisites have been fulfilled.  For the years ended April 30, 2012 and 2011, the Company had sales of approximately $ 1,560,000 and $798,000, respectively.  The cost of the property sold was approximately $968,000 and $669,000 for 2012 and 2011, respectively.  None of the property sold was otherwise providing cash flows to the Company.

 

Rental Income – Rental income is recognized on a straight-line basis over the terms of the respective leases and consists of base rent and reimbursements for certain costs such as real estate taxes, utilities, insurance, common maintenance and other recoverable costs as provided in the lease agreements.  There are no contingent rents.

 

Service Income

 

The Company is party to a Preferred Developer Agreement with CVS Pharmacy Inc. (“CVS”).  Under this agreement, the Company’s fee for such services provided is recognized as earned when services are provided.  Fees earned related to the development of pharmacy stores for CVS during the years ended April 30, 2012 and 2011 were approximately $4,220,000 and $3,094,000, respectively, which is included in service income in the consolidated statements of operations.

 

The Company also provides management and maintenance services to others.  Fees for such services provided are recognized in service income as earned when services are provided.

 

Other Receivables and Payables

 

Pursuant to the Company’s Preferred Developer Agreement with CVS, the Company is obligated to fund allowable costs incurred in connection with the identification of and development of new retail pharmacy stores for which it receives direct reimbursements from CVS.  Payables for allowable costs incurred in connection with the identification of and development of these pharmacy stores but not yet funded were $6,102,292 and $5,218,947 as of April 30, 2012 and 2011, respectively, and have been included as “other payables” in the consolidated balance sheets.  Related reimbursements due from CVS were $ 6,005,663 and $4,708,410 as of April 30, 2012 and 2011, respectively, and have been included in other receivables in the consolidated balance sheets.

Cash and Cash Equivalents – Restricted

Cash and cash equivalents – restricted, consist entirely of funds received from CVS in connection with the Company’s Preferred Developer Agreement.  Such amounts are to be used for the payment of costs incurred by the Company for the development and construction of CVS retail pharmacy stores.

 

 20

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

1.    Summary of Significant Accounting Policies (continued):

Developed Properties, Equipment and Tenant Improvements

Developed properties, equipment and tenant improvements are recorded at cost.

Depreciation and amortization is provided using the straight-line method based on the following estimated useful lives.

                                                                                               

Expenditures for major renewals and betterments, which extend the useful lives of developed properties, equipment and tenant improvements, are capitalized.  Expenditures for maintenance and repairs are charged to operations as incurred.

 

Property Under Construction

 

The Company capitalizes costs clearly associated with the property under construction, including interest.

 

Deferred Expenses

 

Expenditures directly related to real estate under consideration for development are deferred and included in deferred expenses in the consolidated balance sheets.  These costs include option payments, attorney’s fees, architect and engineering fees, consultants, etc., but only to the extent they are from outside sources.  If development of the real estate commences, all of the accumulated costs are reclassified to property under construction in the consolidated balance sheets.  If the project is later abandoned, all of the accumulated costs are charged to expense.

 

Leasing costs incurred, primarily commissions, are capitalized for signed leases.  Financing costs including legal fees and other costs relating to the acquisition of debt financing are deferred.  Leasing and deferred financing costs are included in deferred expenses in the accompanying consolidated balance sheets.  Such costs are amortized using the straight-line method over the terms of the related leases and debt, respectively.  The unamortized balance of such cost was $2,196,296 and $2,492,953 as of April 30, 2012 and 2011, respectively.  Amortization expense was $ 357,583 and $354,022 for the years ended April 30, 2012 and 2011, respectively.  Amortization expense for the next five years is expected to be as follows:

 

 

21

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

1.     Summary of Significant Accounting Policies (continued):

Investment in Affiliated Entities

 

The Company has a 1.99% general partner ownership interest in Hartford Lubbock Parkade LLP which is managing agent for a shopping center in Lubbock, Texas.  The remaining interest is owned by Lubbock Parkade, Inc., a wholly owned subsidiary of Journal Publishing, Inc. which is owned by the Company’s President and his wife.  This investment is carried at cost of $9,665. Any distributions received from this investment are recorded in income.

 

The Company also has investments in four other affiliated partnerships and limited liability entities including Dover Parkade, LLC, Cranston Parkade, LLC, CP Associates, LLC and Trolley Barn Associates.  The Company has a 50% ownership interests in each of these entities and does not control their operating and financial policies.  As such, these investments are accounted for using the equity method.  For the years prior to May 1, 2009, the Company was committed to provide funding to these equity method investees.  The Company’s investments in them was recorded at cost and subsequently adjusted for its share of their net income and losses and distributions.  The resulting carrying value of these investments ($4,098,351) as of April 30, 2012 and ($4,387,983) as of April 30, 2011 is included in other liabilities.

 

Dover Parkade, LLC (“Dover”) owns a shopping center in Dover Township, NJ.  Cranston Parkade, LLC (“Cranston) has an interest in Cranston/BVT Associates LP, which owns a shopping center in Cranston, RI.  CP Associates, LLC owns a retail commercial shopping center in Cranston, RI.  Trolley Barn Associates holds undeveloped land in Cranston, RI and is otherwise inactive.

 

On May 1, 2010, the Company deconsolidated CP Associates, LLC based on updated consolidation guidance issued by the FASB.  As referred to above, CP Associates, LLC is now accounted for under the equity method. Prior to May 1, 2010, CP Associates, LLC was included in the Company’s consolidated financial statements.

 

On October 4, 2011, the Company entered into a partnership with a nonprofit entity which purchased a 99 year leasehold interest in a 200 unit subsidized housing project in Willington, Delaware.  The Company is a limited partner in the entity which borrowed $8,150,000 for the purchase and renovation of the property.  A subsidiary of the Company will make the estimated $3,000,000 renovation while another subsidiary of the Company will be the managing agent.

 

The Company recorded equity in earnings of unconsolidated subsidiaries (including CP Associates, LLC) of $1,307,101 and $1,001,970 for the years ended April 30, 2012 and 2011, respectively.

 

22

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

1.    Summary of Significant Accounting Policies (continued):

Fair Value Measurements

Certain assets and liabilities are presented at fair value on a recurring basis.  In addition, fair values are disclosed for certain other assets and liabilities.  In all cases, fair value is determined using valuation techniques based on a hierarchy of inputs.  A summary of the hierarchy follows:

	•	Level 1 –	Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.
	•	Level 2 –	Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant observable inputs are available, either directly or indirectly such as interest rates and yield curves that are observable at commonly quoted intervals; and
	•	Level 3 –	Prices or valuations that require inputs that are unobservable.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

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 debt since the interest rates on the debt approximates the Company’s current incremental borrowing rate.  Information about the fair values of marketable securities and derivative liabilities is presented below.

Marketable Securities

The Company determines the appropriate classifications of its investments in marketable debt and equity securities at the time of purchase and re-evaluates such determination at each balance sheet date.  As of April 30, 2012 and 2011, investments consist of equity securities, which are classified as available for sale.  Investments in marketable securities are stated at fair value.  Fair value for marketable securities is based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1).  Net unrealized holding gains and temporary losses on equity securities are included as a separate component of the deficiency.  There were no significant gross unrealized gains or temporary losses on such securities as of either April 30, 2012 or 2011. Net unrealized losses of $12,558 as of April 30, 2012 and gains of $64,210 as of April 30, 2011 are included in accumulated other comprehensive (loss) income. Net unrealized losses for the year ended April 30, 2012 of $76,768 included $91,678 as the Company’s share of net unrealized losses on marketable securities held by a 50% owned investee and $14,910 of unrealized gains on the Company’s holdings. Gains or losses on securities sold are based on the specific identification method.

 

 23

 

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

1.    Summary of Significant Accounting Policies (continued):

Long-Lived Assets

Long-lived assets held and used in operations are reviewed for impairment whenever events of changes in circumstances indict that their carrying amount might not be recovered.  There we no impairments for any period presented.

The Company presents operations related to developed properties that have been sold or developed properties that are intended to be sold as discontinued operations.  Developed properties intended to be sold are designated as “held for sale” on the consolidated balance sheets.  No developed properties were sold during the years ended April 30, 2012 or 2011 and none are designated as held for sale at year end.

  Income Taxes

Deferred income taxes are provided on the differences between the financial statement and income tax bases of assets and liabilities and on net operating loss carryforwards using the enacted tax rates.

A valuation allowance is provided for deferred income tax assets for which realization is not likely in the near term.

As of April 30, 2012 and 2011, the Company has no significant uncertain income tax positions.  The Company recognizes interest and penalties on any uncertain income tax positions as a component of income tax expense.

The State of Massachusetts recently concluded an audit for the years ended April 30, 2008 and 2009. In addition, the Internal Revenue Service has been conducting an audit for the year ended April 30, 2010.  The Company does not have any indication that any adjustments are necessary. Otherwise, tax returns for fiscal years after 2008 are open to examination by Federal, local and state authorities.

 

Stock Compensation

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

Earnings (loss) per share (EPS)

Basic earnings (loss) per share amounts are determined using the weighted-average outstanding common shares for the year.  Diluted earnings (loss) per share amounts include the weighted-average outstanding common shares as well as potentially dilutive common stock options and warrants.  All outstanding options and warrants were anti-dilutive and were excluded from the dilutive earnings (loss) per share calculations for those years since the Company had net losses.

24

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

1.    Summary of Significant Accounting Policies (concluded):

New Accounting Pronouncements

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

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

2.    Consolidated Variable Interest Entities

The Company’s consolidated financial statements include the accounts of Rockland Place Apartments Limited Partnership (“Rockland”) and Clarendon Hill Somerville Limited Partnership (“Clarendon”).  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. 

Connolly and Partners, LLC (75% owned by the Company) has a .01% ownership interest in and is a general partner of Rockland.  Connolly and Partners, LLC also owns 49% of Clarendon Hill Somerville, LLC which owns .01% of and is the general partner of Clarendon.

Rockland owns and operates a rental housing project consisting of 204 units located in Rockland, Massachusetts.  Clarendon owns and operates a 501 unit apartment complex in Somerville, Massachusetts.  Both projects were renovated by the Company.  Renovation costs were financed with loans from Massachusetts Housing Finance Agency (MHFA), subsidies from U.S. Departments of Housing and Urban Development (HUD) and limited partner capital contributions.

Each building of the projects will qualify for low-income housing credits pursuant to Internal Revenue Code Section 42 (“Section 42”), which regulates the use of the projects as to occupant eligibility and unit gross rent, among other requirements.  Each building of the projects must meet the provisions of these regulations during each of fifteen consecutive years in order to remain qualified to receive the credits.  In addition, Rockland and Clarendon have executed an Extended Low-Income Housing Agreement, which requires the utilization of each project pursuant to Section 42 through the compliance period, even if Rockland or Clarendon disposes of the project.

Each project’s low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42.  Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest.  In addition, such potential noncompliance may result in a adjustment to the capital contributed by the investment limited partner.

 

25

 

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

2.    Consolidated Variable Interest Entities (continued):

Rockland has an agreement with the Rockland Housing Authority whereby the Housing Authority has the option to purchase the property, after the 15-year tax credit compliant period on January 1, 2024, from Rockland.  The option price is based on a specified formula in the agreement.

Clarendon has an agreement with the 51% owner of Clarendon Hill Somerville, LLC, Clarendon Hill Towers Tenant Associated, LLC (“CHTTA”), whereby CHTTA has an option to purchase the property after the 15 year tax credit compliance period from the partnership.  The option price is the greater of:

a.      Outstanding debt and taxes, or

b.      Fair market value of the property

On February 27, 2012, the Company received a Certificate of Completion from the Massachusetts Housing Financing Agency (“MHFA”) for its Clarendon Hill project.  As a result, the Company received from MHFA via its 75% owned subsidiary, net cash of $2,642,000 after applying $2,900,000 to an outstanding bridge loan previously provided by MHFA.  Of the net amount received, $380,000 was for construction work and $2,262,000 for the Company’s Development Fee.  Of the remaining development fee of $2,040,000, $1,423,000 was paid on August 22, 2012 and $617,000 will be paid in September 2012. The balance of the bridge loan was paid on August 22, 2012 from the partner’s capital contribution.

There was a completion assurance agreement for the construction of the Clarendon Hill project guaranteed by the Company and its President for $1,042,640.  This agreement was canceled and a collateralized letter of credit issued against the guarantee of $819,920 was returned during the year ended April 30, 2012.  In turn, the collateral for the letter of credit consisting of cash and marketable securities of CP Associates, LLC was also released.

The assets at April 30, 2012 and 2011 of the consolidated VIEs (Rockland and Clarendon), that can be used only to settle their obligations and their liabilities for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company are shown parenthetically in the line items of the consolidated balance sheets.

A summary of the assets and liabilities of Rockland and Clarendon included in the Company’s consolidated balance sheets follows:

 

Substantially all assets of Rockland and Clarendon are pledged as collateral for its debt. The recourse of the holders of the mortgages and other notes payable is limited to the assets of Rockland and Clarendon.

26

 

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

2.     Consolidated Variable Interest Entities (concluded):

Combined revenues for Rockland and Clarendon were $10,662,444 for the year April 30, 2012 and $10,062,799 for the year ended April 30, 2011. The combined net loss for Rockland and Clarendon was $1,427,433 for the year ended April 30, 2012 and $1,590,093 for the year ended April 30, 2011. Since the Company’s ownership interest in both entities is nominal, substantially all of such losses are allocated to the noncontrolling interests in the consolidated financial statements.

The limited partners in Clarendon made capital contributions of $5,557,738 for the year ended April 30, 2012 and $617,526 for the year ended April 30, 2011. The limited partners are committed to make additional capital contributions of $4,940,041 for the year ended April 30, 2013. Final payments by the Limited Partners of Rockland ($936,401) were made during the year ended April 30, 2011.

During the year ended April 30, 2011, the Company purchased the noncontrolling interest in Rockland Place Developers, LLC with a carrying value of $742,817 for $600,000. The accounts of Rockland Place Developers, LLC continue to be consolidated with those of the company.

3.     Construction Loans, Mortgages and Notes Payable:

Information about the Company’s debt follows:

	2012		2011
Construction loans and mortgages payable with interest rates ranging from zero to 11.00% at April 30, 2012 and maturities at various dates through 2056.
	$138,267,888		$137,839,107
Notes payable on Clarendon with interest rates ranging from zero to 4.40% at April 30, 2012 and maturities ranging from 2030 to 2050.
	1,704,697		1,679,697
Note and pre-judgment interest payable to Richard E. Kaplan in quarterly installments with interest and final payment of $790,423 due November 29,2016
	2,578,957		2,938,438
	$142,551,542		$142,457,242

 

For the year ended April, 30, 2011, the Company capitalized interest of $115,000 for property under construction.  
No interest was capitalized for the year ended April 30, 2012.

Aggregate principal payments due on the above debt follow:

Year Ending April 30
2013		$   4,822,052
2014		38,677,816
2015		14,434,457
2016		1,808,010
2017		2,261,587
Thereafter		80,547,620
		$142,551,542

 

 

 27

 

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

3.    Construction Loans, Mortgages and Notes Payable (concluded):

 

Debt maturities for 2013 include $2,900,000 of bridge financing for debt of a VIE. This amount will be repaid to the lender from equity contributions of the noncontrolling interest due at the end of August 2012. Included in the 2014 maturities is $36,625,591 of non-amortizing debt which will be converted to amortizing debt (25 years).

Substantially all real estate owned is pledged as collateral for construction and mortgage loans.

4.    Public Infrastructure Reimbursements and Other Incentives:

In connection with the Company’s development and construction of a shopping center owned and operated by the Company in the City of Edinburg, Texas, the Company entered into an Economic Development Agreement dated February 20, 2007 with the City of Edinburg and other local non-profit corporations.  In connection with agreement, the Company receives reimbursements of public infrastructure costs incurred by the Company in addition to other cash incentives.

Public Infrastructure Reimbursements

During the year ended April 30, 2010, the Company recognized a receivable from the City of Edinburg and reduction of the cost of the shopping center of $8,000,000 for the reimbursement of eligible public infrastructure costs incurred by the Company.  The reimbursement is payable solely by the City of Edinburg from proceeds of public infrastructure bonds and/or from proceeds from 50% of the City’s dedicated 1% sales tax generated from the shopping center.  The Company has received $5,405,585 in reimbursements of eligible public infrastructure costs through April 30, 2012.  The remaining receivable of $2,594,415 is included in other receivables at April 30, 2012.  The remaining receivable will be collected from the proceeds from the issuance of additional public infrastructure bonds by the City of Edinburg or collection of sales tax.

Other Cash Incentives

In connection with the agreements, the Company also receives contributions from the Edinburg Economic Development Corporation (“EEDC”) up to $4,000,000 as its .5% share of sales tax revenue generated from the shopping center.  Such nonreciprocal transfers of the Company’s share of sales taxes generated are recorded by the Company as other operating revenue when received.  The Company received $319,120 and $304,311 from the EEDC for the years ended April 30, 2012 and 2011, respectively.

5.    Pledge of Stock in Subsidiaries:

For an extended period of time the Company was unable to obtain financing (secured or unsecured) without the personal guarantees of the President of the Company.  To some degree, the Company has recently been able to obtain financing without a guarantee, but generally guarantees continue to be a necessary component to most construction loans.  In the past, the Company has provided pledges of the stock of its subsidiaries to the President of the Company as protection from personal losses due to his guarantees.  These pledges are expected to stay in place until the guarantees are eliminated.

The President of the Company has guaranteed the following outstanding amounts at April 30, 2012:

Loan for Career Education building -
5% of loan balance outstanding	$512,000
Mortgage – Corporate Office	$235,000
Construction loan – Edinburg, Texas	$49,737,000

 

In the event that the President is called upon to pay on any of the above guarantees, the Company would become liable to him.

 

 28

 

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

6.     Related Party Transactions:

Amounts included in revenue resulting from transactions with Hartford Lubbock LLP (in which the Company has a 2% minority interest), and Journal Publishing Inc, a company which is owned by the President of the Company and his wife are as follows:

	2012		2011
Management Fees	$63,827		$61,407
Service Fees	5,280		7,714
Total	$69,107		$69,121

 

7.    Stock Option Plan:

On February 11, 2004, the Company adopted a stock option plan providing for the grant of up to 1,000,000 shares.  The Company granted options to purchase 250,000 shares to five employees, two of whom are directors.  The options, which have a two year vesting period, were granted at $1.10 per share.  The right to exercise the option expires February 11, 2014.  The options include a “put option” that requires the Company to purchase the exercised shares for $1.30 in excess of the grant price.  The cost of the deferred stock compensation was $325,000, which has been expensed fully in prior periods.  On February 10, 2011, the put options expiration date was extended to February 11, 2014.

As of April 30, 2012 and 2011, 250,000 options were outstanding and exercisable at a weighted average exercise price of $1.10 a share. During the years ended April 30, 2012 and 2011, no options were granted or exercised.  All options granted vested prior to May 1, 2009. As such, there was no compensation expense for the years presented.  The aggregate intrinsic value of outstanding options as of April 30, 2012, was approximately $325,000.

8.     Employee Retirement Plan:

The Company has adopted a Simple IRA.  Under this plan, all employees over 18 years of age, working at least 30 hours weekly are eligible to participate.  Participants are eligible to defer earnings to the extent of IRS regulations.  The Company matches up to 3% of each participating employee’s annual salary.  Pension expense was $70,244 and $70,495 for the years ended April 30, 2012 and 2011, respectively.

9.     Income Taxes:

The provision for income taxes consists of:

	2012		2011
Current state income taxes	$     35,054		$148,461
Deferred income taxes	1,238,000		-0-
	$1,273,054		$148,461
The components of the net deferred income tax asset follow:
Tax effect of net operating loss carry-forwards	$4,452,000		$4,980,000
Investment in CP Associates, LLC	895,000		602,000
Valuation allowance	(5,347,000)		(4,344,000)
	$-0-		$1,238,000

 

 

29

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

9.     Income Taxes (concluded):

The current provision for state income taxes for the years ended April 30, 2012 and 2011 reflects profitable operations of certain of the Company’s subsidiaries in those jurisdictions. As of April 30, 2011, the Company concluded that it was more likely than not that the Company would realize $1,238,000 in net deferred income tax assets. As of April 30, 2012, no additional net deferred income tax assets are expected to be realized in the near term.  Accordingly, the Company increased its valuation allowance by $1,003,000 for the year ended April 30, 2012. For the year ended April 30, 2011, the valuation allowance was increased by $1,368,000. The Company has Federal net operating loss carry-forwards totaling approximately $13,100,000 at April 30, 2012 that are available to offset future Federal taxable income through various periods expiring between 2013 and 2027.

A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. Federal income tax rate before income taxes is as follows:

	2012		2011
Federal statutory rate (34%)	$(355,000)		$(1,657,000)
State tax – net of Federal effect	23,000		96,000
Change in valuation allowance on deferred tax assets	1,003,000		1,368,000
Losses attributable to noncontrolling interests	474,000		228,000
Other	128,000		113,000
Provision for income taxes	$1,273,000		$     148,000

 

10.  Leases:

The Company leases commercial and residential real estate to tenants under various operating leases expiring through 2027.

Minimum future rentals to be received on non-cancellable commercial real estate leases as of April 30, 2012 are as follows:

 

 

 

 30

 

 

---

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

11.    Investments in Affiliates:

Summarized financial and other information for the Company’s investments in Dover, Cranston and CP Associates, LLC follow:

Dover – New Jersey:

As of and for the years ended April 30

Company ownership – 50% investment at inception was $147,500.

 

	2012	2011
Assets	$13,077,126	$13,320,394
Liabilities	18,714,818	19,099,996
Members’ deficit	(5,637,692)	(5,779,602)
Revenue	2,519,411	2,555,375
Operating expenses	1,118,631	1,253,401
Non-operating expense	(1,008,870)	(1,019,596)
Net income	391,910	282,378

 

Dover’s major tenant is Stop & Shop, which provided 56% and 53% of the total revenue in both 2012 and 2011 under a lease that expires June 30, 2026.

Cranston – Rhode Island:

As of and for the years ended December 31

Company ownership – 25% investment at inception was $700,000, with $1,375,000 at renegotiation of terms and $3,000,000 upon an additional purchase of 25% interest in April, 2005.

 

	2011	2010
Assets	$23,798,904	$25,097,019
Liabilities	33,218,817	33,771,380
Partners’ deficit	(9,419,913)	(8,674,361)
Revenue	4,817,439	4,850,573
Operating expenses	2,185,047	2,159,642
Non-operating expense	(1,862,889)	(1,894,750)
Net income	769,503	796,181

 

The property has two major tenants, Stop & Shop and Kmart which provided approximately 65% and 63% of total revenue in 2011 and 2010 under leases that expire October 30, 2021 and May 30, 2027, respectively.

 

 

 

 

31

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

11.    Investments in Affiliates (concluded):

CP Associates, LLC – Rhode Island:

As of the years ended December 31

Company ownership – 50% investment.

 

	2011	2010
Assets	$21,059,293	$21,447,415
Liabilities	24,050,307	23,038,127
Partners’ deficit	(2,991,014)	(1,590,712)
Revenue	3,030,689	3,017,247
Operating expenses	1,195,546	1,188,604
Non-operating expense	2,633,790	1,984,643
Net loss	(798,647)	(156,000)

 

The property has three tenants, Career Education, City of Cranston and Texas Roadhouse.

 

12.    Concentrations of Credit Risk:

The Company’s financial instruments that are subject to concentrations of credit risk consist of cash and cash equivalents, marketable securities, and accounts, notes and other receivables.

The Company places its cash deposits, including investments in certificates of deposit, with various financial institutions.  Bank deposits may be in excess of current Federal depository insurance limits.

The Company assesses the financial strength of its tenants prior to executing leases and typically requires a security deposit and prepayment of rent.  The Company establishes an allowance for doubtful accounts receivable based upon factors surrounding the credit risk of specific tenants, historical trends and other information.

The Company assesses the financial strength of CVS prior to incurring costs in connection with the development of CVS pharmacy stores.  Based on historical experience and other information, no allowance for doubtful accounts is considered necessary by management as of April 30, 2012.

13.  Litigation:

In connection with a court order in the litigation styled Kaplan vs. First Hartford Corporation and Neil Ellis, the Company purchased 591,254 shares of common stock beneficially owned by Richard E. Kaplan on November 29, 2010. Under the terms set by the court, the Company made a cash payment of $500,000 and issued a secured note for $2,879,407. The note is payable in quarterly installments of $146,184 (interest of 5.92% included) through November 15, 2015. The accrual for this matter was recorded prior to May 1, 2009. In addition, the Company was also required to pay “pre-judgment interest” from September 13, 2005 through November 29, 2010 of approximately $767,831 which is due upon the final quarterly payment of $146,184. Such interest has been accrued as the litigation proceeded.

The Company has pledged the aforementioned 591,254 shares of repurchased common stock and a security interest in certain of the Company’s other assets as collateral. On December 16, 2011, Kaplan filed a suit to recover approximately $140,000 in legal fees. This suit was settled with $65,000 payment in February 2012.

 

32

---

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

13.   Litigation (concluded):

 

The Company is also involved in other legal proceedings which arise during the normal course of its business, including disputes over tax assessments, commercial contracts, lease agreements, construction contracts and personal injuries. The Company does not believe that any of these proceedings will have a material impact on its consolidated financial statements.

 

14.    Subsequent Events:

On May 1, 2012, the lender of the Edinburg project reduced the interest rate on $45,458,492 of debt from 6.125 percent to 5.0 percent. None of the other terms of this debt or the profit sharing arrangement was changed. The new rate is saving the Company $46,617 monthly or $511,404 annually.

Between May 1, 2012 and an expected date of early October 2012, the following stores, totaling 101,1680 square feet have opened or will open in the Edinburg project:

Petco

Anna’s Linens

Big Lots

Party City

Melrose Fashions

GNC

Burkes Outlet Stores

Carters

                                   

 

 

 

 

 

 

 

 

33

---

 

PART III

ITEM 10          DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

(a)           Identification of Directors

 The directors of First Hartford Corporation, their ages and the periods during which each has served as such are as follows:

    

Name	Age	Period of Service
Neil H. Ellis	84	1966 – Present
Stuart I. Greenwald	70	1980 – Present
David B. Harding	67	1998 – Present

 There are no arrangements or understandings between any of the foregoing and any other person pursuant to which such person was or is to be selected director or officer.

(b)          Identification of Executive Officers

The names and ages of all executive officers of First Hartford Corporation, their positions and the periods during which each has served as such are as follows:

Name	Age	Position	Period of Service
Neil H. Ellis	84	President	1966 – Present
Stuart I. Greenwald	70	Treasurer/Secretary	1980 - Present
David B. Harding	67	Vice President	1998 - Present

 

There are no arrangements or understandings between any of the foregoing and any other person pursuant to which such person was or is to be selected director or officer.

 

(c)          Identification of Certain Significant Employees

 

Name	Age	Position	Period of Service
John Toic	40	Vice President	2003 - Present

 

(d)         Family Relationships

There are no family relationships among any directors or executive officers.

 

 

 

34

---

 

ITEM 10.               DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE (continued):

(e)           Business Experience

1.             Following is a brief description of the background of each director or executive officer:

Mr. Ellis has been President of the company since 1966.  He is also President and Director of Green Manor Corporation, a holding company (which includes Journal Publishing Inc., Lubbock Parkade Inc. and MIP 16A Corp.) owned by him and his wife.

           

Mr. Greenwald has been Treasurer of the Company since 1980 and also holds the position of Secretary.

Mr. Harding has been Vice President of the Company since 1998.  Additionally, he has been the President or Vice President of Richmond Realty, LLC (“Richmond”) a Real Estate Management

Company owned by he and his wife since January 1996.  Prior to that, he had worked for the Company in the finance area for three years.  In the past, Richmond has managed certain properties of the Company. Richmond Realty has been inactive since 2007 and has been dissolved.

 

2.             Directorships:

No directors hold any other directorships, except directorships in subsidiaries of the Company and the aforementioned Green Manor Corporation.

 

(f)            Involvement in Certain Legal Proceedings:

No director or executive officer has been involved in legal proceedings required to be disclosed under item 401(f) of Regulation S-K promulgated by the Commission except for the Kaplan legal proceedings discussed in Item 3.

 

(g)           Promoter and Control Persons:

Not applicable.

(h)           Audit Committee Financial Expert:

First Hartford does not have an audit committee.  Instead its entire Board of Directors attempts to fulfill the functions of an audit committee.  Mr. Ellis, Mr. Greenwald and Mr. Harding are members of the Company’s management. Mr. Ellis has various business relationships with First Hartford described under “Certain Relationships and Related Transactions”, in Item 13.  Thus, none of the members of the Board of Directors meet the criteria for independence established by the New York Stock Exchange or other self-regulating stock exchanges.  First Hartford does not otherwise meet the eligibility requirements for listing on the NYSE or with such other self-regulating stock exchanges.

 

(i)            Section 16 (a) of the Exchange Act - Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and

persons who own more than 10% of a registered class of the Company’s equity securities, to file with the Commission initial reports of beneficial ownership on Form 3 and reports of changes in beneficial ownership of the Company’s equity securities on Forms 4 and 5.  The rules promulgated by the Commission under Section 16(a) of the Exchange Act require those persons

35

---

ITEM 10.               DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE (continued):

(i)            Section 16 (a) of the Exchange Act - Beneficial Ownership Reporting Compliance (concluded):

to furnish the Company with copies of all reports filed with the Commission pursuant to Section 16(a).  Based solely upon a review of such forms actually furnished to the Company, and written representations of certain of the Company’s directors and executive officers that no forms were required to be filed, the Company believes that during fiscal year 2012, all directors, executive officers and 10% shareholders of the Company have filed with the Commission on a timely basis all reports required to be filed under Section 16(a) of the Exchange Act. Except for the following:

During the fiscal year, Mr. Ellis filed a Form 4 on four (4) occasions. On April 15, 2011, he filed a Form 4 reporting the purchase of more than $10,000 worth of shares; thereafter, the small acquisition exemption was not available for six months. On May 19, 2011, he filed a Form 4 reporting a purchase of 15 shares on April 25, 2011, resulting in a late report; on June 23, 2011 he filed a Form 4 reporting a purchase of 75 shares on May 19, 2011, 500 shares on June 16, 2011 and 1,000 shares on June 20, 2011, resulting in a late report; on July 6, 2011, he filed a Form 4 reporting a purchase of 1,000 shares on June 29, 2011, resulting in a late report; and on July 18, 2011, he filed a Form 4 reporting a purchase of 1,000 shares on July 6, 2011, resulting in a late report.

Mr. Filippelli filed a Form 5 for 2011 due by May 14, 2011 late on February 8, 2012 and Mrs. Filippelli filed a Form 3 late on March 19, 2012 for a January 30, 2012 event.

(j)            Code of Ethics

The Company’s Code of Ethics, applicable to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, was included in the second quarter 10-Q filed on December 19, 2005.  The Company will provide any person, without charge, a copy of any portion of the Code of Ethics upon request directed to the Office on the Treasurer and Secretary of the Company.

ITEM 11.               EXECUTIVE COMPENSATION

(a)  

Summary Compensation Table

Name& Principal Position	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Non-qualified Deferred Compensation Earnings	All Other Compensation	Total
Neil H. Ellis Director and (CEO)	2012	$251,053	$-0-	$-0-	$-0-	$-0-	$-0-	$-0-	$251,053
	2011	$251,053	$-0-	$-0-	$-0-	$-0-	$-0-	$-0-	$251,053
Stuart I. Greenwald Director, Treasurer and Secretary	2012	$150,000	$-0-	$-0-	$-0-	$-0-	$-0-	$4,500	$154,500
	2011	$150,000	$-0-	$-0-	$-0-	$-0-	$-0-	$4,500	$154,500

 

36

---

 

ITEM 11.         EXECUTIVE COMPENSATION (continued):

(a)  

Summary Compensation Table (continued):

Name& Principal Position	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Non-qualified Deferred Compensation Earnings	All Other Compensation	Total
David B. Harding director and Vice President	2012	$176,053	$-0-	$-0-	$-0-	$-0-	$-0-	$5,250	$181,303
	2011	$176,053	$-0-	$-0-	$-0-	$-0-	$-0-	$5,250	$181,303

 

Directors Compensation

 

Directors have not received any compensation for serving on the Board.

 (b)          Stock Options

The Company has a stock option plan which was approved and ratified by the shareholders of the Company.  The Company does not have a formal schedule for issuing options.  In the past 25 years, the Company awarded an aggregate of 250,000 options in increments of 50,000 options each to 5 long term employees; such options were awarded in February 2004.  Mr. Harding and Mr. Greenwald were included in these employees.  The options fully vested in February of 2006 and expire February 11, 2014.  These options have never been repriced.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
	Option Awards					Stock Awards
Name	Number of Securities Under-lying Un-exercised Options (#) Exercisable	Number of Securities Under-lying Un-exercised Options (#) Unexercis-able	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date		Number of Shares or Units That Have Not Vested (#)	Market Value of Shares or Units That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Stuart I. Greenwald	50,000	0	0	1.10	2/11/14		0	0	0	0
David B. Harding	50,000	0	0	1.10	2/11/14		0	0	0	0
Other Employees	150,000	0	0	1.10	2/11/14		0	0	0	0

 

 

 

 

37

---

ITEM 11.         EXECUTIVE COMPENSATION (continued):

(c)     Benefits and Prerequisites

Medical

All employees, including executive officers, working over 30 hours a week are entitled to Company paid medical insurance of which the employee pays, family $59 a week, employee and spouse $41 a week and employee $23 a week.

Mr. Ellis has opted out of the Company plan and is covered by Medicare.

Disability

All employees, including executive officers, are covered up to 60% of wages, up to $10,000 monthly.

Management Employees, as defined by the Company, and including executive officers, will be paid for all sick time up to three months unless extended by the Board of Directors.  In the event that it is extended beyond six months, the Company will pay the difference between full pay and Long Term Disability.

Life Insurance

Each Employee of First Hartford, including executive officers, is eligible to receive life insurance that, in the event of such employee’s death, will provide proceeds of two times the annual salary of each employee until such employee reaches the age of 70.  At the age of 70, the amount of life insurance proceeds each employee is entitled to receive upon his death is equal to one times such employee’s annual salary.

(d)     Automobiles

To assist management of the Company in carrying out its responsibilities and to improve job performance, the Company provides its executive officers with automobiles.  The Company cannot specifically or precisely ascertain the amount of personal benefit, if any, derived by those officers from such automobiles.  However, after reasonable inquiry, the Company has concluded that the amount of any such immaterial and does not in any event exceed $10,000 to any officer.  No provision had therefore been made for any such benefit.  All of the above mentioned officers are provided automobiles.

ITEM 12.             SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)            Security Ownership of Certain Beneficial Owners – per SEC filings:

The following table sets forth information as of the date hereof with respect to all persons know to the Company to be beneficial owners of more than 5% of the Company’s outstanding shares of common stock:

Title of Class	Name & Address of Beneficial Owner of Identity of Group	Amount and Nature of Beneficial Ownerships	(3) Percent Of Class
Common Stock	Neil H. Ellis	1,353,876 (1)	50.7%
	43 Butternut Road
	Manchester, CT  06040

 

 

38

---

 

 

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)                Security Ownership of Certain Beneficial Owners – per SEC filings (concluded):

Title of Class	Name & Address of Beneficial Owner of Identity of Group	Amount and Nature of Beneficial Ownerships	(3) Percent Of Class
Common Stock	John Filippelli	307,706 (2)	11.5%
	85 Pawling Lake
	Pawling, NY  12564
Common Stock	Joel Lehrer	200,000	7.5%
	231 Atlantic Street
	Keyport, NJ  07735-2044

(1)       Includes 416,483 shares owned by a corporation, which is wholly owned by Mr. & Mrs. Ellis: 17,693 shares owned beneficially and of record by Mr. Ellis’ wife; 53,412 shares held as Trustee for his daughters in which he disclaims beneficial ownership.  Excludes 14,250 shares held as trustee for the Jonathan G. Ellis Leukemia Foundation (a charitable foundation).

(2)       Included in Mr. Filippelli’s shares are 204,693 shares over which he has Shared Dispositive Power and 38,350 owned by Mr. Filippelli’s wife.

(3)       Percent of class calculation included options for 250,000 shares.

 

(b)             Security Ownership of Directors and Executive Officers:

The following sets forth information as of the date hereof with respect to all shares beneficially owned by all directors and executive officers of the Company as a group:

Title of Class	Name & Address of Beneficial Owner of Identity of Group	Amount and Nature of Beneficial Ownerships	Percent Of Class
Common	Neil H. Ellis	1,353,876 (1)	50.7%
	43 Butternut Road
	Manchester, CT  06040
Common	All Directors and Officers	1,453,876 (4)	54.4%
	As a Group (3 in number)

(4)     Included in shares of officers and directors are options for 100,000 shares for David Harding and Stuart Greenwald.

 

(c)             Changes in Control

The Company is aware of no arrangements, which may result at a subsequent date in change in control of the Company.

 

 

39

---

 

ITEM 12.              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS (continued):

(d)            Equity Compensation Plan Information

Information for our equity compensation plans in effect as of April 30, 2012 is as follows: 

	(a)	(b)	(c)
			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan category	Number of  Securities to be issued upon exercise of outstanding options, warrants and rights.	Weighted-average exercise price of outstanding options, warrants and rights
Equity compensation plans Approved by security holders Equity compensation plans not Approved by security holders	250,000              0	$1.10         0	750,000               0
Total..........	250,000	$1.10	750,000

(b)  The options include a “put option” that requires the Company to purchase the exercised shares for $1.30 in excess of the grant price.  The put options have been extended until the option expiration date of the underlying options.

 

ITEM 13.               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR  INDEPENDENCE

 

(a)            Parkade Center Inc. (a wholly owned subsidiary of First Hartford Corporation) has a .0199% Interest in Hartford Lubbock Parkade LP, a partnership, which owns a shopping center in Lubbock, Texas.  Lubbock Parkade Inc., is a wholly owned subsidiary of Journal Publishing Inc. owns .9801% of the Partnership.  Journal Publishing Inc. is owned by Neil Ellis, the president and chairman of First Hartford Corporation, and his wife Elizabeth.  First Hartford Realty Corporation manages the Property and receives a 4% management fee, which is the industry norm for a shopping center.

 

For the year ended April 30, 2012, Parkade Center Inc. and First Hartford Realty Corporation

Were paid the following:

 

For the year ended April 30, 2012, Parkade Center Inc. received distributions of $4,294 and Lubbock Parkade Inc. received distributions in that period of $211,087 from Hartford Lubbock LP.

Mr. and Mrs. Ellis also own a small residential property (40 apartment units) in Enfield, Connecticut that the Company no longer manages.

(b)             Certain Business Relationships:

Refer to (a) above.

 

 

40

---

ITEM 13.               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE (concluded):

 

(c)             Indebtedness of Management:

There is none.

(d)             Transactions with Promoters:

There is none.

(e)             Director Independence:

Neil Ellis, David Harding and Stuart Greenwald are all employees of the Company and by definition are not independent.  The Company does not have any directors that meet the independence standards for audit, nominating or compensation committee.

 

The Company’s securities are not listed on a national securities exchange or in an inter-dealer quotation system, which has a requirement that a majority of the Board of Directors be independent.

 

ITEM 14.              PRINCIPAL ACCOUNTING FEES AND SERVICES

                               The Company dismissed CCR LLP on April 29, 2011 and engaged J.H. Cohn LLP on April 29, 2011. Set forth below is a summary of the fees paid J. H. Cohen LLP for the fiscal year ended April 30, 2012 and 2011.

                                                                                     

	2012	2011
Audit Fees (1)	$98,750	$80,000
Audit Related Fees (2)	37,500	37,500
Tax Fees (3)	-0-	-0-
All Other Fees (4)	15,000	-0-

 

(1)   Includes fees for the audit of the Company’s annual financial statements included in its Annual Report on Form 10-K and the reviews of its interim condensed financial statements included in its Quarterly Reports on Form 10-Q.

(2)   Includes fees for the audit of financial statements of certain entities which are included in the Company’s Annual Report on Form 10-K.

(3)   No tax services were rendered.

(4)   Includes fees for research.

 

The Board of Directors has:

(a)          Reviewed and discussed the Company’s audited financial statements with the independent auditors;

(b)          Discussed with the independent auditors the matters required to be discussed by professional standards;

(c)          Reviewed and discussed the independence of the auditors and received a written disclosure from the audit  firm confirming its independence. 

 

 

 

41

---

 

 

 

 

Based on the review and discussions described above, the Board of Directors approved the inclusion of the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended April 30, 2012.

 

Neil H. Ellis

Stuart I. Greenwald

David B. Harding

 

 

 

 

 

 

 

 

42

---

PART IV 

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		Pages
(a)	(1)	The following items are included in Part II, Item 8:
		Report of Independent Registered Public Accounting Firm	11
		Financial Statements:
		Consolidated Balance Sheets – April 30, 2012 and 2011	12-13
		Consolidated Statements of Operations for the Years
		Ended April 30, 2012 and 2011	14
		Consolidated Statements of Comprehensive Loss for the Years
		Ended April, 30, 2012 and 2011	15
		Consolidated Statements of Changes in Deficiency
		for the Years Ended April 30, 2012 and 2011	16
		Consolidated Statements of Cash Flows for the Years
		Ended April 30, 2012 and 2011	17-18
		Notes to Consolidated Financial Statements	19-33
	(2)	Financial statement schedules
		All financial statement schedules are omitted because they are not required.
(b)	Exhibits
	(3)	Articles of Incorporation and by-laws.
		Exhibits (3) to Form-K for the Fiscal Year ended April 30, 1984, Pages 1-18 of
		Exhibits Binders, incorporated by reference to Securities File Number 0-8862.
	(4)	Instruments defining the rights of security holders, including Indentures.
		Not applicable.
	(5)	Voting Trust Agreement.
		Not Applicable.
	(6)	Material Contracts.
		Not Applicable.
	(7)	Statement regarding computation of per share earnings.
		Not Applicable.

 

43

---

 

 

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):
(b)		Exhibits (continued):
		(8)	Statement regarding computation of ratios.
			Not Applicable.
		(9)	Annual report to Security Holders, Form 10-Q or Quarterly Report To Security Holders.
			The annual report to security holders consists of this report (Form 10-K) and the
			President’s letter attached as Exhibit 13.
		(10)	Letter regarding change in accounting principle.
			Not Applicable.
		(11)	Previously Unfilled Documents.
			Not Applicable.
		(12)	Subsidiaries of the Registrant.
			Name of Subsidiary	State in which Incorporated
			First Hartford Realty Corporation	Delaware
			Lead Tech, Inc.	Connecticut
			Parkade Center, Inc.	Texas
			Plainfield Parkade, Inc.	Connecticut
			Putnam Parkade, Inc.	Connecticut
			EH&N Construction Company	Delaware
			Dover Parkade LLC	Delaware
			DE 150 Corp.	Delaware
			Brewery Parkade, Inc.	Rhode Island
			Cranston Parkade, LLC	Rhode Island
			Tri-City Plaza, Inc.	New Jersey
			1150 Union Street Corp.	Massachusetts

 

 

44

---

 

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):
(b)		Exhibits (continued):
		(12)	Subsidiaries of the Registrant (Continued):
			Name of Subsidiary	State in which Incorporated
			CP Associates, LLC	Rhode Island
			Trolley Barn Associates, LLC	Rhode Island
			Main Street NA Parkade, LLC	Connecticut
			Connolly & Partners, LLC	Massachusetts
			Cranston/BVT Associates Limited Partnership	Rhode Island
			FHRC Management Corp.	Delaware
			The Shoppes at Rio Grande Valley, LP	Texas
			Rockland Place Apartments, LLC	Massachusetts
			Rockland Place Developers, LLC	Massachusetts
			Rockland Place Apartments, LP	Massachusetts
			Independence Park Asset Management Co., LLC	Delaware
			EH&N U Inc.	Massachusetts
			First Harford Plumbing Inc.	Massachusetts
			FALAH Corp.	Massachusetts
			Clarendon Hill Somerville Limited Partnership	Massachusetts
			Clarendon Developer, LLC	Massachusetts
			Clarendon Hill Somerville, LLC	Massachusetts
			LTI Environmental Services Inc.	Massachusetts
		(13)	Published report regarding matters submitted to vote of Security Holders.
			Not Applicable.
		(14)	Power of Attorney.
			Not Applicable.

 

 

45

---

 

 

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):
(b)	Exhibits (continued):
	(15)	Additional Exhibits.
		Not Applicable.
	(16)	Information from Reports furnished to State Insurance Regulatory Authorities.
		Not Applicable.
	(17)	Exhibit 31.1
	(18)	Exhibit 31.2
	(19)	Exhibit 32.1
	(20)	Exhibit 32.2
(c)		Other Financial Statements -  Nonconsolidated subsidiaries
		Cranston/BVT Associates Limited Partnership
		Dover Parkade LLC
		CP Associates, LLC

           

 

           

 

 

 

46

---

 

S I G N A T U R E S

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

Has duly caused this Report to be signed on its behalf by the undersigned,

 

Dated:  September 5, 2012

 

 

	FIRST HARTFORD CORPORATION
	By: /s/ Neil H. Ellis
	Neil H. Ellis
	President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
September 5, 2012	/s/ Neil H. Ellis
	Neil H. Ellis
	Principal and Executive Officer
	President and Director
September 5, 2012	/s/Stuart I. Greenwald
	Stuart I. Greewald
	Principal Financial Officer
	Secretary, Treasurer and Director

           

 

47

---

 

---

 

---

 

 

 

---

---

-6-

---

DOVER PARKADE LLC

 

Notes to Financial Statements
For the Years Ended December 31, 2011 and 2010

 

 

---

 

 

---

 

-1-

---

-2-

---

 

---

CP ASSOCIATES, LLC

 

Notes To Financial Statements

For the Years Ended December 31, 2011 and 2010

 

-8-

---

CP ASSOCIATES, LLC

 

Notes To Financial Statements

For the Years Ended December 31, 2011 and 2010

 

 

-9-

---

CP ASSOCIATES, LLC

 

Notes To Financial Statements

For the Years Ended December 31, 2011 and 2010

 

 

-10-

---

CP ASSOCIATES, LLC

 

Notes To Financial Statements

For the Years Ended December 31, 2011 and 2010

 

 

-11-

---

 

 

 

 

 

 

 

 

 

 

 

 

 

-12-

---