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 January 31, 2014.

 

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

 

For the transition period from                                                                          to                                                                                           

 

Commission File Number:                  0-8862                                                                                                                                                  

 

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

 

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

Yes          No X

 

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

Yes          No X

 

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

 

Large accelerated filer                                                                                                       Accelerated filer

 

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

 

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

Yes          No X

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

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

 

2,412,611 as of July 25, 2014

 

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES

 

INDEX

 

PART I.	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets –                 January 31, 2014 and April 30, 2013	3 - 4
	Condensed Consolidated Statements of Operations for the                 Three and Nine Months Ended January 31, 2014 and 2013	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for                 the Three and Nine Months Ended January 31, 2014 and 2013	6
	Condensed Consolidated Statements of Cash Flows for the                 Nine Months Ended January 31, 2014 and 2013	7 - 8
	Notes to Condensed Consolidated Financial Statements	9 - 13
Item 2.	Management’s Discussion and Analysis of Financial Condition                 and Results of Operations	14 - 17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	18
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
	Signatures	20
	Exhibits	21 – 23

2

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

ASSETS

See accompanying notes.

 

3

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

LIABILITIES AND EQUITY (DEFICIENCY)

 

	January 31, 2014		April 30, 2013
Liabilities:
Mortgages and notes payable:
Construction loans payable	$49,401,956		$52,847,132
Mortgages payable (including $53,661,087 in January and $54,335,209 in April for VIEs)	149,296,567		146,327,723
Notes payable (including $1,704,697 in January and in April for VIEs)	1,704,697		3,534,301
	200,403,220		202,709,156
Accounts payable (including $502,217 in January and $434,309 in April for VIEs)	1,697,838		1,853,976
Other payables	9,008,478		6,832,367
Accrued liabilities (including $3,232,470 in January and $2,648,075 in April for VIEs)	4,696,574		4,866,430
Accrued cost of derivatives	2,348,267		3,656,380
Deferred income (including $247,856 in January and in April for VIEs)	858,470		455,475
Other liabilities	1,987,976		2,198,045
Due to related parties and affiliates (including $394,859 in January and $377,775 in April for VIEs)	466,759		449,757
	221,467,582		223,021,586
Equity (Deficiency):
First Hartford Corporation:
Preferred stock, $1 par value; $.50 cumulative and convertible; authorized     4,000,000 shares; no shares issued and outstanding	-0-		-0-
Common stock, $1 par value; authorized 6,000,000 shares; issued 3,298,609     shares; outstanding 2,414,925 shares as of January and 2,416,825 as of April	3,298,609		3,298,609
Capital in excess of par	5,198,928		5,198,928
Accumulated deficit	(22,811,653)		(22,553,780)
Accumulated other comprehensive income (loss)	(42,720)		146,666
Treasury stock, at cost, 883,684 and 881,784 shares as of January 31, 2014 and     April 30, 2013, respectively	(4,964,884)		(4,952,574)
Total First Hartford Corporation	(19,321,720)		(18,862,151)
Noncontrolling interests	4,554,085		6,106,888
Total Shareholders’ Equity (Deficiency)	(14,767,635)		(12,755,263)
Total Liabilities and Shareholders’ Equity (Deficiency)	$206,699,947		$210,266,323

                                                                                                                                               

See accompanying notes.

 

4

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

 

	Three Months Ended				Nine Months Ended
	Jan. 31, 2014		Jan. 31, 2013		Jan. 31, 2014		Jan. 31, 2013
			(Restated)				(Restated)
Operating revenues:
Rental income	$7,016,661		$7,006,441		$21,552,546		$21,023,793
Service income	1,689,849		1,495,414		4,259,143		5,521,481
Sales of real estate	-0-		-0-		2,902,596		-0-
Other income	724,838		401,664		1,378,678		835,060
	9,431,348		8,903,519		30,092,963		27,380,334
Operating costs and expenses:
Rental expenses	5,491,640		4,550,375		15,057,850		13,809,933
Service expenses	1,231,568		950,009		2,920,338		3,611,567
Cost of real estate sales	125,871		-0-		2,396,171		-0-
Selling, general and administrative expenses	1,394,000		1,290,972		3,874,484		3,375,998
	8,243,079		6,791,356		24,248,843		20,797,498
Income from operations	1,188,269		2,112,163		5,844,120		6,582,836
Non-operating income (expense):
Interest expense	(2,571,278)		(2,793,593)		(8,058,607)		(8,267,636)
Other income	80,000		115,349		281,447		288,374
Loss on defeasance	-0-		-0-		(243,602)		-0-
Gain (loss) on derivatives	374,096		276,440		1,308,113		(10,396)
Equity in earnings of unconsolidated subsidiaries	61,932		92,042		337,570		318,306
	(2,055,250)		(2,309,762)		(6,375,079)		(7,671,352)
Loss before income taxes	(866,981)		(197,599)		(530,959)		(1,088,516)
Income taxes	36,629		52,781		60,551		70,273
Consolidated net loss	(903,610)		(250,380)		(591,510)		(1,158,789)
Net loss attributable to noncontrolling interests	373,907		40,717		333,138		340,859
Net loss attributable to First Hartford Corporation	$(529,703)		$(209,663)		$(258,372)		$(817,930)
Net loss per share – basic	$(0.22)		$(0.09)		$(0.11)		$(0.34)
Net loss per share – diluted	$(0.22)		$(0.09)		$(0.11)		$(0.34)
Shares used in basic per share computation	2,413,418		2,415,498		2,414,480		2,418,772
Shares used in diluted per share computation	2,413,418		2,415,498		2,414,480		2,418,772

See accompanying notes.

 

5

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

 

	Three Months Ended				Nine Months Ended
	Jan. 31, 2014		Jan. 31, 2013		Jan. 31, 2014		Jan. 31, 2013
			(Restated)				(Restated)
Consolidated net loss	$(903,610)		$(250,380)		$(591,510)		$(1,158,789)
Other comprehensive income, net of income taxes:
Unrealized (losses) gains on marketable securities	(58,449)		109,162		(508,384)		326,324
Comprehensive loss	(962,059)		(141,218)		(1,099,894)		(832,465)
Amounts attributable to noncontrolling interests:
Net loss	373,907		40,717		333,138		340,859
Unrealized gains (losses) on marketable securities	(6,418)		38,357		318,998		107,120
	367,489		79,074		652,136		447,979
Comprehensive loss attributable to First Hartford Corporation	$(594,570)		$(62,144)		$(447,758)		$(384,486)

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

6

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

 

 

 

 

See accompanying notes.

 

7

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

 

	Nine Months Ended
	January 31, 2014		January 31, 2013
			(Restated)
Financing activities:
Contributions from noncontrolling interests – limited partners	$500		$5,066,943
Distributions to noncontrolling interests	(900,668)		(735,551)
Purchase of treasury stock	(12,310)		(8,312)
Proceeds from:
Construction loans payable	1,169,396		3,510,210
Mortgage loans payable	495,258		12,704
Principal payments on:
Construction loans payable	(2,020,640)		(2,965,085)
Mortgage loans payable	(1,949,950)		(1,844,249)
Notes payable	-0-		(631,983)
Advances to related parties and affiliates, net	16,984		15,356
Net cash provided by (used in) financing activities	(3,201,430)		2,420,033
Net change in cash and cash equivalents	(2,189,962)		1,677,768
Cash and cash equivalents, beginning of period	8,346,956		6,599,325
Cash and cash equivalents, end of period	$6,156,994		$8,277,093
Cash paid during the period for interest	$8,422,077		$7,931,236
Cash paid during the period for income taxes	$128,725		$345,186
Debt refinancing in 2nd quarter:
New mortgage loan	$6,200,000
Debt reduced	(6,140,370)
Net cash from refinancing in 2nd quarter	$59,630
Debt refinancing in 3rd quarter:
New mortgage loan	$3,029,560		$240,000
Less debt paid	(2,593,932)		(227,296)
Net cash from refinancing in 3rd quarter	$435,628		$12,704

 

 

See accompanying notes.

 

8

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.     Business and Significant Accounting Policies:

 

Business

 

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

 

Principles of Consolidation

 

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

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments to previously accrued loss provisions) considered necessary for a fair presentation have been included.  Operating results for the interim periods are not necessarily indicative of the results that may be expected for the entire year.  The condensed consolidated balance sheet as of April 30, 2013 was derived from the audited financial statements for the year then ended.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2013.

 

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

 

New Accounting Pronouncements

 

In May 2014, the FASB issued a standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts with customers. The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchanged for those goods or services. The standard is effective beginning January 1, 2017, with no early adoption permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the

 

 

9

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

 

1.     Business and Significant Accounting Policies (continued):

 

New Accounting Pronouncements (concluded)

 

date of initial application. We are currently evaluating the adoption method options and the impact of the new guidance on our consolidated financial statements.

 

Net Loss Per Common Share

Financial Instruments and Fair Value

 

The Company’s financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses, and debt.  The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying amounts because of their relative short-term nature.  In general, the carrying amount of variable rate debt approximates its fair value.  Further, the carrying amount of fixed rate debt approximates fair value since the interest rates on the debt approximates the Company’s current incremental borrowing rate.  Marketable securities consist of equity securities and are stated at fair value based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1).  Net unrealized losses of $64,867 and $189,386 for the three and nine month periods ended January 31, 2014 are included in accumulated other comprehensive income.

 

Segment Information

 

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

 

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2014		2013		2014		2013
Real Estate Operations	$8,000,000		$7,636,000		$26,375,000		$24,306,000
Fee for Service	1,431,000		1,268,000		3,718,000		3,074,000
Total	$9,431,000		$8,904,000		$30,093,000		$27,380,000
Operating Cost and Expense:
Real Estate Operations	$5,915,000		$4,622,000		$17,752,000		$15,139,000
Fee for Service	934,000		878,000		2,623,000		2,282,000
SGA	1,394,000		1,291,000		3,874,000		3,376,000
Total	$8,243,000		$6,791,000		$24,249,000		$20,797,000

 

 

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

 

1.     Business and Significant Accounting Policies (concluded):

 

Segment Information (concluded):

 

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

 

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of approximately $37,000 on January 31, 2014 and $860,000 on April 30, 2013 and receivables of approximately  $9,654,000 on January 31, 2014 and $6,533,000 on April 30, 2013.

 

2.     Restatement:

 

The Company has restated its January 31, 2013 consolidated financial statements by adding four joint ventures into its consolidated results.  Upon reanalyzing its agreements, it was determined that the Company was the controlling partner of the ventures which triggers a requirement to consolidate.  The ventures are:

 

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

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

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

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

 

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

 

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

 

Balance Sheet January 31, 2013

	Previously Reported	Increase  (Decrease)	Restatement
Real Estate and Equipment Net	$133,351,809	$41,341,321	$174,693,130
Cash	4,609,451	4,149,986	8,759,437
Investment in Marketable Securities	2,147,357	2,169,998	4,317,355
Accounts and notes receivable	2,254,061	1,958,380	4,212,441
Other receivable	8,531,837	-0-	8,531,837
Deposits, escrows & prepaid & deferred expenses net	6,420,586	2,091,370	8,511,956
Investment in affiliate	9,665	(9,665)	-0-
Due from related parties and affiliates	535,629	(368,260)	167,369
Total Assets	$157,860,395	$51,333,130	$209,193,525

 

 

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

 

2.       Restatement (continued):

 

Balance Sheet January 31, 2013

	Previously Reported	Increase  (Decrease)	Restatement
Mortgage & notes payables	$141,591,408	$62,308,177	$203,899,585
Payables and accrued liabilities	10,438,521	1,057,757	11,496,278
Accrued cost of derivatives	-0-	4,023,438	4,023,438
Deferred income	754,766	60,115	814,881
Other liabilities	3,633,469	(1,349,358)	2,284,111
Due  to related parties	102,752	342,758	445,510
Total liabilities	156,520,916	66,442,887	222,963,803
Stockholders’ Equity (Deficit)	1,339,479	(15,109,757)	(13,770,278)
Total Liabilities and Shareholders’ Deficit	$157,860,395	$51,333,130	$209,193,525

 

Statement of Operations – Three Months Ended January 31, 2013

	Previously Reported	Increase (Decrease)	Restatement
Revenues	$6,565,024	$2,338,495	$8,903,519
Operating cost	5,683,606	1,107,750	6,791,356
Income from operations	881,418	1,230,745	2,112,163
Interest expenses	(1,822,748)	(970,845)	(2,793,593)
Other Income	115,349	-0-	115,349
Gain (Loss) on Derivatives	-0-	276,440	276,440
Equity in earnings of unconsolidated subsidiaries	152,456	(60,414)	92,042
Loss before income tax	(673,525)	475,926	(197,599)
Income Taxes	52,781	0	52,781
Consolidated Net Loss	(726,306)	475,926	(250,380)
Net (income) loss attributable to non-controlling interest	297,257	(256,540)	40,717
Net (Loss) Gain attributable to First Hartford	$(429,049)	$219,386	$(209,663)

 

 

 

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

 

2.       Restatement (concluded):

Statement of Operations – Nine Months Ended January 31, 2013

 

 

	Previously Reported	Increase (Decrease)	Restatement
Revenues	$20,316,985	$7,063,349	$27,380,334
Operating cost	17,569,987	3,227,511	20,797,498
Income from operations	2,746,998	3,835,838	6,582,836
Interest expenses	(5,391,204)	(2,876,432)	(8,267,636)
Other Income	288,374	-0-	288,374
Gain (Loss) on Derivatives	-0-	(10,396)	(10,396)
Equity in earnings of unconsolidated subsidiaries	742,715	(424,409)	318,306
Loss before income tax	(1,613,117)	524,601	(1,088,516)
Income Taxes	60,915	9,358	70,273
Consolidated Net Loss	(1,674,032)	515,243	(1,158,789)
Net (income) loss attributable to non-controlling interest	891,310	(550,451)	340,859
Net Loss attributable to First Hartford	$(782,722)	$(35,208)	$(817,930)

The change in the loss attributable to the Company for the three and nine months ended January 31, 2013 was mainly due to differences in accounting between equity method and consolidation.

 

 

2.     Consolidated Variable Interest Entities and Investments in Affiliated Partnerships:

The Company has consolidated both Rockland and Clarendon based on the express legal rights and obligations provided to it by the underlying partnership agreements and its control of their business activity.  The assets of these partnerships that can only be used to settle their obligations and their liabilities for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company are shown parenthetically in the line items of the consolidated balance sheets.  A summary of the assets and liabilities of Rockland and Clarendon included in the Company’s condensed consolidated balance sheets follows:

 

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

 

3.     Consolidated Variable Interest Entities and Investments in Affiliated Partnerships (concluded):

 

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

 

 

For the years prior to May 1, 2009, the Company was committed to provide funding to Dover, Parkade LLC. Although the Company no longer considers itself liable for their obligations, it had not previously discontinued applying the equity method on this investment since the Company had previously considered itself to be committed to providing financial support to them.  The Company’s investment was recorded at cost and subsequently adjusted for their gains, losses and distributions.  The resulting carrying value of this investment is ($1,987,976) as of January 31, 2014 and ($2,198,045) as of April 30, 2013, and is included in other liabilities.

 

4.     Income Taxes:

As of January 31, 2014, the Company has Federal net operating loss carryforwards totaling approximately $15,400,000 that are available to offset future Federal taxable income through various periods expiring between 2016 and 2028. The Company has concluded that it is more likely than not that it will not realize any deferred income tax assets in the near term.

5.     Litigation:

 

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

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of the Company’s financial position, results of operations and cash flows.  This analysis should be read in conjunction with the condensed consolidated financial statements and related notes.

The following discussion and certain other sections of this Report on Form 10-Q contain statements reflecting the Company’s views about its future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  These views may involve risk and uncertainties that are difficult to predict and may cause the Company’s actual results to differ materially from the results discussed in such forward-looking statements.  Readers should consider how various factors including changes in general economic conditions, cost of materials, interest rates and availability of funds, and the nature of competition and relationship with key tenants may affect the Company’s performance.  The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or other.

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

Results of Operations

Critical Accounting Policies

There have been no significant changes in the Company’s critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2013 under the subheading “Critical Accounting Policies and Estimates”. 

Rental Income

Rental Income by type of tenant follows:

	Three Months Ended				Nine Months Ended
	January 31, 2014		January 31, 2013		January 31, 2014		January 31, 2013
Residential	$2,787,072		$2,784,595		$8,312,410		$8,329,679
Commercial	4,229,589		4,221,846		13,240,136		12,694,114
	$7,016,661		$7,006,441		$21,552,546		$21,023,793

Service Income

Service income by type of service follows:

	Three Months Ended				Nine Months Ended
	January 31, 2014		January 31, 2013		January 31, 2014		January 31, 2013
Construction Services	-0-		-0-		-0-		$1,966,138
Management Fees	101,753		226,630		342,971		480,872
Preferred developer Fees	1,588,096		1,268,784		3,916,172		3,074,471
	$1,689,849		$1,495,414		$4,259,143		$5,521,481

Sales of Real Estate

In the three month period ended January 31, 2014, the Company did not sell any real estate.   In the nine months ended January 31, 2014, the Company sold a total of three outparcels in our Edinburg shopping center for a total of $1,682,000 as well as a parcel in Houston, Texas to Aldi Supermarkets for $1,220,000.

Other Income

Included in other income are the beer and wine sales from a liquor store the Company is operating in our North Adams shopping center.  A small sandwich shop opened as part of the same facility.  The Company hopes to get a full liquor license in 2014.  The beer and wine portion opened in mid-September 2013 and has sales revenue of approximately $472,000 to January 31, 2014, of that amount approximately $353,000 was from the three months ended January 31, 2014.

Revenue from the movie theater in North Adams, Massachusetts, was approximately $235,000 and $633,000 for the three and nine month periods ended January 31, 2014 and $210,000 and $534,000 for the three and nine months of 2013 respectively.

 

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

Operating Cost and Expenses

Rental Expenses

	Three Months Ended				Nine Months Ended
	January 31, 2014		January 31, 2013		January 31, 2014		January 31, 2013
Residential	$2,959,568		$2,402,162		$7,875,309		$7,120,762
Commercial	2,532,072		2,148,213		7,182,541		6,689,171
	$5,491,640		$4,550,375		$15,057,850		$13,809,933

 

Residential

The three and nine month period ended January 31, 2014 had a year over year increase in rental expense of approximately $557,000 and $754,000 respectfully.  The increase was mainly from asbestos remediation work.  Additional costs were incurred in utilities, as a fire in the cogeneration system forced a closure of the system.   As a result cogeneration savings did not occur.

Service Expenses

Included in service expense in the nine month period ended January 31, 2013, is $1,329,000 of construction costs. In the periods ended January 31, 2014, there were no construction costs. All remaining service expense, other than the construction cost, is cost of the preferred development program.

Selling, General and Administrative

For the three and nine month periods ended January 31, 2014 SG&A expenses increased approximately $103,000 and $499,000 respectively over the three and nine month periods ended January 31, 2013.  Of that increase approximately $184,000 was due to operations (including certain startup cost) for the wine and beer store described above.  A major part of the balance was due to salary and medical insurance cost.

Non-operating Income (Expense)

Interest Expense

Interest expense breaks out as follows:

 

	Three Months Ended				Nine Months Ended
	January 31, 2014		January 31, 2013		January 31, 2014		January 31, 2013
Residential	$687,075		$706,368		$2,012,382		$2,121,686
Commercial	1,884,203		2,087,225		6,046,225		6,077,968
Other	-0-		-0-		-0-		67,982
	$2,571,278		$2,793,593		$8,058,607		$8,267,636

 

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

Non-operating Income (Expense) (concluded):

Loss on Defeasance

Loss on Defeasance was caused by an early refinancing and repayment of the mortgage on the Plainfield Parkade.  Details of the refinances were included in a form 8-K filed on October 8, 2013.

Gain (Loss) on Derivatives

For the three and nine month periods ended January 31, 2014 the Company recorded gains of $374,096 and $1,308,113  as compared to a gain of $276,440 and a (loss) of $(10,396) for the three and nine month period ended January 31, 2013.   Of these amounts, 50% was reduced through the non-controlling interest.

Equity in Earnings of Unconsolidated Subsidiary

Equity in earnings of the unconsolidated subsidiary increased approximately $19,000 on a period over period basis for the nine months ended January 31, 2014.  During the same periods the amounts distributed from a 50% owned investee were lower than the prior periods by approximately $21,000. Such distributions are in excess of net assets of the 50% owned investee since its accumulated net losses (including significant amounts for depreciation, amortization and gain or losses from derivatives which are noncash) have exceeded capital contributions.

While the Company has a policy of recording distributions in excess of basis as income, it does not control the rate of distributions of the investee partnership. Cash flow in excess of distribution is held at the partnership level.  Please refer to the financial statements of the Company’s nonconsolidated investee partnership which are included in the Company’s Form 10-K for the year ended April 30, 2013.

Income Taxes

The Company has significant net operating loss carryforwards, so it will likely not be required to pay Federal income taxes in the near term.

Capital Resources and Liquidity

As of January 31, 2014, the Company had approximately $10,732,000 of unrestricted cash, cash equivalents and marketable securities. This includes approximately $10,120,000 belonging to partnership entities in which the Company’s financial interests range from .01% (VIEs) to 50%.  Funds received from CVS, which are to be paid out in connection with CVS developments, amounted to approximately $38,000 and tenant security deposits held by VIEs of approximately $417,000 are included in restricted cash and cash equivalents.

The Company believes it has sufficient cash and cash resources to fund operations and debt maturities in the next fiscal year without any new bank borrowings through April 30, 2015. Borrowings for selective new construction loans,  property purchases or mortgage debt refinancing are generally available to the Company at competitive rates which requires greater equity than in past periods.

Item 3.  QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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Item 4.  CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, 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 Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15b of the Exchange Act.  Based on the Evaluation, our President and Treasurer concluded that because of weaknesses in our control environment, our disclosure controls were not effective as of the end of the period covered by this report.  Notwithstanding weaknesses in our control environment, as of January 31, 2014, we believe that the condensed consolidated financial statements contained in this report present fairly the Company’s financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

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

 

 

 

 

 

 

 

 

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PART II                OTHER INFORMATION

Item 1.                  LEGAL PROCEEDINGS

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

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.                  MINE SAFETY DISCLOSURES

                               Not applicable

Item 5.                  OTHER INFORMATION

None

                                SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                                The Company’s Annual Meeting of Shareholders was held on June 9, 2014 in Hartford, Connecticut.

                                The following nominees were elected as directors by the votes indicated:

                               

Name	For	Against
Neil H. Ellis	1,983,243	13,815
David B. Harding	1,983,243	13,815
Stuart I. Greenwald	1,983,368	13,690

 

Item 6.                  EXHIBITS

a)      Exhibits:

 

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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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