FIRST HARTFORD CORP - FORM 10-K

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EX-31 - FIRST HARTFORD CORP	ex31-2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended April 30, 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	(I.R.S. Employer
incorporation or organization	Identification No.)

149 Colonial Road, Manchester, Connecticut 06042

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 860-646-6555

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value of $1 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 Yes X No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 Yes X No

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

 Yes X No

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, 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 X No

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of the Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K.

X Yes  No

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12-b of the Exchange Act. (check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company X

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes X No

As of October 31, 2013, the aggregate market value of the registrant’s common stock (based upon $2.70 closing price on that date on the OTC Securities Market) held by non-affiliates (excludes shares reported as beneficially owned by directors and officers – and does not constitute an admission as to affiliate status) was approximately $1,480,000.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. 2,411,965 as of September 16, 2014.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Cautionary Statement Concerning Forward Looking Statements

This Annual Report on Form 10-K contains forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in registration statements, annual reports, and other periodic reports and filings of First Hartford Corporation and Subsidiaries (the Company) filed with the Securities and Exchange Commission. All statements, other than statements of historical facts, which address the Company’s expectations of sources of capital or which express the Company’s expectation for the future with respect to financial performance or operating strategies can be identified as forward-looking statements. As a result, there can be no assurance that the Company’s future results will not be materially different from those described herein as “believe”, “anticipate”, “estimate” or “expect”, which reflect the current view of the Company with respect to future events. We caution readers that these forward-looking statements speak only as of the date hereof. The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which such statement is based.

PART I

ITEM 1. BUSINESS

First Hartford Corporation, which was incorporated in Maine in 1909, and its subsidiaries (the “Company”), is engaged in the purchase, development, ownership, management and sale of real estate, which collectively is considered a single segment. The Company has a second segment – “Fee for Service” discussed below.

When profitable opportunities arise, the Company may consider selling certain properties.

The real estate, owned and/or managed by the Company through various subsidiaries and joint ventures, is located in Connecticut, New Jersey, Texas, Massachusetts, Rhode Island and Delaware. Non-residential tenants are obtained through brokers and employed representatives of the Company, by means of Industry Trade Shows, direct contacts with retail stores and other potential commercial tenants and an occasional inquiry by potential tenants at the Company’s on-site offices. Residential tenants are obtained through advertisements and inquiry at on-site offices.

The Company’s real estate business is diversified by geographical locations, type of commercial property and form of ownership or management. The commercial real estate business is not divided further into significant separate classes of products or services.

The Company has an agreement with CVS Caremark Corporation (“CVS”) to be a preferred developer in Western Texas, the Rio Grande Valley, Houston, Austin, Long Island, NY, Northern New Jersey and Louisiana. This is a fee for service agreement whereby the Company will locate a site, negotiate a letter of intent, prepare store development budgets, demographics, arrange traffic counts and submit for real estate committee approval. Once approved the Company will negotiate a purchase or lease and obtain permits. The Company will invoice (and record as income) approximately 75% of the fee when the property is purchased or leased and a building permit is issued. Fees vary based on location and style of the store. A third party contractor is selected who will work through the Company. The Company will manage the construction and administrate the contracts and payments. When a Certificate of Occupancy is obtained, CVS will make a payment of approximately 50% of the balance. After the store is opened and all the open items are closed out the Company will receive a final payment. These two payments are recognized as income when invoiced. The entire process will normally take 1-3 years. The volume of revenue is in excess of 10% of the Company revenue.

The Company is also a preferred developer for Cumberland Farms Inc. Its scope of work is less than the above as the Company is not involved in the construction management of the store.

The Company has no material patents, licenses, franchises or concessions.

Research and development is not a part of the Company’s business.

The Company’s operations and property are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health safety.

The Company’s economic performance and the value of its real estate are subject to the risks incidental to the development, construction and ownership of real estate properties, as well as the economic well being of its tenants.

On April 30, 2014, the Company employed 89 people full time.

ITEM 1A. RISK FACTORS

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

ITEM 2. PROPERTIES

The following table shows the location, general character and ownership status of the materially important physical properties of the Company.

Consolidated Subsidiaries

Company Managed	Location of Properties	Use	Available Space or Facilities and Major Tenants	Ownership Status
X	Edinburg, TX	Shopping Center	449,558 sq. ft. JC Penney 23% Academy Sports 17% Burlington Coat Factory 18%, Effective rent per sq. ft. occupied, exclusive of JC Penney (JC Penney owns building) is $9.41, occupied 98%	100% owned by a subsidiary of the Company. Lender to get extra interest if available (50% of cash flow) plus 50% of cash proceeds from sale or refinancing

X	W. Springfield, MA	Shopping Center	144,350 sq. ft. Price Rite 28% Big Lots 21% Harbor Freight 12%, Effective rent per sq. ft. occupied is $8.92, 82.45% occupied	Owned by a subsidiary of the Company

X	North Adams, MA	Shopping Center	131,682 sq. ft. Steeple City Cinema 20% Company owned; Steeple City Liquor 11% Company owned; Peebles 14% Planet Fitness 8% Effective rent per sq. ft. occupied – net of 41,067 sq. ft. Company owned $8.44, 75% occupied	100% owned by a subsidiary of the Company. Lender to get extra interest if available (50% of cash flow) plus 50% of cash proceeds from sale or refinancing after Company receives $500,000

ITEM 2. PROPERTIES (continued):

Consolidated Subsidiaries (continued):

Company Managed	Location of Properties	Use	Available Space or Facilities and Major Tenants	Ownership Status
X	Plainfield, CT	Strip Shopping Center	60,154 sq. ft. Big Y 76%, effective rent per sq. ft. occupied is $11.68, 100% occupied	Owned by a subsidiary of the Company
X	Putnam, CT	Shopping Center	57,527 sq. ft. Big Lots 46%, Effective rent per sq. ft. occupied is $9.37 94.3% occupied	Owned by a subsidiary of the Company
	Cranston, RI	Shopping Center	259,218 sq. ft. Kmart 40% Stop & Shop 25 % TJ Maxx 9% Effective rent per sq. ft. occupied is $14.65 95.6% occupied	50% owned by a subsidiary of the Company

	Cranston, RI	College	60,000 sq. ft. Career Education College Effective rent per sq. ft. is $25.41 Currently vacant-leased to 12/31/18	50% owned by a subsidiary of the Company

	Cranston, RI	Restaurant	Texas Roadhouse Land Lease 100% occupied	50% owned by a subsidiary of the Company

	Cranston, RI	Police Station	60,000 sq. ft. Leased to City of Cranston Effective rent per sq. ft. occupied is $17.75 100% occupied	50% owned by a subsidiary of the Company

X	Lubbock, TX	Shopping Center	160,555 sq. ft. Steinmart 26% Mardel 25% TJ Maxx 19% Effective rent per sq. ft. occupied is $8.62 91.9% occupied	2.0% owned by a subsidiary of the Company

ITEM 2. PROPERTIES (continued):

Consolidated Subsidiaries (continued):

The properties listed above, contain approximately 1,383,000 of rentable sq. ft. of which approximately 88,000 sq. ft. was vacant at April 30, 2014. Over the next 10 years, 80 of the current 86 leases will expire as follows:

Year Ended	Number of Leases	Sq. Ft.	Base Rent	Percentage of Base Rent
4/30/15	4	61,410	$450,028	3.27%
4/30/16	10	110,748	$893,237	6.49%
4/30/17	17	91,211	$1,204,188	8.74%
4/30/18	11	70,752	$786,817	5.71%
4/30/19	15	237,485	$3,542,236	25.71%
4/30/20	6	114,289	$1,065,428	7.74%
4/30/21	2	6,556	$100,290	0.73%
4/30/22	5	97,781	$1,391,564	10.01%
4/30/23	7	92,000	$978,864	7.11%
4/30/24	3	95,808	$618,647	4.49%

Total rental income of these properties for the year ended April 30, 2014 was approximately $17,826,000 of which approximately $3,694,000 is for reimbursement of Real Estate tax, common area and insurance expense.

The Company does not have any individual tenants which accounts for 5% or more of the Company’s revenues.

Company Managed	Location of Properties	Use	Available Space or Facilities and Major Tenants	Ownership Status

X	Rockland, MA	Apartments	204 units, low to moderate income 96% occupied, effective sq. ft. rent - $16.56	.01% owned by a 75% owned subsidiary of the Company

X	Somerville, MA	Apartments	501 units, low to moderate income, 98% occupied, effective sq. ft. rent - $24.09	.0049% owned by a 75% owned subsidiary of the Company

ITEM 2. PROPERTIES (concluded):

Non Consolidated Subsidiaries

Company Managed	Location of Properties	Use	Available Space or Facilities and Major Tenants	Ownership Status
X	Claymont, DE	Apartments	208 units, senior housing, 100% sec 8 subsidized	Nonconsolidated, .01% owned by a 75% owned subsidiary of the Company

	Dover Township, NJ	Shopping Center	108,314 sq. ft. Stop & Shop 52% Dollar Tree 9% Plus Outparcels	50% owned by a subsidiary of the Company

ITEM 3. LEGAL PROCEEDINGS

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

Other proceedings

The Company is not aware of any material legal proceedings which would need to be cited herein.

For proceedings involving officers and directors, see Item 10(f) on Page 41.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

First Hartford Corporation (FHRT) trades on the OTC. Investors can find current financial disclosures and quotes for the Company on Yahoo Finance and other financial sites.

STOCK PRICE AND DIVIDEND INFORMATION

Stock Price
2014	High	Low	Dividends Paid Per Common Share
First Quarter	$3.19	$2.25	None
Second Quarter	$3.00	$2.70	None
Third Quarter	$2.70	$2.10	None
Fourth Quarter	$2.30	$1.10	None

2013
First Quarter	$1.35	$1.35	None
Second Quarter	$2.49	$1.04	None
Third Quarter	$2.71	$2.25	None
Fourth Quarter	$2.61	$2.25	None

No dividends have been paid in the past two fiscal years.

Sales of common stock have occurred sporadically. The last reported sale was for $1.60 per share on October 8, 2014.

The Company repurchased 4,823 shares of common stock during the year ended April 30, 2014.

The Company has not sold unregistered shares of securities during the year ended April 30, 2014.

There are approximately 439 shareholders of record for the Company’s common stock as of April 30, 2014.

ITEM 6. SELECTED FINANCIAL DATA

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

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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

This and certain other sections of the Company’s Annual Report on Form 10-K 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 differ materially from the results discussed in such forward-looking statements. Readers should consider that various factors including changes in general economic conditions, interest rates and the availability of funds, and competition and relationships with key customers and their financial condition which may affect the Company’s performance. The Company undertakes no obligation to update publicly any forward-looking statements, as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Real Estate Transactions

On February 21, 2014 the Company purchased a 2.7 acre parcel of land for approximately $1,533,000. The Company leased 1.8 acres to a national retailer and sold the lease for $1,660,000. A .90 acre parcel is available for lease or sale.

During the course of the year the Company sold a parcel purchased last year to Aldi Supermarket for $1,220,000, and three outparcels from our Edinburg, Texas shopping center for $1,682,000.

On April 29, 2013 the Company purchased 7.9467 acres of land in Humble, Texas for $2,219,906, of that parcel 1.959 acres was leased to a national retailer. That lease was simultaneously sold to an investor for $2,385,000. Approximately $1,205,000 of the purchase price was allocated to the cost of property sold.

Rental Income

Rental income for the years ended April 30, by type of tenant follows:

	2014	2013
Residential	$11,161,000	$11,105,000
Commercial	17,826,000	17,171,000
	$28,987,000	$28,276,000

Residential

Increases in residential rental income of approximately $56,000, resulted from a full year occupancy after construction in Clarendon Hill Towers.

Commercial

Commercial rental income increased by approximately $655,000 year over year, there were increases of approximately $478,000 as a result of new rentals in Edinburg, Texas. We currently only have 9,000 sq. ft. of space unoccupied in Edinburg (leased and under construction) but we still have the space to double the size of the center. This would be contingent upon leasing and financing.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued);

RESULTS OF OPERATIONS (continued):

Service Income

Service income is approximately made up of the following:

	2014	2013

Preferred Developer Fees	$5,189,000	$4,952,000
Construction Income, Delaware Housing	-0-	1,966,000
Management Fees	498,000	586,000
Other Service Income	208,000	36,000
	$5,895,000	$7,540,000

Preferred Developer Fees are from CVS and Cumberland Farms.

Construction in Delaware was completed by October 2012. Management fees are mainly from the Delaware project, as the fees which result from controlled projects are eliminated in consolidations. Other service income for the year ended April 30, 2014 included a $150,000 fee from a third party.

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 expects to get a full liquor license in 2014. The beer and wine portion opened in mid-September 2013 and has sales revenue of approximately $800,000 for the year ended April 30, 2014.

Revenue from the movie theater in North Adams, Massachusetts, was approximately $800,000 and $687,000 for the years ended April 30, 2014 and 2013 respectively also included in other income.

Operating Costs and Expenses

Rental Expenses

Rental expense is made up as follows:

Commercial	2014	2013
Depreciation and Amortization	$3,451,000	$3,521,000
Other Rental Expenses	6,432,000	5,893,000
	$9,883,000	$9,414,000
Residential
Depreciation and Amortization	$2,157,000	$2,140,000
Other Rental Expenses	8,350,000	7,040,000
	$10,507,000	$9,180,000

TOTAL	$20,390,000	$18,594,000

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued);

RESULTS OF OPERATIONS (continued):

In the previous year the increase in the rental expense from the commercial properties is mainly a result of adding in excess of 100,000 sq. ft. to the Edinburg property.

The year over year in residential rental expenses are mainly from asbestos remediation work at Clarendon Hill Towers. Additional costs were incurred in utilities, as a fire in the cogeneration system at Clarendon forced a closure of the system. As a result cogeneration savings did not occur.

Service Expense

Service Expense is explained as follows:

	2014	2013
Preferred Developer Expense and other cost	$2,125,000	$1,705,000
Fees	1,630,000	1,648,000
	$3,755,000	$3,353,000
Construction and other cost	422,000	1,372,000
	$4,177,000	$4,725,000

Payroll and related cost increase year over year in an attempt to increase our Preferred Developer business

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

The store selling beer and wine opened in September 2013 and had cost of $926,000 included in SGA expenses in the year ended April 30, 2014.

Non Operating Income (Expense)

Equity in Earnings (Losses) of Unconsolidated Subsidiary

The equity in earnings (losses) of unconsolidated subsidiary are broken down as follows:

	April 30, 2014	April 30, 2013
Income from operations	$286,213	$255,872
Distributions	137,500	178,500
Equity in Earnings of Unconsolidated Subsidiary	$423,713	$434,372

Gain on Derivatives

These are the non-cash items that track the value of the interest rate swaps owned by a 50% owned subsidiary of the Company.

Loss on Defeasance

Resulted from a refinancing of a shopping center owned by a 100% owned subsidiary of the Company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued);

RESULTS OF OPERATIONS (continued):

Non Operating Income (Expense) (concluded):

Impairment and Debt

In conjunction with preparing its fiscal year 2014 financial statements the Company determined that the carrying value of a shopping center in North Adams, Massachusetts owned by its 100% owned subsidiary, Main Street N A Parkade, LLC was impaired. The continuing overall economic decline in the geographical area and retail industry thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center. The carrying value of the shopping center exceeded its estimated fair value by $4,027,573 and was written down to $7,260,000. This impairment loss is included in the operating results for the Company’s “Real Estate Operations” segment.

The Company is currently negotiating with the representative of the holder of the nonrecourse mortgage debt on the shopping center. If mutually agreeable and financially feasible terms cannot be reached the Company may exchange the shopping center in satisfaction of the debt. The fair value of the shopping center as of April 30, 2014 is $7,260,000 and the carrying value of the related debt is $12,575,423. Fair value was determined by third party valuation on an “as is” basis using primarily discounted cash flows.

Interest Expense

	2014	2013
Commercial	$7,975,000	$8,086,000
Residential	2,691,000	2,814,000
Other	36,000	124,000
	$10,702,000	$11,024,000

Income Taxes

See Note 10 to the Company’s financial statements for information about the effective income tax rate. In general, 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

The Company ended the 2014 fiscal year with approximately $6,501,000 of unrestricted cash and cash equivalents. The unrestricted cash and cash equivalents includes approximately $5,062,000 belonging to partner 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 $351,000 and tenant security deposits held by VIE’s of approximately $418,000 are included in restricted cash and cash equivalents.

The Company ended the 2014 fiscal year with approximately $4,906,000 of investments in marketable securities, all of which belongs to partner entities.

The Company has a Federal net operating loss carry-forward in excess of $15,000,000 for tax purposes, and no net deferred income tax asset. The Company will not have to pay any Federal taxes until its net operating losses are used or expired.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued);

RESULTS OF OPERATIONS (concluded):

Capital Resources and Liquidity (concluded):

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. Borrowing for new construction loans, property purchases or balloon payments are unclear at this time.

This discussion and analysis of financial condition and results of operations is based on the Company’s Consolidated Financial Statements contained in Item 8 in this Annual Report.

Recently Issued Accounting Guidance:

For a description of recently issued accounting pronouncements, see Note 1 to the consolidated financial statements included in Item 8. Summary of Significant Accounting Policies.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

For a discussion of accounting policies see Note 1 to the consolidated financial statements included in Item 8, Summary of Significant Accounting Policies.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements begin on page 15. See the index to Financial Statements in Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

See Item 14.

ITEM 9A: 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 Treasurer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of the President and Treasurer, of the effectiveness of the design and operation of disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a – 15b of the Exchange Act. Based on this Evaluation, our President and Treasurer concluded that because of weaknesses in our control environment, our Disclosure Controls were not effective as of the end of the period covered by this report.

ITEM 9A: CONTROLS AND PROCEDURES (concluded):

Management’s Report on Internal Control over Financial Reporting

The management of First Hartford Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a – 15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of April 30, 2014, the Company’s internal control over financial reporting was not effective due to the existence of the material weaknesses identified by management and disclosed below:

Lack of Appropriate Independent Oversight. There are no independent members of the Board of Directors who could provide an appropriate level of oversight, including challenging management’s accounting for and reporting of transactions.

Although the Company has identified a lack of appropriate independent oversight as a material weakness, an independent board of directors is not required by The OTC Markets (the electronic quotation system that trades the Company’s securities) and the Company does not intend to remediate this material weakness at this time.

The Company has engaged a consultant to assist the Company with certain complex, non-routine and unusual accounting issues and transactions when they are encountered.

Changes in Internal control Over Financial Reporting

During the years ended April 30, 2014 and 2013, there have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of First Hartford Corporation

We have audited the accompanying consolidated balance sheets of First Hartford Corporation and Subsidiaries as of April 30, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ deficiency and cash flows for each of the years in the two-year period ended April 30, 2014. First Hartford Corporation and Subsidiaries’ management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Hartford Corporation and Subsidiaries as of April 30, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended April 30, 2014 in conformity with accounting principles generally accepted in the United States of America.

/s/ Mahoney Sabol & Company, LLP
Glastonbury, Connecticut
October 20, 2014

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2014 AND 2013

ASSETS

	2014	2013
Real estate and equipment:
Developed properties (including $71,182,200 in 2014 and $70,735,840 in 2013 for VIEs)	$195,999,323	$202,050,054
Equipment and tenant improvements (including $2,314,849 in 2014 and $2,084,461 in 2013 for VIEs)	3,639,292	3,458,587
	199,638,615	205,508,641
Less accumulated depreciation and amortization (including $9,776,315 in 2014 and $7,781,281 in 2013 for VIEs)	34,260,586	31,695,129
	165,378,029	173,813,512
Property under construction (including $391,905 in 2014 and 2013 for VIEs)	1,401,846	613,200

	166,779,875	174,426,712

Cash and cash equivalents (including $535,230 in 2014 and $2,052,427 in 2013 for VIEs)	6,500,885	8,346,956

Cash and cash equivalents – restricted (including $441,877 in 2014 and $412,518 in 2013 for VIEs)	769,231	1,272,924

Marketable securities (including $2,936,778 in 2014 and $1,424,072 in 2013 for VIEs)	4,906,248	4,846,778

Accounts and notes receivable, less allowance for doubtful accounts of $341,600 in 2014 and $508,700 in 2013 (including $87,049 in 2014 and $126,408 in 2013 for VIE’s)	4,266,706	3,684,774

Other receivables	16,842,826	8,744,470

Deposits and escrow accounts (including $1,768,581 in 2014 and $2,824,785 in 2013 for VIEs)	3,907,239	5,222,827

Prepaid expenses (including $223,453 in 2014 and $178,762 in 2013 for VIEs)	925,906	571,775

Deferred expenses, net (including $1,053,585 in 2014 and $1,091,734 in 2013 for VIEs)	3,103,178	2,983,819

Investment in affiliates	100	100

Due from related parties and affiliates	165,206	165,188

Total assets	$208,167,400	$210,266,323

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2014 AND 2013
(continued)

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)

	2014	2013
Liabilities:
Mortgages and other notes payable:
Construction loans payable	$49,316,486	$52,847,132
Mortgages payable (including $53,429,857 in 2014 and $54,335,209 in 2013 for VIEs)	148,308,158	146,327,723
Notes payable – other (including $1,704,697 in 2014 and 2013 for VIEs)	1,704,697	3,534,301

	199,329,341	202,709,156

Accounts payable (including $488,140 in 2014 and $434,309 in 2013 for VIEs)	2,317,036	1,853,976
Other payables	14,845,606	6,832,367
Accrued liabilities (including $3,225,028 in 2014 and $2,648,075 in 2013 for VIEs)	5,467,707	4,866,430
Accrued cost of derivatives	2,411,173	3,656,380
Deferred income (including $247,856 in 2014 and 2013 for VIEs)	855,121	455,475
Other liabilities	1,911,832	2,198,045
Due to related parties and affiliates (including $399,214 in 2014 and $377,775 in 2013 for VIEs)	471,114	449,757
Total liabilities	227,608,930	223,021,586

Commitments and Contingencies

Shareholders’ Equity (Deficiency):
First Hartford Corporation
Preferred stock, $1 par value; $.50 cumulative and convertible; authorized 4,000,000 shares; no shares outstanding	-0-	-0-
Common stock, $1 par value; authorized 6,000,000 shares: issued 3,298,609 in 2014 and 2013, outstanding 2,412,002 and 2,416,825 in 2014 and 2013, respectively	3,298,609	3,298,609

Capital in excess of par	5,198,928	5,198,928
Accumulated deficit	(27,222,017)	(22,553,780)
Accumulated other comprehensive income (loss)	34,313	146,666
Treasury stock, at cost, 886,607 and 881,784 shares in 2014 and 2013, respectively	(4,964,884)	(4,952,574)
Total First Hartford Corporation	(23,655,051)	(18,862,151)

Noncontrolling interests	4,213,521	6,106,888
Total shareholders’ equity (deficiency)	(19,441,530)	(12,755,263)

Total liabilities and shareholders’ equity (deficiency)	$208,167,400	$210,266,323

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

	2014	2013
Revenues:
Rental income	$28,986,777	$28,276,204
Service income	5,895,313	7,540,019
Sales of real estate	4,562,596	2,385,000
Other income	1,614,637	826,357
	41,059,323	39,027,580

Operating costs and expenses:
Rental expenses (Includes depreciation and amortization of approximately $4,767,000 and $5,661,000 in 2014 and 2013, respectively	20,389,867	18,594,461
Service expenses	4,177,617	4,725,887
Cost of real estate sales	3,631,374	1,221,627
Selling, general and administrative expenses	5,374,666	4,717,697
	33,573,524	29,259,672

Income from operations	7,485,799	9,767,908

Non-operating income (expense):
Equity in earnings of unconsolidated subsidiaries	423,713	434,372
Other income	719,709	655,990
Gain on derivatives	1,245,207	356,662
Loss on defeasance	(243,602)	-0-
Loss on impairment	(4,027,573)	-0-
Interest expense	(10,702,148)	(11,024,267)
	(12,584,694)	(9,577,243)

Income (loss) before income taxes	(5,098,895)	190,665

Income taxes	48,872	64,985

Consolidated net income (loss)	(5,147,767)	125,680

Net loss attributable to noncontrolling interests	479,030	33,279

Net income (loss) attributable to First Hartford Corporation	$(4,668,737)	$ 158,959

Net income (loss) per share – basic	$(1.93)	$0.07

Net income (loss) per share – diluted	$(1.93)	$0.06

Shares used in basic per share computation	2,413,452	2,418,286
Shares used in diluted per share computation	2,413,452	2,521,227

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

	2014	2013

Consolidated net income (loss)	$(5,147,767)	$125,680


Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on marketable securities	(202,728)	330,960

Total comprehensive income (loss)	(5,350,495)	456,640

Amounts Attributable to noncontrolling interests:
Net loss	479,030	33,279
Unrealized gain (loss) on marketable securities	90,375	(155,546)

	569,405	(122,267)

Comprehensive income (loss) attributable to First Hartford Corporation	$(4,781,090)	$334,373

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

	Common Stock	Capital in Excess of Par	Accumulated Deficit	Accumulated Other Comprehensive (Loss) Income*	Treasury Stock	Total First Hartford Corporation	Noncontrolling Interests	Total

Balance, April 30, 2012	$3,298,609	$5,198,928	$(22,714,515)	$(28,748)	$(4,943,289)	$(19,189,015)	$1,563,054	$(17,625,961)

Contributions from noncontrolling interests, net	-0-	-0-	-0-	-0-	-0-	-0-	5,066,944	5,066,944

Equity adjustment for reversing equity method	-0-	-0-	1,776	-0-	-0-	1,776	-0-	1,776

Distribution	-0-	-0-	-0-	-0-	-0-	-0-	(645,377)	(645,377)

Purchase of treasury stock	-0-	-0-	-0-	-0-	(9,285)	(9,285)	-0-	(9,285)

Net income	-0-	-0-	158,959	-0-	-0-	158,959	(33,279)	125,680

Unrealized gain on marketable securities	-0-	-0-	-0-	175,414	-0-	175,414	155,546	330,960

Balance, April 30, 2013	3,298,609	5,198,928	(22,553,780)	146,666	(4,952,574)	(18,862,151)	6,106,888	(12,755,263)

Equity adjustment for reversing equity method	-0-	-0-	500	-0-	-0-	500	-0-	500

Distribution	-0-	-0-	-0-	-0-	-0-	-0-	(1,323,962)	(1,323,962)

Purchase of treasury stock	-0-	-0-	-0-	-0-	(12,310)	(12,310)	-0-	(12,310)

Net loss	-0-	-0-	(4,668,737)	-0-	-0-	(4,668,737)	(479,030)	(5,147,767)

Unrealized loss on marketable securities	-0-	-0-	-0-	(112,353)	-0-	(112,353)	(90,375)	(202,728)

Balance, April 30, 2014	$3,298,609	$5,198,928	$(27,222,017)	$34,313	$(4,964,884)	$(23,655,051)	$4,213,521	$(19,441,530)

*Consists exclusively of net unrealized gains (losses) on available-for-sale marketable securities.

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

	2014	2013
Operating activities:

Consolidated net income (loss)	$(5,147,767)	$125,680
Adjustments to reconcile consolidated net income (loss)
to net cash provided by operating activities:
Equity in earnings of unconsolidated subsidiaries, net of
distributions of $137,500 in 2014 and $178,500 in 2013	(286,213)	(255,872)
Gains on sale of real estate	(931,222)	(1,163,373)
Loss on impairment	4,027,573	-0-
Depreciation and amortization of real estate and equipment	5,090,421	5,223,066
Amortization of deferred expenses	441,346	514,823
Changes in operating assets and liabilities:
Accounts, notes and other receivables	(8,680,288)	109,060
Deposits and escrow accounts	1,315,588	3,242,212
Prepaid expenses	(354,131)	88,495
Deferred expenses	(560,705)	(541,525)
Cash and cash equivalents – restricted	503,693	(423,034)
Accrued liabilities	601,277	(178,472)
Accrued cost of derivatives	(1,245,207)	(356,662)
Deferred income	399,646	(25,203)
Accounts and other payables	8,476,299	(422,377)
Net cash provided by operating activities	3,650,310	5,936,818

Investing activities:
Investments in affiliates	-0-	(100)
Investments in marketable securities	(2,672,740)	(3,715,280)
Proceeds from sale of marketable securities	2,410,542	1,206,430
Purchases of equipment and tenant improvements	(180,705)	(515,714)
Consolidation of formerly nonconsolidated entity	500	1,776
Proceeds from sales of real estate	4,562,596	2,385,000
Additions to developed properties and property under construction	(4,921,825)	(4,877,528)
Net cash used in investing activities	(801,632)	(5,515,421)

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013
(continued)

	2014	2013
Financing activities:

Contributions from noncontrolling interests – limited partners	$-0-	$5,066,944
Purchase of treasury stock	(12,310)	(9,285)
Distribution to noncontrolling interests	(1,323,963)	(645,377)
Proceeds from:
Construction loans	1,178,517	3,510,210
Mortgages	495,258	21,886,960
Other notes	-0-	-0-
Principal payments on:
Construction loans	(2,115,231)	(24,689,340)
Mortgages	(2,938,359)	(3,067,309)
Other notes	-0-	(749,353)
Advances to related parties and affiliates, net	21,339	22,784
Net cash (used in) provided by financing activities	(4,694,749)	1,326,234

Net change in cash and cash equivalents	(1,846,071)	1,747,631
Cash and cash equivalents, beginning of year	8,346,956	6,599,325

Cash and equivalents, end of year	$6,500,885	$8,346,956

Cash paid during the year for interest	$10,914,243	$10,324,633
Cash paid during the year for income taxes	$220,507	$147,942

See accompanying notes.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

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, all of which is considered the “Real Estate Operation” segment. The Company has a second segment “Fee for Service” in which the Company is engaged as a preferred developer for CVS and Cumberland Farms. (see Service Income to follow).

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. Construction revenues were approximately $-0- and $1,966,000 for the years ended April 30, 2014 and 2013. Such revenues are included in service income and relate primarily to a single contract which was completed prior to April 30, 2013.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

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, 2014 and 2013, the Company had sales of approximately $4,562,000 and $2,385,000, respectively. The cost of the property sold was approximately $3,631,000 and $1,221,000 for 2014 and 2013, 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. If conditions of rent are not met, certain tenants may have rights to pay percentage rent not to exceed stated rent. Currently there is one tenant on percentage rent.

Service Income

The Company is party to a Preferred Developer Agreement with CVS. Under this agreement, the Company’s fee for such services provided is recognized as earned when services, as outlined in the development agreement are provided. Fees earned related to the development of pharmacy stores for CVS during the years ended April 30, 2014 and 2013 were approximately $4,514,000 and $4,822,000 respectively, which is included in service income in the consolidated statements of operations. The Company is also a party to a Preferred Developer Agreement with Cumberland Farms Inc. Fees earned during the years ended April 30, 2014 and April 30, 2013 were $675,000 and $130,000 respectively.

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 and development of new retail pharmacy stores for which it receives direct reimbursements from CVS. Payables for allowable costs incurred in connection with these activities but not yet funded were $14,845,000 and $6,832,366 as of April 30, 2014 and 2013 respectively, and have been included as “other payables” in the consolidated balance sheets. Related reimbursements due from CVS were $15,405,000 and $6,533,260 as of April 30, 2014 and 2013, respectively, and have been included in other receivables in the consolidated balance sheets.

Cash and Cash Equivalents – Restricted

Cash and cash equivalents – restricted, consist 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. The restricted cash also contains Tenant Security Deposits held by the VIEs.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

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 are provided using the straight-line method based on the following estimated useful lives.

	Description	Years
	Developed properties	15 – 40
	Equipment	3 – 10
	Tenant improvements	Lesser of improvement life
		or lease term

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 directly associated with property under construction. Such costs include materials, construction labor and payroll cost, allocation of salaries and payroll cost from direct activities such as engineering, purchasing and legal and services provided by subcontractors. Material carrying costs for property taxes, insurance and interest are also capitalized during the period of active construction until construction is substantially complete.

The Company capitalizes labor cost for direct work by offsite staff on specific projects. In the year ended April 30, 2014, $-0- was capitalized. For the year ended April 30, 2013 approximately $139,000 was capitalized.

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 $2,366,155 and $2,720,341 as of April 30, 2014 and 2013, respectively. Amortization expense was $441,342 and $514,823 for the years ended April 30, 2014 and 2013, respectively.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

1. Summary of Significant Accounting Policies (continued):

Deferred Expenses (concluded):

Amortization expense for the next five years is expected to be as follows:

Year Ending April 30
2015	$332,789
2016	261,163
2017	251,635
2018	221,319
2019	170,804
Thereafter	1,128,445
Total	$2,366,155

Investment in Affiliated Entities

The Company has an investment in an affiliated limited liability entity Dover Parkade, LLC, (“Dover”). The Company has a 50% interest in “Dover” which owns a shopping center in Dover Township, NJ. The operating and financial policies of “Dover” are not controlled by the Company. For the years prior to May 1, 2009, the Company was committed to provide funding to this equity method investee. The Company’s investment was recorded at cost and subsequently adjusted for its share of their net income and losses and distributions. Since 2009, the Company has not increased its negative investment but has begun to record distributions to income. The resulting carrying value of this investment ($1,911,833) as of April 30, 2014 and ($2,198,046) as of April 30, 2013 is included in other liabilities.

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 Claymont, Delaware. The Company is a non-controlling .01% limited partner in the entity. The Company’s investment is carried at cost of $100. A subsidiary of the Company is the managing agent.

The Company recorded equity in earnings of unconsolidated subsidiaries of $423,713 and $434,372 for the years ended April 30, 2014 and 2013, respectively.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

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.

Level 1

Marketable Securities – Common and Preferred Stocks

The Company determines the appropriate classifications of its investments in marketable debt and equity securities at the time of purchase and re-evaluates such determinations at each balance sheet date. As of April 30, 2014 and 2013, 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. Net unrealized losses of $202,728 as of April 30, 2014 and gains of $330,960 as of April 30, 2013 are included in accumulated other comprehensive (loss) income. Gains or losses on securities sold are based on the specific identification method.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

1. Summary of Significant Accounting Policies (continued):

Fair Value Measurements (concluded):

Level 2

Derivative Instruments

During fiscal year 2006, the Company entered into two separate floating-to-fixed interest rate swap agreements with a bank which expire in June 2015 and July 2031. The Company has determined that these derivative instruments do not meet the requirements of hedge accounting and have therefore recorded the change in fair value of these derivative instruments through income in the consolidated statement of operations. The gain on derivatives incurred during the years ended April 30, 2014 and 2013 totaled $1,245,207 and $356,662, respectively, and the Company has recorded a liability of $2,411,173 and $3,656,380 in the consolidated balance sheets, which represents the fair value of the interest rate swaps as of April 30, 2014 and 2013, respectively.

Level 3

Debt

A VIE of the Company assumed a third mortgage note with MHFA on November 1, 2006, having a balance of $18,315,482. The note bears interest at the rate of 5.36% per annum. The VIE has the right to purchase the note upon maturity for the fair value of the note as determined by an appraiser. The mortgage loan was recorded at its estimated fair value on the date of acquisition. The fair value of the third mortgage note has been determined based on the fair value of the property on the acquisition date less the primary loan balances. The third mortgage note is revalued at each reporting period. As of April 30, 2014, the carrying amount of the loan was $1,828,910.

There have been no significant transfers between Level 1 and Level 2.

Long-Lived Assets

Long-lived assets held and used in operations are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount might not be recovered.

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, 2014 or 2013 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.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

1. Summary of Significant Accounting Policies (continued):

Income Taxes (concluded):

As of April 30, 2014 and 2013, 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 last concluded an audit for the years ended April 30, 2008 and 2009. In addition, the Internal Revenue Service conducted an audit for the year ended April 30, 2010. The Company received a notice from the Internal Revenue Service dated November 29, 2012 that the Service has completed its examination of the Company’s Federal income tax return for the period ended April 30, 2010. The examination resulted in no change in reported tax. The determination does not include any partnerships in which the Company has an interest. Otherwise, tax returns for fiscal years after 2010 are open to examination by Federal, local and state authorities.

The Company follows FASB ASC 740-10 which clarifies the accounting for uncertainty in income taxes recognized in financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. After review of the Company’s tax positions, no liabilities were recorded for unrecognized tax benefits as of April 30, 2014 or 2013.

The Company recognizes interest accrued related to unrecognized tax benefits, if any, in interest expense and penalties in operating expense. During the years ended April 30, 2014 and 2013, the Company did not recognize any interest or penalties related to unrecognized tax benefits.

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 using the “treasury stock” method. There were no options outstanding at April 30, 2014. For the year ended April 30, 2013, the effect for the dilutive options outstanding was 102,941 shares.

New Accounting Pronouncements

In April 2014, the FASB issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on the Company's consolidated financial statements.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

1. Summary of Significant Accounting Policies (concluded):

New Accounting Pronouncements (concluded):

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

2. Consolidated Variable Interest Entities

The Company’s consolidated financial statements include the accounts of Rockland Place Apartments Limited Partnership (“Rockland”), Clarendon Hill Somerville Limited Partnership (“Clarendon”) and Trolley Barn Associates, LLC (“Trolley Barn”). The Company has consolidated Rockland, Clarendon and Trolley Barn 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. Trolley Barn is 50% owned by the Company.

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 and are managed by the Company. Renovation costs were financed with loans from Massachusetts Housing Finance Agency (MHFA), subsidies from U.S. Department of Housing and Urban Development (HUD) and limited partner capital contributions.

Each building of the projects qualifies 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 an adjustment to the capital contributed by the investment limited partner.

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.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

2. Consolidated Variable Interest Entities (concluded):

Clarendon has an agreement with the 51% owner of Clarendon Hill Somerville, LLC, Clarendon Hill Towers Tenant Association, 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

The assets at April 30, 2014 and 2013 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 as follows:

	April 30
	2014	2013

Real estate and equipment, net	$66,786,598	$68,084,169
Other assets	7,060,316	8,096,778
Total assets	73,846,914	76,180,947

Intercompany profit elimination	(3,085,303)	(3,045,149)
Consolidated	$70,761,611	$73,135,798

Mortgages and other notes payable	$55,134,554	$56,039,906
Other liabilities	3,961,024	3,330,240
Total liabilities	$59,095,578	$59,370,146

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. Combined revenues for Rockland and Clarendon were $11,160,723 for the year ended April 30, 2014 and $11,105,125 for the year ended April 30, 2013. The combined net loss for Rockland and Clarendon was $1,920,508 for the year ended April 30, 2014 and $1,073,416 for the year ended April 30, 2013. 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.

Trolley Barn’s only asset is approximately seven acres of land in Cranston, RI.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

3. Construction Loans, Mortgages and Notes Payable:

Information about the Company’s debt follows:

	2014	2013
Construction loans and mortgages payable with interest rates ranging from
zero to 11.00% at April 30, 2014 and 2013 and maturities at various dates through 2056.	$197,624,644	$199,174,855

Notes payable on Clarendon with interest rates ranging from zero to 4.40% at
April 30, 2014 and 2013 and maturities ranging from 2030 to 2050.	1,704,697	1,704,697

Note and pre-judgment interest payable to Richard E. Kaplan
Paid in full by October 4, 2013.	-0-	1,829,604

	$199,329,341	$202,709,156

No interest was capitalized for the years ended April 30, 2014 and 2013, as the amounts were not material.

Aggregate principal payments due on the above debt for each of the years succeeding April 30, 2014 are as follows:

Year Ending April 30

2015	$8,976,546
2016	42,140,790
2017	2,534,102
2018	13,215,975
2019	2,482,552
Thereafter	129,979,376
	$199,329,341

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 the agreement, the Company receives reimbursements of public infrastructure costs incurred by the Company in addition to other cash incentives.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

4. Public Infrastructure Reimbursements and Other Incentives (concluded):

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 $6,211,533 in reimbursements of eligible public infrastructure costs through April 30, 2014. The remaining receivable of $1,788,467 is included in other receivables at April 30, 2014. 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”) of 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 $422,793 and $383,155 from the EEDC for the years ended April 30, 2014 and 2013, 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, 2014:

Loan for Career Education building -
5% of loan balance outstanding	$490,000
Construction loan – Edinburg, Texas	$48,232,000

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

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

6. Related Party Transactions:

Amounts included in revenue resulting from transactions with Journal Publishing Inc., a company which is owned by the President of the Company and his wife are as follows:

	2014	2013

Service Fees	$18,440	$11,223
Total	$18,440	$11,223

Included in amounts due from related parties and affiliates is approximately $157,000 at April 30, 2014 and 2013. This relates to funds borrowed from Hartford Lubbock Limited Partnership by Green Manor Corp., which owns Journal Publishing, which owns 98.01% of Hartford Lubbock Limited Partnership. These funds were borrowed some years ago (prior to consolidation).

Included in amounts due to related parties and affiliates is approximately $471,000 and $450,000 payable to Cranston Brewery LLC at April 30, 2014 and 2013, respectively. Cranston Brewery LLC is an affiliate but not owned by the Company. The amount due represents their investment in Trolley Barn Associates (50%). The Company’s advances were eliminated in consolidation.

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 an aggregate of 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 expired February 11, 2014. The options included 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. On February 11, 2014, all options were unexercised and expired unused.

As of April 30, 2013 however, 250,000 options were outstanding and exercisable at a weighted average exercise price of $1.10 a share. During the years ended April 30, 2014 and 2013, no options were granted or exercised. All options granted vested prior to May 1, 2009. As such, there was no compensation expense for the year ended April 30, 2013. The aggregate intrinsic value of outstanding options as of April 30, 2013, 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 $70,729 and $69,073 for the years ended April 30, 2014 and 2013, respectively.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

9. Impairment Loss:

In conjunction with preparing its fiscal year 2014 financial statements the Company determined that the carrying value of a shopping center in North Adams, Massachusetts owned by its 100% owned subsidiary, Main Street NA Parkade LLC was impaired. The continuing overall economic decline in the geographical area and retail industry thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center. The carrying value of the shopping center exceeded its estimated fair value by $4,027,573 and was written down to $7,260,000. This impairment loss is included in the operating results for the Company’s “Real Estate Operations” segment. There was no impairment loss for fiscal 2013.

The Company is currently negotiating with the representative of the holder of the nonrecourse mortgage debt on the shopping center. If mutually agreeable and financially feasible terms cannot be reached the Company may exchange the shopping center in satisfaction of the debt. The fair value of the shopping center as of April 30, 2014 is $7,260,000 and the carrying value of the related debt is $12,575,423. Fair value was estimated on an “as is” basis using primarily discounted cash flows.

10. Income Taxes:

The provision for income taxes consists of:

	2014	2013

Current state income taxes	$38,535	$64,985
Federal – alternative minimum tax	10,337	-0-
	$48,535	$64,985

The components of the net deferred income tax asset follow:

Tax effect of net operating loss carry-forwards	$5,051,000	$4,909,000
Valuation allowance	(5,051,000)	(4,909,000)
	$-0-	$-0-

The Company has Federal net operating loss carry-forwards in excess of $15,000,000 at April 30, 2014 that are available to offset future Federal taxable income through various periods expiring between 2016 and 2028. The Company has recorded $5,051,000 as the potential tax effect, but has also recorded a valuation allowance which reduces the net deferred tax asset to $0.

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:

	2014		2013

Federal statutory rate (34%)	($1,733,000)		$52,000
Nondeductible loss on impairment	1,369,000		-0-
State tax – net of Federal effect	38,535		43,000
Change in valuation allowance on deferred tax assets	142,000		-0-
Losses attributable to noncontrolling interests	163,000		37,000
Other	69,337		(67,000)
Provision for income taxes		$48,872	$65,000

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

11. 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, 2014 are as follows:

Year Ending April 30

2015	$13,481,932
2016	13,037,178
2017	12,112,400
2018	10,928,340
2019	9,509,831
Thereafter	40,234,132
Total	$99,303,813

12. Investments in Affiliates:

Summarized financial and other information for the Company’s investment in Dover Parkade LLC (Dover) follows:

Dover – New Jersey:

As of and for the years ended April 30

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

	2014	2013

Assets	$13,370,323	$12,864,049
Liabilities	18,530,850	18,322,003
Members’ deficit	(5,160,527)	(5,457,954)
Revenue	2,601,195	2,600,929
Operating expenses	1,305,066	1,103,289
Non-operating expense, net	(723,702)	(985,902)
Net income	572,427	511,738

Dover’s major tenant is Stop & Shop, which provided 55% and 55% of the total revenue in both 2014 and 2013 under a lease that expires June 30, 2026.

13. 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 has one customer which accounts for more than 10% of the Company's revenue in both 2014 and 2013.

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013

13. Concentrations of Credit Risk (concluded):

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 related to these receivables is considered necessary by management as of April 30, 2014 or 2013.

14. 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 is approximately as follows:

	2014	2013
Revenues:
Real Estate Operations	$35,872,000	$34,075,000
Fee for Service	5,187,000	4,952,000
TOTAL	$41,059,000	$39,027,000

Operating Cost and Expense:
Real Estate Operations	$24,021,000	$21,519,000
Fee for Service	4,177,000	3,353,000
Administrative Expenses	5,375,000	4,388,000
TOTAL	$33,573,000	$29,260,000

All costs after administrative expenses are cost of the real estate operation.

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $351,000 in 2014 and $860,000 in 2013 and receivables of $15,054,000 in 2014 and $6,533,000 in 2013.

15. Subsequent Events:

On July 9, 2014 Dover Parkade LLC (a 50% owned non-controlled subsidiary of the Company) refinanced the mortgage on their shopping center in Toms River, N.J. in the amount of $20,000,000. A prior mortgage with a remaining balance of approximately $17,485,000 with an interest rate of 5.358% was paid from the proceeds. A defeasance cost of approximately $775,000 and closing cost of approximately $236,000 was paid as well. The new mortgage has an interest rate of 4.16% with a 30 year amortization and a duration of 10 years. Transaction cost will be amortized over the life of the loan but the defeasance cost will be written off in the quarter ended July 31, 2014.

On August 15, 2014 the Company refinanced the mortgage on their shopping center in West Springfield, MA in the amount of $10,500,000. A prior mortgage with a remaining balance of $7,815,897 with an interest rate of 5.52% was paid from the proceeds. The new mortgage has an interest rate of 4.60% with a 30 year amortization and a duration of 10 years, calls for interest only for the first two years. Transaction cost of approximately $110,000 will be amortized over the life of the loan.

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	86	1966 – Present
	Stuart I. Greenwald	72	1980 – Present
	David B. Harding	69	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	86	President	1966 – Present
Stuart I. Greenwald	72	Treasurer/Secretary	1980 - Present
David B. Harding	69	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	42	Vice President	2003 - Present

(d)		Family Relationships
		There are no family relationships among any directors or executive officers.

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 was the President or Vice President of Richmond Realty, LLC (“Richmond”) a real estate management company owned by him and his wife from January 1996 until it was dissolved. Prior to that, he had worked for the Company in the finance area for three years. In the past, Richmond had managed certain properties of the Company.


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.

(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. From time to time the Board of Directors will look to consultants for guidance. 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.

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

(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 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 2014, all directors, executive officers and 10% shareholders of the Company have not had to file any reports under Section 16(a) of the Exchange Act.


(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 of 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)	2014	$331,963	$-0-	$-0-	$-0-	$-0-	$-0-	$-0-	$331,963
	2013	$251,053	$-0-	$-0-	$-0-	$-0-	$-0-	$-0-	$251,053
Stuart I. Greenwald Director, Treasurer and Secretary	2014	$171,016	$-0-	$-0-	$-0-	$-0-	$-0-	Simple IRA $5,130	$176,146
	2013	$150,000	$-0-	$-0-	$-0-	$-0-	$-0-	$4,500	$154,500
David B. Harding Director and Vice President	2014	$196,441	$-0-	$-0-	$-0-	$-0-	$-0-	Simple IRA $5,893	$202,334
	2013	$176,053	$50,000	$-0-	$-0-	$-0-	$-0-	$6,750	$232,803

ITEM 11.		EXECUTIVE COMPENSATION (concluded):

		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 expired February 11, 2014. These options have never been repriced. All options were unexercised on February 11, 2014 and expired unused.

(c)		Benefits and Perquisites

		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 $73 a week, employee and spouse $58 a week and employee $27 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 benefit is 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 known 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	1,355,326	56.2%
	43 Butternut Road
	Manchester, CT 06040

Common Stock	John Filippelli	308,508 (2)	12.8%
	85 Pawling Lake
	Pawling, NY 12564

Common Stock	Joel Lehrer	200,000	8.3%
	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.


(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	1,355,326 (1)	56.2%
	43 Butternut Road
	Manchester, CT 06040

Common	All Directors and Officers	1,355,326	56.2%
	As a Group (3 in number)

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

(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.

(d)	Equity Compensation Plan Information

	None.

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., a wholly owned subsidiary of Journal Publishing Inc. owns .9801% of the Partnership. Journal Publishing Inc. is owned by Neil H. Ellis, the president and chairman of First Hartford Corporation, and his wife Elizabeth, through their ownership of Green Manor Inc. which owns Journal Publishing Inc. First Hartford Realty Corporation manages the Property and receives a 4% management fee, which is the industry norm for a shopping center.

	For the years ended April 30, 2014 and 2013, Parkade Center Inc. and First Hartford Realty Corporation were paid the following:

		2014	2013
	Management Fee (at 4%)	$61,407	$63,827
	Miscellaneous Service	11,666	5,280

	For the years ended April 30, 2014 and 2013, Parkade Center Inc. received distributions of $4,410 and $9,243, respectively. For the years ended April 30, 2014 and 2013, Lubbock Parkade Inc. received distributions of $216,595 and $455,682, respectively, from Hartford Lubbock LP.

(b)	Certain Business Relationships:

	Refer to (a) above.

(c)	Indebtedness of Management:

	There is none.

(d)	Transactions with Promoters:

	There is none.

(e)	Director Independence:

	Neil H. Ellis, David B. Harding and Stuart I. 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 and J H Cohn, LLP terminated their relationship on October 2, 2012. On November 2, 2012, the Company engaged BDO USA as our auditor for the fiscal year ended April 30, 2013. On December 2, 2013, The Company terminated the relationship with BDO USA. The Company paid BDO approximately $60,000 for audit fees of the three related companies and approximately $255,000 for the unfinished Company audit.

		On December 5, 2013, the Company engaged Mahoney Sabol & Company, LLP to audit 2013 and 2012.

		The 2014 and 2013 amounts in the table below represent payments made to Mahoney Sabol & Company, LLP.


	2014	2013
Audit Fees (1)	$115,500	$185,000
Audit Related Fees	-0-	-0-
All Other Fees (3)	2,200	-0-

		(1) Includes fees for the audit of the Company’s annual financial statements included in its Annual Report on Form 10-K, and Form 10-Q’s filed Quarterly.
		(2) 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.

		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, 2014.

		Neil H. Ellis
		Stuart I. Greenwald
		David B. Harding

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 -	15

		Financial Statements:

		Consolidated Balance Sheets – April 30, 2014 and 2013	16-17

		Consolidated Statements of Operations for the Years
		Ended April 30, 2014 and 2013	18

		Consolidated Statements of Comprehensive Income (Loss) for the Years
		Ended April, 30, 2014 and 2013	19

		Consolidated Statements of Changes in Deficiency
		for the Years Ended April 30, 2014 and 2013	20

		Consolidated Statements of Cash Flows for the Years
		Ended April 30, 2014 and 2013	21-22

		Notes to Consolidated Financial Statements	23-37

	(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.

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):
(b)	Exhibits (continued):

	(7)	Statement regarding computation of per share earnings.

		Not Applicable.

	(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.	Delaware

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):

(b)	Exhibits (continued):

	(12)	Subsidiaries of the Registrant (Continued):

		Name of Subsidiary	State in which Incorporated

		1150 Union Street Corp.	Massachusetts

		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 BTS LLC	Texas

		First BTS Claiborne LLC	Louisiana

		EPFH LLC	Texas

		Clarendon Hill Somerville Limited Partnership	Massachusetts

		Clarendon Developer, LLC	Massachusetts

		Clarendon Hill Somerville, LLC	Massachusetts

		LTI Environmental Services Inc.	Massachusetts

		Steeple City Cinemas, Inc.	Massachusetts

		Steeple City Liquors, Inc.	Massachusetts

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):
(b)	Exhibits (continued):

	(12)	Subsidiaries of the Registrant (Continued):

		Hartford Lubbock Limited Partnership	Texas

		Hartford Lubbock Limited Partnership II	Texas

		B’nai B’rith Claymont LP	Delaware

	(13)	Published report regarding matters submitted to vote of Security Holders.

		Not Applicable.

	(14)	Power of Attorney.

		Not Applicable.

	(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

(c)	Other Financial Statements

		None.

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, thereunto duly authorize.

Dated: October 20, 2014

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.

October 20, 2014	/s/ Neil H. Ellis
	Neil H. Ellis
	Principal Executive Officer
	President and Director


October 20, 2014	/s/Stuart I. Greenwald
	Stuart I. Greenwald
	Principal Financial Officer
	Secretary, Treasurer and Director

FIRST HARTFORD CORP - FORM 10-K - October 27, 2014

Attached files

FIRST HARTFORD CORP Reports