UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended January 31, 2017.

[  ]   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                                                                                                                                                 

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

Yes X       No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes       No X

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act).

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

Yes      No X

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

2,340,799 as of April 24, 2017

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

INDEX

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

ASSETS

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

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)

See accompanying notes.

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

See accompanying notes.

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

 See accompanying notes.

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

 See accompanying notes.

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

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

1.       Business and Significant Accounting Policies:

Business

First Hartford Corporation, which was incorporated in Maine in 1909, and its subsidiaries (the Company), is engaged in two business segments: 1) the purchase, development, ownership, management and sale of real estate and 2) providing preferred developer services for two corporate franchise operators (i.e., “Fee for Service”).

Principles of Consolidation

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included.  Operating results for the interim periods are not necessarily indicative of the results that may be expected for the entire year.  The condensed consolidated balance sheet as of April 30, 2016 was derived from the audited financial statements for the year then ended.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2016.

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

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases, (Topic 842), which is intended to improve financial reporting around leasing transactions. The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment. This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019. The Company is in process of assessing the impact of the adoption of ASU No. 2016-02 on its financial position, results of operations and cash flows.

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

1.      Business and Significant Accounting Policies (continued):

Basis of Presentation (concluded)

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows. For public entities, ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements.

For further discussions on Accounting Standard Updates, refer to the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2016.

Net Income (Loss) Per Common Share

Financial Instruments and Fair Value

The Company’s financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses, and debt.  The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying amounts because of their relative short-term nature.  In general, the carrying amount of variable rate debt approximates its fair value.  Further, the carrying amount of fixed rate debt approximates fair value since the interest rates on the debt approximates the Company’s current incremental borrowing rate.  Marketable securities consist of equity securities and are stated at fair value based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1). Accumulated other comprehensive (loss) income consists solely of unrealized gains (losses) on marketable securities.

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

1.      Business and Significant Accounting Policies (concluded):

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 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 as follows:

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

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $337,126 on January 31, 2017 and $1,664,214 on April 30, 2016 and receivables of $5,806,387 on January 31, 2017 and $5,956,103 on April 30, 2016.

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

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

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

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

3.       Income Taxes:

The Company files a Federal consolidated tax return to report all income and deductions for its subsidiaries. The Company and its subsidiaries file income tax returns in several states. The tax returns are filed by the entity that owns the real estate or provides services in such state. Some states do not allow a consolidated or combined tax filing. This sometimes creates income taxes to be greater than expected as income for some subsidiaries cannot be offset by other subsidiaries with operating losses.

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

4.       Litigation:

On September 7, 2016, the Company was notified it lost the first of two companion lawsuits against a former tenant for wrongful termination of its separate leases at two of the Company’s commercial shopping centers.  After evaluating its options, the Company settled both lawsuits with the plaintiff by agreeing to pay $200,000 to cover all claims, including reimbursement of defendant’s claimed legal fees and costs.  The parties mutually released each other from any other liability relating to this case.

There were no other changes in litigation since April 30, 2016.

5.       Refinancings:

Rockland Place Apartments LP – Refinance: On June 3, 2016, Rockland Place Apartments LP executed a First Mortgage Note payable with the Massachusetts Housing Finance Agency in the amount of $14,300,000.  The note is nonrecourse, has a 40-year term and requires monthly payments of principal and interest of $54,628.  The interest rate is fixed at 3.41%.  The proceeds of the note were used to repay its bridge mortgage note with a principal balance of $591,174, its Fourth Mortgage Note with a principal balance of $500,000, and it’s Flexible Subsidy Capital Improvement Loan with a principal balance of $4,268,539.  The proceeds also funded closing costs and certain escrows that are being used to redevelop the complex.

Edinburg, TX - Refinance: On September 7, 2016, the Company partially refinanced its loans on its shopping center property in Edinburg, TX.  The new loan with Goldman Sachs is for $32,500,000 and is secured by the shopping center.  Proceeds from this new loan were used to pay off $31,030,767 of existing debt with Protective Life and to establish a $1,100,000 Earnout Reserve Account (ERA), with the balance used to fund escrows and pay closing costs.  The remainder of the existing debt of $15,926,740 is secured by vacant land of approximately 50 acres attached to the shopping center.  The $1,100,000 ERA will be returned to the Company if, within two years, it can provide evidence that two significant named tenants have renewed their lease options for an additional five years (or the Company has entered into Approved Substitute Lease(s) for same) and the Earnout Debt Yield (EDY), as defined, is equal to or greater than 8.30%.  If the Company fails to do so, a minimum of $1,000,000 of the ERA will be used to reduce the principal balance of the loan and up to $100,000 will be used to pay the applicable yield maintenance premium.    The loan has a 30 year amortization and duration of 10 years (i.e., maturity date of September 6, 2026) with an interest rate of 4.604%.  For the first year, interest only is paid monthly; beginning in October 2017, principal and interest are paid monthly.  Prepayment of the loan is generally prohibited.  The Company receives income directly to its operating account unless a “trigger event” occurs in which case the cash goes into a lockbox account controlled by the lender.  Basic “trigger events” include:

• Failure to maintain a 12 month-rolling Debt-Service Coverage Ratio (DSCR), as defined, of 1.1:1.0,

• Failure to maintain a market-based Net Worth, as defined, of $20,000,000,

• Failure to maintain Liquid Assets, as defined, of $2,000,000,

• Loan default,

• Various Rollover Trigger Events, which include certain significant named tenants vacating, terminating or not renewing their leases, or filing for bankruptcy and not replaced with an Approved Substitute Lease, as defined.

In addition, if a significant named tenant goes dark, vacates, or is not in occupancy of substantially all of its current space, the Company would have to deposit either a $2,000,000 reserve or letter of credit with the lender until such time as agreed upon lease conditions being met.

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

5.       Refinancings (concluded):

With respect to the remaining balance of $15,926,740 from the original loans with Protective Life now secured by vacant land of approximately 50 acres directly adjacent to the shopping center, the Company and the lender have agreed that once the Company repays $2,000,000 of the balance, the interest rate on the remaining balance will be reduced from 5.0% to 4.0%.  The lender has also agreed that if the Company pays off the entire loan by September 6, 2017, its 50% Additional Interest Agreement (AIA) rights will terminate.  This remaining loan is personally guaranteed by the Chairman of the Company.

New Orleans, LA – Refinance: On November 18, 2016, the Company refinanced one of its construction loans on its shopping center property in New Orleans, LA.  The construction loan, which had a principal balance of $7,301,803, was replaced by a mortgage loan of $7,436,745.  The new mortgage loan has an interest rate of One Month ICE LIBOR, as defined, plus 2.50% and an initial maturity date of November 18, 2017 with an option to extend the maturity to November 18, 2018 at an interest rate of 5.0% if it meets certain requirements.  The loan is interest-only until November 18, 2017; if the loan is extended an additional year, principal payments will be made using a 25-year amortization.

Lubbock, TX – Refinance: On November 21, 2016, the Company refinanced its mortgage loan on its shopping center in Lubbock, TX.  The new mortgage loan has a principal balance of $13,750,000, which was used to pay off the previous mortgage loan balance of $10,837,300, pay a defeasance premium of $432,776, pay closing costs, and fund escrows.  The new mortgage loan has an interest rate of 4.974%, monthly payments of $76,540 based on a 27.5-year amortization, and a ten year term expiring on December 6, 2026.  Prepayment is not permitted until six months before the maturity date.

6.       Purchase of Real Estate:

Buda, TX Land Purchases: On April 29, 2016, the Company purchased a parcel of land in Buda, TX adjacent to another parcel owned by the Company for $686,167 including closing costs.  On May 13, 2016, the Company purchased three additional parcels of land adjacent to these parcels for $1,051,034 including closing costs. These purchases were financed by a new land loan of $1,505,000 with the balance funded by working capital.  Key terms of the loan are as follows:

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

6.       Purchase of Real Estate (concluded):

Austin, TX – Land Purchase: On December 19, 2016, the Company purchased a parcel of land in Austin, TX for $3,732,223.  This purchase, along with related closing costs, was financed by an existing line of credit of $1,250,000 and a new land loan of $2,500,000.  This land is being held for potential future development.  Key terms of the loan are as follows:

Brentwood, NY – Land Purchase: On December 23, 2016, the Company purchased a parcel of land in Brentwood, NY for $5,000,000, which along with closing costs was financed by a new acquisition mortgage loan of $5,000,000 and working capital.  The Company is going to build a single entity build-to-suit on this land.  This construction will be financed by a building mortgage loan of $4,775,000 and a project mortgage loan of $875,000.  The total amount of these three loans is $10,650,000.  Key terms of the loans are as follows:

St. Louis, MO – Property Purchase: On January 20, 2017, the Company purchased a property with a single retail tenant in St. Louis, MO for $6,444,768 including closing costs.  The Company plans to resell it by the end of the calendar year.  This purchase, along with closing costs, was financed with a new loan of $5,120,000, advances from one of the Company’s line of credit of $1,000,000, and working capital of $324,768. Key terms of the loan are as follows:  

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

7.       Subsequent Events:

Austin, TX – Financing: On February 28, 2017, the Company modified an existing line of credit loan to $4,000,000 of which up to $1,600,000 is available to finance construction of a building on a parcel of land it owns in Austin, TX.  This loan has an interest rate of 1.50% plus the Prime Rate, as defined, with a Floor Rate of 5.00% and has a maturity date of December 27, 2017 with an option to extend for six months if certain criteria are met.

Cedar Park, TX – Property Purchase: On March 29, 2017, the Company purchased a property with a single retail tenant in Cedar Park, TX for $1,625,000 including closing costs.  The Company plans to resell it by the end of the fiscal year ending April 30, 2018.  This purchase was financed with proceeds from a new loan of $1,365,000 and working capital of $260,000. Key terms of the loan are as follows:  

New Unsecured Credit Line: On April 19, 2017, the Company entered into a $2,000,000 unsecured line of credit with a regional bank.  Terms of the line of credit are as follows:

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

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

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

Critical Accounting Policies

There have been no significant changes in the Company’s critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2016 under the subheading “Critical Accounting Policies and Estimates”. 

Results of Operations:

Rental Income

Rental income for the three and nine months ended January 31, 2017 and 2016, by type of tenant, follows:

Residential rental income was flat compared to the prior year comparable periods.  An increase of vacancies at the Rockland, MA property needed as part of the renovation project taking place there were offset by a decrease in vacancies at the Somerville, MA (i.e., Clarendon) property.

The increase in commercial rental income was caused by rents received on the Company’s development properties (e.g., New Orleans, LA; Stanhope, NJ; Olathe, KS; Conroe, TX; etc.) and additional rents from new tenants at the West Springfield, MA and Edinburg, TX properties, partially offset by the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015.

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

Service Income

Service income for the three and nine months ended January 31, 2017 and 2016 follows:

The decrease in preferred developer fees reflected lower fees received from both CVS and Cumberland Farms.  The decrease in CVS fees was the result of a recent acquisition that has impacted in the slowing of their pipeline for new stores.  The smaller decrease in Cumberland Farms was the result of timing of closings based on the construction schedule.

Sales (and Cost of Sales) of Real Estate

Nine months ended January 31, 2017:

On June 29, 2016, the Company sold a property in Stanhope, NJ for $10,000,051 (cost of $8,280,570).  A construction loan with a balance of $6,329,667 was paid off with the proceeds.

On June 30, 2016, the Company sold a portion of its property in Edinburg, TX (i.e., Texas Roadhouse) for $2,210,000 (cost of $1,355,597).  A mortgage loan with a balance of $1,279,136 was paid off with the proceeds.

On August 16, 2016, the Company sold a condominium in Wethersfield, CT for $285,000 (cost of $277,191).  The net proceeds were used to reduce a mortgage loan on this property.  The Company currently owns three other condominiums at this site.

On September 20, 2016, the Company sold a parcel of land in Austin, TX for $6,100,000 (cost of $4,190,523) that was previously ground leased.  The Company continues to own land attached to the sold parcel and is currently overseeing construction of a single-tenant retail building of approximately 6,900 square feet on this property.

On December 14, 2016, the Company sold a property in Conroe, TX for $8,778,442 (cost of $6,721,794).  A mortgage loan with a balance of $5,363,913 was paid off with the proceeds.

On December 28, 2016, the Company sold a property in Olathe, KS for $7,000,000 (cost of $6,867,228).  A mortgage loan with a balance of $5,335,000 was paid off with the proceeds.

Nine months ended January 31, 2016:
On May 28, 2015, the Company sold a parcel of land in Pearland, TX for $1,104,161 (cost of $747,610).

On August 6, 2015, the Company sold a property in Austin, TX for $10,246,021 (cost of $7,761,449).  A construction loan with a balance of $6,106,437 was paid off with the proceeds.

There were also costs related to property sales that occurred in the fiscal year ended April 30, 2015 totaling $199,077 that were not anticipated as of the prior fiscal year end.

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

Other Income

The increase in other income was primarily at the liquor store, which obtained a liquor license in December 2014.  The sales at the store have been increasing steadily as previously the store only sold beer and wine.

Operating Costs and Expenses:

Rental Expenses

Rental expenses for the three and nine months ended January 31, 2017 and 2016, by type of tenant, follows:

Residential rental expenses were slightly higher for the three months and slightly lower for the nine months compared to the prior year.  The most notable year-over-year items were voucher incentive payments made to tenants at the Rockland, MA property in the prior year that did not re-occur this year and some higher expenses at the Somerville, MA (i.e., Clarendon) property (e.g., higher insurance, utility,  elevator repairs, and decorating expenses).  

The decrease in commercial rental expenses was mainly due to higher costs related to the initial expansion of our shopping center in Edinburg, TX in the prior year.  Also impacting the nine month comparison were prior year professional and legal expenses incurred as part of the initial effort to refinance the debt at the Cranston, RI shopping center, largely offset by a legal settlement of $200,000 with a former tenant (see Note 4 of the Financial Statements included within for discussion) and accelerated amortization expense of deferred commissions arising from the sale of a portion of its property in Edinburg, TX (i.e., Texas Roadhouse).   

Service Expenses

Service expenses were higher for the three months and lower for the nine months compared to the prior year.  These variances reflect lower commissions paid commensurate with the lower service revenue offset by higher compensation expense. 

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

The increase in SG&A expenses was primarily due to writing-off costs relating to abandoned projects, higher expenses at the liquor store commensurate with the higher volume, expenses related to the Company’s development properties (e.g., New Orleans, LA, Stanhope, NJ, Olathe, KS, Conroe, TX, etc.), and higher legal and professional fees. 

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

Non-Operating Income (Expense):

Interest Expense

Interest expense for the three and nine months ended January 31, 2017 and 2016, by type of tenant, follows:

The increase in commercial interest expense was the result of expense related to loans for the Company’s development properties (e.g., New Orleans, LA, Stanhope, NJ, Olathe, KS, etc.), partially offset by savings from the prior year refinancings at Cranston and CP Associates.

The increase in residential interest expense was the result of the refinancing at Rockland as discussed in Note 5 of the Financial Statements included within.  Note the loans paid off as part of this refinancing did not accrue interest.

Gain on Voluntary Foreclosure

Putnam, CT – Transfer to Lender: On November 1, 2014, a payment was due for the mortgage of the shopping center in Putnam, Connecticut in the amount of approximately $4,700,000.  The rentable space of the shopping center is 57,529 square feet, 46% of which was leased to one store.  That store informed the Company that they were not renewing their lease, which expired on January 31, 2015, and, as a result, the Company found it impossible to refinance the mortgage without finding a replacement tenant.  Therefore, on June 5, 2015, the Company agreed to transfer title of the property to the lender.  The Company recognized a gain of $2,649,850 since the mortgage was non-recourse and was in excess of the book value.  Pre-tax income for this shopping center was $44,645 for the three and nine months ended January 31, 2016.

Other Income

Other income for the three and nine months ended January 31, 2017 and 2016 follows:

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

The decrease in investment income reflected realized gains on sales of securities in the prior year that did not repeat in the current year.

During the three and nine months ended January 31, 2016, the Company received $189,912 of residual funds that remained in a reserve account after payoff of the underlying bondholders securitized by the mortgage that was refinanced at Clarendon in February 2015.

Gain (Loss) on Derivatives

The Company, through its 50% owned consolidated subsidiaries, has entered into two separate floating-to-fixed interest rate swap agreements with banks that expire in May 2025 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.  Note that the change in fair value recorded through income is a non-cash item.

Loss on Impairment

During the three and nine months ended January 31, 2016, the Company recorded an impairment loss of $330,700 on a non-core property it owns in Wethersfield, CT.  The amount of the impairment loss represented the excess of the cost over the estimated net sales proceeds from the property.

Loss on Defeasance

During the three and nine months ended January 31, 2017, the Company paid a defeasance premium of $437,776 when refinancing its mortgage loan on its shopping center in Lubbock, TX as discussed in Note 5 of the Financial Statements included within.

Equity in Earnings of Unconsolidated Subsidiary

The equity in earnings of unconsolidated subsidiary for the three and nine months ended January 31, 2017 and 2016 follows:

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 providing 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. To 2009, losses and distributions from Dover exceeded the Company’s investment.  Since then, distributions from Dover have been credited to income.  The Company does not control the rate of distributions of Dover.  Such distributions are in excess of Dover’s net assets since its accumulated net losses (including significant amounts for depreciation and amortization) have exceeded capital contributions.

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

Income Taxes

The Company files a Federal consolidated tax return to report all income and deductions for its subsidiaries. The Company and its subsidiaries file income tax returns in several states. The tax returns are filed by the entity that owns the real estate or provides services in such state. Some states do not allow a consolidated or combined tax filing. This sometimes creates income taxes to be greater than expected as income for some subsidiaries cannot be offset by other subsidiaries with operating losses.

Capital Resource and Liquidity

At January 31, 2017, the Company had $7,446,671 of unrestricted cash and cash equivalents. This includes $5,449,571 belonging to partnership entities in which the Company’s financial interests range from .01% (VIEs) to 50%.  Funds received from CVS, which are to be paid out in connection with CVS developments, amounted to $337,126 and tenant security deposits held by VIEs of $398,274 are included in restricted cash and cash equivalents.

At January 31, 2017, the Company had $1,036,716 of investments in marketable securities, all of which belongs to partner entities.

The sources of future borrowings that may be needed for new construction loans, property purchases, or balloon payments on existing loans are unclear at this time.  On December 7, 2015, the Company entered into a $2,000,000 revolving demand loan agreement (“line of credit”) with a regional bank.  The interest rate on this loan is Wall Street Journal Prime, with a floor of 3.25%.  The loan is unsecured and there are no guarantors.  Interest is to be paid monthly; principal is to be repaid within twelve months or on demand, at the bank’s discretion.  There are no prepayment penalties.  This line of credit will primarily be used from time to time to fund initial investments related to development opportunities.  As of January 31, 2017, the Company had borrowings of $1,000,000 against this credit line.  The Company also obtained another credit line as part of a purchase of land in Austin, TX as described in Note 17 to the Company’s financial statements included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2016. This $2,760,000 line of credit will primarily be used from time to time to fund initial investments related to development opportunities.  As of January 31, 2017, the Company had borrowings of $1,250,000 against this credit line.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4.  CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.  We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chairman and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15b of the Exchange Act.  Based on the Evaluation, our Chairman and Treasurer concluded that because of weaknesses in our control environment, our disclosure controls were not effective as of the end of the period covered by this report.  Notwithstanding weaknesses in our control environment, as of January 31, 2017, we believe that the condensed consolidated financial statements contained in this report present fairly the Company’s financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

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

On September 7, 2016, the Company was notified it lost the first of two companion lawsuits against a former tenant for wrongful termination of its separate leases at two of the Company’s commercial shopping centers.  After evaluating its options, the Company settled both lawsuits with the plaintiff by agreeing to pay $200,000 to cover all claims, including reimbursement of defendant’s claimed legal fees and costs.  The parties mutually released each other from any other liability relating to this case.

There were no other changes in litigation since April 30, 2016.

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

10b5-1 Private Repurchase Stock Plan: On January 5, 2017, the Company’s Board of Directors amended and approved the Amended and Restated 10b5-1 Private Repurchase Stock Plan (the “Repurchase Plan”), which was initially adopted on March 29, 2016.  The Company found less demand under the Repurchase Plan than expected and desired to broaden the eligibility requirements to increase participation in the Repurchase Plan.  The Company desires to amend the Repurchase Plan in order to permit shareholders holding five (5%) percent or more of the issued and outstanding common stock of the Company the ability to participate in the Repurchase Plan.  The Repurchase Plan provides for the repurchase of up to 150,000 shares of the Company's common stock in minimum blocks of 15,000 shares and maximum blocks of 25,000 shares.  Eligible shareholders will be those holding blocks of common stock of the Company in excess of fifteen thousand (15,000) shares and less than three hundred fifty thousand (350,000) shares.  Repurchases may be made at management’s discretion from time-to-time only through privately negotiated transactions pursuant to the terms of the 10b5-1 plan to meet the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934.  The privately negotiated purchase price may not exceed 1.5 times the highest independent bid or the last independent transaction price and in no event be higher than five ($5.00) dollars per share.  The purchases and negotiations may resume 15 days after filing of this quarterly report; the program will be suspended for 15 days before the due date of each next quarterly or annual report filing and will resume 15 days after the filing.  The repurchase program may continue up to a maximum of 12 months and may be suspended for periods or discontinued at any time.  Any shares acquired under this program will be returned as authorized but unissued; however, the Company in its discretion may retire such shares.

There were no stock repurchases by the Company under the Repurchase Plan in the fiscal quarter covered by this report.

Please see the below table for information with respect to repurchases by the Company during the fiscal year-to-date covered by this report:

Issuer Repurchases of its Equity Securities

None

Not applicable

None

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s annual meeting of shareholders was held on January 18, 2017 in Hartford, CT. The following nominees were elected as directors by vote indicated:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.