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 October 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             

First Hartford Corporation
(Exact name of registrant as specified in its charter)

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.

2,315,799 as of December 28, 2017

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FIRST HARTFORD CORPORATION AND SUBSIDIARIES

INDEX

2

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

ASSETS

See accompanying notes.

3

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

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)

See accompanying notes.

4

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

See accompanying notes.

5

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

See accompanying notes.

6

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

See accompanying notes.

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

See accompanying notes.

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

1.  Business and Significant Accounting Policies:

Business

First Hartford Corporation, 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, 2017 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, 2017.

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.

Currently, there are no Accounting Standards Updates (ASUs) that the Company is required to adopt that are likely to have a material effect on its financial statements that have not been previously discussed in the Company’s annual report on Form 10 K for the fiscal year ended April 30, 2017.

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

1.  Business and Significant Accounting Policies (continued):

Net Income (Loss) Per Common Share

Basic income (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted income (loss) per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options and warrants (using the “treasury stock” method).

There were no common stock equivalents outstanding at October 31, 2017 or October 31, 2016.

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.

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.

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

Segment Information (concluded):

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $106,006 on October 31, 2017 and $129,651 on April 30, 2017 and receivables of $3,069,776 on October 31, 2017 and $4,262,302 on April 30, 2017.

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:

In August 2017, the Company finalized an agreement to invest in an affiliated limited liability company called Ware Seguin, LLC. The Company accounts for its 50% interest in Ware Seguin, LLC under the equity method of accounting. Ware Seguin, LLC owns property in Schertz, TX that it plans to develop for approximately 285 single family residential lots and approximately 15 acres of commercial or other uses. The operating and financial policies of Ware Seguin, LLC are not controlled by the Company. The Company’s initial investment was $326,498 and the Company committed to invest an additional amount up to $500,000, of which an additional $53,149 was made as of October 31, 2017. Additional future investments may be required if agreed by the Members. The Company is also a guarantor of 50% of a $1,000,000 bank loan obtained by Ware Sequin, LLC that was used to purchase the property.

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

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.

On October 26, 2017, the Company was informed that its fiscal year 2016 Federal tax return was selected for examination.

4.  Litigation:

Following a site inspection of asbestos abatement activities being conducted at the Spring Gate Apartments in Rockland, Massachusetts (Facility) on April 14, 2017, the Massachusetts Department of Environmental Protection (MassDEP) by letter dated April 21, 2017 requested that Rockland Place Apartments, LP (Company) temporarily cease and desist from any additional asbestos removal, abatement and/or handling activities at the Facility. Upon receipt of the MassDEP letter, the Company engaged MassDEP in discussions regarding the abatement project. Following submission to and approval by MassDEP of a work plan addressing the issues raised in MassDEP’s April 21 letter, MassDEP permitted the asbestos abatement work to go forward. There have been no further enforcement actions taken by MassDEP.

By letters dated May 15, May 16 and May 30, 2017, three attorneys representing tenants in three units at the Facility notified the Company and/or its management company, FHRC Management Corporation, of claims related to environmental conditions at the Facility. The first of these letters alleges that the tenant and her family have been exposed to and have been living in an apartment containing asbestos for many years. The second letter claims that the tenant and her three minor children have suffered injuries believed to be caused by the presence of mold and asbestos in the apartment. The final letter asserts claims with respect to the tenant and her three minor children involving the presence and remediation of asbestos including violation of a tenant’s quiet enjoyment, breach of the warranty of habitability, causation of emotional distress and the use of unfair and deceptive practices under M.G.L. c. 93A. The first two letters made no specific monetary demand; the third letter demanded $312,600. All three claims were tendered to the Company’s insurer, which agreed to respond under a reservation of rights. On July 14, 2017, counsel retained by the insurer provided a timely response to the third letter, adamantly denying the Company’s liability pursuant to M.G.L. c. 93A or for any of the other claims. By letter dated July 27, 2017, the insurer acknowledged receipt of the three claims, at the same time stating however that as no lawsuit had arisen, it did not have a duty to defend, but nonetheless would continue to investigate.

At this time, the Company cannot assess the likelihood of an unfavorable outcome or provide any estimate of the amount or range of any potential loss.

5.  Refinancings:

New Orleans, LA – Refinance: On June 30, 2017, the Company refinanced its construction loan on its shopping center property in New Orleans, LA. The construction loan, which had a principal balance of $5,567,673, was replaced by a mortgage loan of $8,565,000. The new mortgage loan has an interest rate of 4.75%. The loan is interest only until July 1, 2020; thereafter, monthly payments of $44,576 inclusive of principal and interest are due and payable until the maturity date of July 1, 2027, at which time the remaining principal balance must be repaid in full.

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

6.  Purchase of Real Estate:

Houston, TX – Land Purchase: On May 12, 2017, the Company completed its purchase of a parcel of land in Houston, TX for $8,583,235 including closing costs. This purchase was financed with proceeds from a construction loan of $5,158,210, utilization of the Company’s lines of credit of $2,400,000, and working capital of $1,025,025. Key terms of the construction loan are as follows:

Montgomery, TX – Land Purchase: On August 16, 2017, the Company completed its purchase of a 26.43 acre parcel of land in Montgomery, TX for $6,672,754 including closing costs. This purchase was financed with proceeds from a land loan of $4,150,000, utilization of the Company’s lines of credit of $2,360,000, and working capital of $162,754. Key terms of the construction loan are as follows:

7.  Subsequent Events:

The Company has evaluated for subsequent events through December 28, 2017, the date the financial statements were issued.

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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, 2017 under the subheading “Critical Accounting Policies and Estimates”.

Results of Operations:

Rental Income

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

The slight increase in residential rental income was primarily caused by rent increases at the Somerville, MA (i.e., Clarendon), partially offset by lower revenue at the Rockland, MA property due to vacancies from converted apartments needed for the ongoing renovation project.

The decrease in commercial rental income was primarily caused by lower common area maintenance (CAM) billings to tenants resulting from lower associated expenses and lower rents received on the Company’s development properties, partially offset by additional rents from a new tenant at the Company’s Lubbock, TX property.

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

Service Income

Service income for the three and six months ended October 31, 2017 and 2016 follows:

The increase in management fees was due to higher fees received from the Company’s unconsolidated Claymont, DE property.

The full year decrease in preferred developer fees reflected lower fees received from both CVS and Cumberland Farms, while the second quarter decrease reflected lower Cumberland Farms fees partially offset by higher CVS fees. The decrease in CVS fees, which continues a trend over the past several years, was the result of a recent acquisition that has impacted in the slowing of their pipeline for new stores. The decrease in Cumberland Farms was the result of timing of closings based on the construction schedule.

Sales (and Cost of Sales) of Real Estate

Six months ended October 31, 2017:

St. Louis, MO – Sale of Property: On May 30, 2017, the Company sold its single tenant property in St. Louis, MO for $6,800,000 (cost of $6,567,195). A loan with a balance of $5,120,000 and a credit line of $1,000,000 were paid off with the proceeds.

New Orleans, LA – Sale of Property: On June 7, 2017, the Company sold a parcel of its property in New Orleans, LA for $11,350,000 (cost of $9,002,022). A loan with a balance of $7,436,745 was paid off with the proceeds. The Company continues to hold the parcel of the property that includes the shopping center.

Austin, TX – Sale of Property: On June 15, 2017, the Company sold its single tenant property in Austin, TX for $3,210,000 (cost of $2,968,692). A loan with a balance of $1,102,899 was paid off with the proceeds.

East Providence, RI – Sale of Property: On September 7, 2017, the Company sold its property held for sale in East Providence, RI for $830,000 (cost of $664,312).

There were also costs incurred in fiscal year 2018 related to property sales that occurred in the fiscal year ended April 30, 2017 totaling $85,809 that were not anticipated as of the prior fiscal year end.

Six months ended October 31, 2016:

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.

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

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.

Other Revenues

The increase in other income was primarily due to sales by the Company’s new restaurant it built and owns at its Edinburg, TX property. This store was opened on July 14, 2017.

Operating Costs and Expenses:

Rental Expenses

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

The slight increase in residential rental expenses were mainly from higher legal fees incurred at the Rockland, MA property resulting from a temporary cease and desist order from the Massachusetts Department of Environmental Protection (MassDEP). See Part II, Item 1, Legal Proceedings, on page 20 for more information. This was partially offset by lower repairs and maintenance expenses at the Somerville, MA (i.e., Clarendon) property.

The decrease in commercial rental expenses was mainly due to expenses incurred in the prior year related to a lawsuit against a former tenant, including a legal settlement of $200,000 and higher bad debt and legal expenses. Also, in the prior year there was accelerated amortization expense of deferred commissions arising from the sale of a portion of its property in Edinburg, TX (i.e., Texas Roadhouse) and accelerated depreciation of tenant improvements at the Lubbock, TX properties upon the departure of two tenants. These factors were partially offset by a current year fee paid to a tenant at its Edinburg, TX shopping center to allow the Company to lease to another tenant and higher expenses related to the Company’s New Orleans, LA shopping center, which was completed and refinanced in the first quarter of fiscal 2018.

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

Service Expenses

Service expenses for the three and six months ended October 31, 2017 and 2016 follows:

The decrease in preferred developer expenses and fees primarily reflects lower commissions paid commensurate with the lower revenue, primarily at CVS.

The increase in construction expenses relates to unbudgeted costs (i.e., overruns) incurred at the renovation project at the Company’s Rockland, MA property resulting from a temporary cease and desist order from the Massachusetts Department of Environmental Protection (MassDEP). See Part II, Item 1, Legal Proceedings, on page 20 for more information.

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

The increase in SG&A expenses relates primarily to expenses relating to its new restaurant it built and owns at its Edinburg, TX property, legal and professional expenses related to a potential residential housing deal in the Bronx, NY, and costs incurred to resolve the Rockland, MA matter discussed above, including providing hotels and meals to displaced tenants and legal and professional fees (see Part II, Item 1, Legal Proceedings, on page 20 for more information).

Non Operating Income (Expense):

Interest Expense

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

The change in commercial interest expense was minimal; there were no individually significant changes.

The six month increase in residential interest expense was the result of the prior year first quarter refinancing at Rockland. Note the loans paid off as part of this refinancing did not accrue interest.

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

Other Income / (Loss)

Other income / (loss) for the three and six months ended October 31, 2017 and 2016 follows:

The decrease in investment income reflected realized losses on sales of securities in the current year first quarter.

During the three and six months ended October 31, 2017, the Company received $200,000 from a settlement of a lawsuit filed against another party for breach (relating to an alleged wrongful termination) of a contract to purchase a commercial shopping center owned by the Company and located in New Orleans, LA. As a result, the sale did not go through and the Company retains ownership of the shopping center.

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.

Equity in Earnings of Unconsolidated Subsidiary

The equity in earnings of unconsolidated subsidiary for the three and six months ended October 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 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. Through April 30, 2009, losses and distributions from Dover exceeded the Company’s investment and the Company’s investment balance was reduced below $0 and recorded as a liability. Beginning May 1, 2009, distributions from Dover have been credited to income and any additional losses have not been allowed to further reduce the investment balance. 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.

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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.

On October 26, 2017, the Company was informed that its fiscal year 2016 Federal tax return was selected for examination.

Capital Resource and Liquidity

At October 31, 2017, the Company had $6,251,630 of unrestricted cash and cash equivalents. This includes $5,018,099 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 $106,006 and tenant security deposits held by VIEs of $396,960 are included in restricted cash and cash equivalents.

At October 31, 2017, the Company had $1,101,110 of investments in marketable securities, all of which belongs to partner entities.

The Company has three separate credit lines that allows for borrowings up to $6,760,000. At October 31, 2017, the Company had borrowings of $4,760,000 against these credit lines.

The sources of future borrowings that may be needed for new construction operations, property purchases, or balloon payments on existing loans are unclear at this time. As a result of the decreasing CVS fee for service business and the increasingly difficult environment surrounding commercial real estate, the Company has become more dependent on its ability to buy, develop, and sell real estate at a profit. Failure to do so would have an adverse impact on the Company’s liquidity. The Company’s liquidity could also be adversely impacted if the Company’s new restaurant in Edinburg, TX does not meet its financial projections or if the Rockland, MA matter discussed in Part II, Item 1, Legal Proceedings, on page 20, has an unfavorable outcome.

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.

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Item 4.   CONTROLS AND PROCEDURES (continued)

Evaluation of Disclosure Controls and Procedures (continued)

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 October 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.

PART II       OTHER INFORMATION

Item 1.        LEGAL PROCEEDINGS

Following a site inspection of asbestos abatement activities being conducted at the Spring Gate Apartments in Rockland, Massachusetts (Facility) on April 14, 2017, the Massachusetts Department of Environmental Protection (MassDEP) by letter dated April 21, 2017 requested that Rockland Place Apartments, LP (Company) temporarily cease and desist from any additional asbestos removal, abatement and/or handling activities at the Facility. Upon receipt of the MassDEP letter, the Company engaged MassDEP in discussions regarding the abatement project. Following submission to and approval by MassDEP of a work plan addressing the issues raised in MassDEP’s April 21 letter, MassDEP permitted the asbestos abatement work to go forward. There have been no further enforcement actions taken by MassDEP.

By letters dated May 15, May 16 and May 30, 2017, three attorneys representing tenants in three units at the Facility notified the Company and/or its management company, FHRC Management Corporation, of claims related to environmental conditions at the Facility. The first of these letters alleges that the tenant and her family have been exposed to and have been living in an apartment containing asbestos for many years. The second letter claims that the tenant and her three minor children have suffered injuries believed to be caused by the presence of mold and asbestos in the apartment. The final letter asserts claims with respect to the tenant and her three minor children involving the presence and remediation of asbestos including violation of a tenant’s quiet enjoyment, breach of the warranty of habitability, causation of emotional distress and the use of unfair and deceptive practices under M.G.L. c. 93A. The first two letters made no specific monetary demand; the third letter demanded $312,600. All three claims were tendered to the Company’s insurer, which agreed to respond under a reservation of rights. On July 14, 2017, counsel retained by the insurer provided a timely response to the third letter, adamantly denying the Company’s liability pursuant to M.G.L. c. 93A or for any of the other claims. By letter dated July 27, 2017, the insurer acknowledged receipt of the three claims, at the same time stating however that as no lawsuit had arisen, it did not have a duty to defend, but nonetheless would continue to investigate.

At this time, the Company cannot assess the likelihood of an unfavorable outcome or provide any estimate of the amount or range of any potential loss.

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SIGNATURES

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

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