PINX:FHRT Annual Report 10-K Filing - 4/30/2012

Effective Date 4/30/2012

PINX:FHRT (): Fair Value Estimate
Premium
PINX:FHRT (): Consider Buying
Premium
PINX:FHRT (): Consider Selling
Premium
PINX:FHRT (): Fair Value Uncertainty
Premium
PINX:FHRT (): Economic Moat
Premium
PINX:FHRT (): Stewardship
Premium
 

 

 

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, 2012                                               

[ ]         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 character)

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.

X  Yes        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)

X  Yes       No

 

 1



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, 2011, the aggregate market value of the registrant’s common stock (based upon $1.38 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 $1,494,312.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date.  2,419,802 as of July 31, 2012.

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 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.

 

 

 

2



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.

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 Pharmacy Inc. (“CVS”) to be a preferred developer in western Texas, the Rio Grande Valley in Texas, Houston, Austin, Long Island, New York, northern New Jersey and Louisiana.  Under a master development agreement dated September 1, 2011, but not finalized until early October between First Hartford Realty Corporation and Cumberland Farms Inc., the Company was given an exclusive arrangement to locate and develop sites for Cumberland Farms stores in parts of the Northeast United States.

The Company has no material patents, license, 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, 2012, the Company employed 103 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.

 

Company
Managed

 

Location of
Commercial Properties

 

Use

Available Space or
Facilities and Major
Tenants

Ownership Status

X

Plainfield, CT

Strip Shopping Center

64,838 sq. ft.
Big Y 78%

Owned by a subsidiary of the Company

3



 

 

 

ITEM 2:           PROPERTIES (continued)

 

 

Company
Managed

 

Location of
Commercial Properties

 

Use

Available Space or
Facilities and Major
Tenants

 

 

Ownership Status

 

 

 

 

 

X

Putnam, CT

Shopping Center

57,311 sq. ft.
Big Lots 46%

Owned by a subsidiary of the Company

 

 

 

 

 

X

W. Springfield, MA

 

 

 

 

Shopping Center

144,350 sq. ft.
Price Rite 28%
Home Goods 18%
Big Lots 21%
Harbor Freight 12%

Owned by a 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

 

 

 

 

 

 

 Cranston, RI

Shopping Center

259,600 sq. ft.
Kmart 40%
Stop & Shop 25 %
TJ Maxx 9%

50% owned by a subsidiary of the Company

 

 

 

 

 

 

 

 

Cranston, RI

College

60,000 sq. ft. Career
Education College

50% owned by a subsidiary of the Company

 

 

 

 

 

 

Cranston, RI

Restaurant

Texas Roadhouse
Land Lease

50% owned by a subsidiary of the Company

 

 

 

 

 

 

Cranston, RI

Police Station

60,000 sq. ft. Leased to City of Cranston

50% owned by a subsidiary of the Company

 

 

 

 

 

X

Rockland, MA

Apartments

204 units, low to moderate income

.01% owned by a 75% owned subsidiary of the Company

 

 

 

 

 

X

Somerville, MA

Apartments

501 units, low to moderate income

.0049% owned by a 75% owned subsidiary of the Company

 

 

 

 

 

X

Claymont, DE

Apartments

208 units, senior housing, 100% sec 8 subsidized

Nonconsolidated,
.01% owned by a 75% owned subsidiary of the Company

 

4



 

ITEM 2:           PROPERTIES (continued)

 

Company
Managed

 

Location of
Commercial Properties

 

Use

Available Space or
Facilities and Major
Tenants

Ownership Status

 

 

 

 

 

X

North Adams, MA

Shopping Center

131,682 sq. ft.
Steeple City Cinema 15%
Peebles 14%
Planet Fitness 8%
4,000 sq. ft. unleased and not renovated

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

 

 

 

 

 

X

Edinburg, TX

Shopping Center

338,058 sq. ft.
JC Penney 31%
Academy Sports 23%
Burlington Coat Factory 24%, plus 111,526 sq.ft. under construction, approximately 90% leased.

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

 

 

 

 

 

ITEM 3.           LEGAL PROCEEDINGS

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

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

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

Other proceedings

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

For proceedings involving officers and directors, see Item 10(f) on Page 34.

5



 

 

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 (OTCQX:  FHRT) trades on OTCQX.  Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on www.otcmarkets.com.

STOCK PRICE AND DIVIDEND INFORMATION

Stock Price

2012

High

Low

Dividends Paid Per Common Share

First Quarter

$2.00

$1.85

None

Second Quarter

$1.85

$1.38

None

Third Quarter

$1.40

$1.05

None

Fourth Quarter

$1.45

$1.30

None

 

 

 

 

2011

First Quarter

$3.00

$1.90

None

Second Quarter

  1.60

  1.60

None

Third Quarter

  2.10

  1.45

None

Fourth Quarter

  2.10

  1.90

None

 

No dividends have been paid in the past two fiscal years and none can be paid until all the payments discussed in Item 3 are paid.

Sales of common stock have occurred sporadically.  The last reported sale was for $1.10  per share on August 10, 2012.

The Company repurchased 13,509 of common stock during the year ended Aril 30, 2012.

The Company has not sold unregistered shares of securities during the year ended April 30, 2012.

There are approximately 763 shareholders of record for the Company’s common stock as of April 30, 2012.

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

 

6



 

 

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

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

Sales of Real Estate

During the year ended April 30, 2012, the Company purchased 18.46 acres of land in Del Valle, Texas for approximately $2,413,000 and then sold 2.26 acres of that land for $1,560,000.  During the year ended April 30, 2011, the Company sold an “out parcel” in its Edinburg, Texas shopping center for $798,000.  Gains on these sales were approximately $592,000 in 2012 and $129,000 in 2011. These were the only sales of real estate for these years. Significant judgment was required to estimate the cost of real estate sold, particularly in 2012. Based on the acres sold and the best available estimates of the sales value of the remaining acres held using comparable sales, cost was allocated between the acres sold and those held.

Rental Income

Rental income was approximately $17,938,000 and $16,804,000 for the years ended April 30, 2012 and 2011 respectively.  The increase was mostly a result of a better occupancy rate in the Clarendon project due to the completion of renovations plus increases in rents.

Service Income

Service income was approximately $7,849,000 and $4,478,000 for the years ended April 30, 2012 and 2011, respectively.  Included in service income is $4,220,000 and $3,094,000 of income from CVS development projects for the above respective periods.

Construction income included in service income, was approximately $1,342,000 for the year ended April 30, 2012 and nil for the year ended April 30, 2011.  The 2012 income is a result of renovations in the B’nai B’rith Housing project in Delaware.  This property is not controlled by the Company.  Profits on renovations for properties that are controlled and consolidated with the Company are eliminated in consolidation.

Also included in service income for the year ended April 30, 2012 is approximately $1,759,000 related to the B’nai B’rith project in Delaware. This income was realized from a development fee related to arranging the purchase, financing and renovation for the B’nai B’rith partnership in which a subsidiary of the Company has a nominal, non-controlling interest as a limited partner.  In the year ended April 30, 2011, a development fee for Rockland and Clarendon of approximately $1,184,000 (25% of fee) was included in service income.  The remaining portion representing the 75% owned by the Company was eliminated in consolidation as a reduction of the costs of the property renovations. 

In December 2011, the Company re-opened the Cinema in the North Adams shopping plaza, as a subsidiary of the Company.  Approximately $243,000 included in other income is for the revenues of the Cinemas’ operations.

Operating Costs and Expenses

Rental Expenses

Rental expense decreased to approximately $14,066,000 from $14,613,000 for a number of reasons, better weather and related cost was as a definite cause.

7



 

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

RESULTS OF OPERATIONS (continued):

Service Expenses

Service expenses of approximately $3,760,000 for the year ended April 30, 2012 and $2,852,000 for April 30, 2011 includes $3,010,000, and $2,445,000, respectively, of CVS related expenses.

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

SG&A expenses increased approximately $787,000 for the year ended April 30, 2012 over the same period in the prior year.  In the current year there was also approximately $250,000 in expenses for the cinema in the North Adams shopping plaza as well as, increases in a broad spectrum of items including write-off of pending projects $74,000, and leasing expenses of $127,000.

Equity in Earnings (Losses) of Unconsolidated Subsidiaries

The equity in earnings (losses) of unconsolidated subsidiaries was impacted by the Company’s share of a non-cash charge for unfavorable changes in the fair value of derivative liabilities of approximately $700,000 and $400,000, for the years ended December 31, 2011 and 2010, respectively. The loss in CP Associates LLC was due to the unfavorable change in the fair value of derivative liabilities. However, the amount of loss recognized by the Company has been reduced by $400,000 for the Company’s share of losses in excess of its commitment to provide additional funding. No income will be recognized in the future until such unrecognized losses are recovered.

Income Taxes

See note 9 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 income taxes in the near term.

Capital Resources and Liquidity

The Company ended the 2012 fiscal year with approximately $3,058,000 of unrestricted cash and cash equivalents.  The unrestricted cash and cash equivalents includes approximately $419,000 belonging to VIE’s (Rockland Place, LP and Clarendon Hill Somerville, LP).  Funds received from CVS Pharmacy, which are to be paid out in connection with CVS developments,  amounted to approximately $458,000 and are included in restricted cash and cash equivalents.

The reduction of the “other receivable” from April 30, 2011 to April 30, 2012, reflects amounts collected from the City of Edinburg, Texas of $4,403,382 on January 6, 2012 for reimbursement of the shopping center’s infrastructure costs.  Of that amount, $3,600,000 was applied as a principal payment of a related outstanding loan and $803,382 was deposited into a special escrow account to meet any shortfall amounts of the shopping center. The remaining balance of the receivable of $2,594,415 will be paid via sales tax or additional funding from bonds sold by the City of Edinburg, Texas.

As described in the notes to the financial statements, the Company received capital contributions of $5,557,738 on its Clarendon Hill Project on February 12, 2012, from which it paid $2,900,000 of the $5,800,000 bridge loan. On August 22, 2012, Clarendon Hill received $4,940,041 and repaid the balance of the bridge loan. On September 22, 2012, the final installment of the capital contribution will be made.

With the August and September payments the Company will have received its 75% portion of the development fee. The development fee and the construction profit was eliminated in consolidation as a reduction in the cost of developed properties and is not reflected in either operating results or equity.  However, both profits are taxable.

 

8



 

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

RESULTS OF OPERATIONS (concluded):

Capital Resources and Liquidity (concluded):

Fortunately, we have a $17,880,000 Federal net operating loss carry-forward 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.

The Company believes it has sufficient cash and cash resources to fund operations and debt maturities of $4,822,000 in the next fiscal year without any new bank borrowings beyond April 30, 2013.

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.

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.

 

9



 

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, 2012.  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, 2012, 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.

Technical Expertise Relating to Certain Complex, Non-routine or Unusual Accounting Issues or Transactions:  The Company does not have the capabilities to account for certain complex, non-routine or unusual accounting issues or transactions.

The Company will remediate this material weakness by engaging 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 quarter ended April 30, 2012, 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.

 

10



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and

Shareholders of First Hartford Corporation

We have audited the accompanying consolidated balance sheets of First Hartford Corporation and Subsidiaries as of April 30, 2012 and 2011, and the related consolidated statements of operations, comprehensive loss, changes in deficiency and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated 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 audit 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 audit 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 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 reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Hartford Corporation and Subsidiaries as of April 30, 2012 and 2011, and their results of operations and cash flows for the years ended, in conformity with accounting principles generally accepted in the United States of America.

As disclosed in Note 1, under the caption “New Accounting Pronouncements”, the Company adopted, as required, ASU 2009-17 Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities effective May 1, 2010.

 

/s/ J.H. Cohn LLP

Glastonbury, Connecticut

September 5, 2012

 

 

 

 

 

 

 

 11

 



FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2012 AND 2011

 ASSETS

 

2012

 

2011

 

 

 

 

Real estate and equipment:

 

 

 

Developed properties (including $70,644,959 in 2012 and $67,500,964 in 2011  for VIE’s)

$139,096,722

 

$136,321,737

      Equipment and tenant improvements (including $2,004,014 in 2012 and $1,790,162 in 2011for VIE’s)

2,661,928

 

2,434,052

 

141,758,650

 

138,755,789

      Less accumulated depreciation and amortization (including $5,722,182 in
            2012 and $3,636,804 in 2011 for VIEs)

15,086,499

 

11,546,363

 

126,672,151

 

127,209,426

      Property under construction (including $28,838 in 2012 and $125,586 in 2011 for VIEs)

6,381,722

 

1,125,437

 

 

 

 

 

133,053,873

 

128,334,863

 

 

 

 

Cash and cash equivalents (including $418,838 in 2012 and $821,706 in 2011 for VIEs)

         3,057,736

 

858,175

 

 

 

 

Cash and cash equivalents – restricted

         457,952

 

618,086

 

 

 

 

Marketable securities (including $155,799 in 2012 and $0 in 2011 for VIEs)

657,299

 

13,436

 

 

 

 

Accounts and notes receivable, less allowance for doubtful accounts of

     $367,500 in 2012 and $205,700 in 2011 (including $172,899 in 2012 and $163,138 in 2011 for VIE’s)

 

      1,955,838

 

3,004,800

 

 

 

 

Other receivables

    8,600,078

 

12,187,535

 

 

 

 

Deposits and escrow accounts (including $5,954,372 in 2012 and $6,264,318 in 2011 for VIEs)

7,087,150

 

7,595,913

 

 

 

 

Prepaid expenses (including $204,747 in 2012 and $188,619 in 2011 for VIEs)

546,498

 

558,008

 

 

 

 

Deferred expenses, net (including $1,215,904 in 2012 and $1,324,181 in 2011 for VIEs)

2,261,266

 

3,066,433

 

 

 

 

Investment in affiliate

             9,665

 

9,665

 

 

 

 

Due from related parties and affiliates (including $65,345 in 2012 and $0 in 2011 for VIE’s)

          517,713

 

484,888

 

 

 

 

Deferred income taxes

           -0-

 

1,238,000

 

     

      Total assets

$158,205,068

 

$157,969,802

See accompanying notes.

12



 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2012 AND 2011
(continued)

LIABILITIES AND DEFICIENCY

 

2012

 

2011

 

 

 

 

Liabilities:

 

 

 

      Mortgages and other notes payable:

 

 

 

            Construction loans payable (including $24,289,341 in 2012 and $24,191,497 in 2011 for VIEs)

$74,026,262

 

$72,478,683

            Mortgages payable (including $33,795,664 in 2012 and $34,468,962 in  2011 for VIEs)

    64,241,626

 

    65,360,424

Notes payable – other (including $2,004,697 in 2012 and $1,979,697 in 2011 for VIEs)

4,283,654

 

      4,618,135

 

 

 

 

 

142,551,542

 

  142,457,242

 

 

 

 

Accounts payable (including $801,353 in 2012 and $763,453 in 2011 for VIEs)

2,673,293

 

      3,297,878

Other payables

      6,102,292

 

      5,218,947

Accrued liabilities (including $2,367,143 in 2012 and $2,397,453 in 2011 for VIEs)

      4,160,079

 

      6,930,289

Deferred income (including $214,217 in 2012 and $219,806 in 2011 for VIEs)

         657,215

 

         665,549

Other liabilities

      4,098,351

 

      4,387,981

Due to related parties and affiliates

102,752

 

102,752

      Total liabilities

160,345,524

 

163,060,638

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Deficiency:

 

 

 

First Hartford Corporation

 

 

 

Preferred stock, $1 par value; $.50 cumulative and convertible;
      authorized 4,000,000 shares; no shares issued

                   -0-

 

                  -0-

Common stock, $1 par value; authorized 6,000,000 shares:
      issued 3,298,609 in 2012 and 2011, outstanding 2,423,202
      and 2,436,355 in 2012 and 2011, respectively

       3,298,609

 

        3,298,609

 

 

 

 

Capital in excess of par

       5,198,928

 

        5,198,928

Accumulated deficit

   (18,419,410)

 

(17,503,081)

Accumulated other comprehensive income (loss)

             (12,558)

 

64,210

Treasury stock, at cost, 875,407 and 861,898 shares in 2012 and 2011,  respectively

(4,943,289)

 

(4,923,836)

      Total First Hartford Corporation

    (14,877,720)

 

     (13,865,170)

 

 

 

 

Noncontrolling interests

12,737,264

 

8,774,334

Total deficiency

(2,140,456)

 

(5,090,836)

 

 

 

 

      Total liabilities and deficiency

$158,205,068

 

$157,969,802

 

See accompanying notes.

13



 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

 

2012

 

2011

 

 

 

 

 

Revenues:       

 

 

 

 

      Rental income

 

$17,938,326

 

$16,803,894

      Service income

 

7,849,297

 

4,478,390

      Sales of real estate

 

1,559,658

 

798,000

      Other income

 

266,159

 

43,896

 

 

27,613,440

 

22,124,180

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

     Rental expenses

 

14,065,821

 

14,612,886

     Service expenses

 

3,760,385

 

2,852,239

     Cost of real estate sales

 

968,061

 

668,912

     Selling, general and administrative expenses

 

3,798,745

 

3,010,950

 

 

22,593,012

 

21,144,987

 

 

 

 

 

Income from operations

 

5,020,428

 

979,193

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

     Equity in earnings of unconsolidated subsidiaries

 

   1,307,101

 

1,001,970

     Other income

 

319,120

 

267,536

     Interest expense

 

(7,684,732)

 

(7,121,653)

 

 

(6,058,511)

 

(5,852,147)

 

 

 

 

 

Loss before income taxes

 

(1,038,083)

 

(4,872,954)

 

 

 

 

 

Income taxes

 

1,273,054

 

148,461

         

Consolidated net loss

 

  (2,311,137)

 

  (5,021,415)

 

 

 

 

 

Net loss attributable to noncontrolling interests

 

1,394,808

 

670,499

 

 

 

 

 

Net loss attributable to First Hartford Corporation

 

$ (916,329)

 

$ (4,350,916)

 

 

 

 

 

Net loss per share – basic

 

$(0.38)

 

$(1.56)

 

 

 

 

 

Net loss per share – diluted

 

$(0.38)

 

$(1.56)

 

 

 

 

 

Shares used in basic per share computation

 

 2,433,055

 

 2,781,777

Shares used in diluted per share computation

 

 2,433,055

 

 2,781,777

 

See accompanying notes.

 

14



 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

2012

 

2011

 

 

 

 

Consolidated net loss

$(2,311,137)

 

$(5,021,415)

 

     

 

 

 

 

Other comprehensive (loss) income, net of tax:

     

     Unrealized (loss) gain on marketable securities

(76,768)

 

64,210

 

 

 

 

            Other comprehensive (loss) income

(76,768)

 

64,210

 

 

 

 

Comprehensive loss

(2,387,905)

 

  (4,957,205)

Comprehensive loss attributable to noncontrolling interests

1,394,808

 

670,499

 

 

 

 

Comprehensive loss attributable to First Hartford Corporation

$  (993,097)

 

$(4,286,706)

 

 

 

 

 

See accompanying notes.

 

15



FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

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, 2010

$3,298,609

 

$2,176,704

 

$(15,118,235)

 

$(85,414)

 

$(2,044,429)

 

$(11,772,765)

 

$9,131,749

 

$(2,641,016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contributions from noncontrolling interests, net

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

1,553,927

 

1,553,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of cost of treasury stock

-0-

 

2,879,407

 

-0-

 

-0-

 

(2,879,407)

 

-0-

 

-0-

 

-0-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deconsolidation of CP Associates, LLC

-0-

 

-0-

 

1,966,070

 

85,414

 

-0-

 

2,051,484

 

(498,026)

 

1,553,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of minority interest in Rockland Place Developers, LLC

-0-

 

142,817

 

-0-

 

-0-

 

-0-

 

142,817

 

    (742,817)

 

(600,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-0-

 

-0-

 

(4,350,916)

 

-0-

 

-0-

 

(4,350,916)

 

(670,499)

 

(5,021,415)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

-0-

 

-0-

 

-0-

 

64,210

 

-0-

 

64,210

 

-0-

 

64,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2011

3,298,609

 

5,198,928

 

(17,503,081)

 

64,210

 

(4,923,836)

 

(13,865,170)

 

8,774,334

 

(5,090,836)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contributions from noncontrolling interests, net

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

5,557,738

 

5,557,738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

-0-

 

(200,000)

 

(200,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of treasury stock

-0-

 

-0-

 

-0-

 

-0-

 

(19,453)

 

(19,453)

 

-0-

 

(19,453)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-0-

 

-0-

 

(916,329)

 

-0-

 

-0-

 

(916,329)

 

(1,394,808)

 

(2,311,137)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

-0-

 

-0-

 

-0-

 

(76,768)

 

-0-

 

(76,768)

 

-0-

 

(76,768)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2012

$3,298,609

 

$5,198,928

 

$(18,419,410)

 

$(12,558)

 

$(4,943,289)

 

$(14,877,720)

 

$12,737,264

 

$(2,140,456)

 

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

See accompanying notes.

 

16



FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011

 

2012

 

2011

Operating activities:

 

 

 

  Consolidated net loss

$(2,311,137)

 

$(5,021,415)

  Adjustments to reconcile consolidated net loss

 

 

 

  to net cash provided by operating activities: 

 

 

 

  Equity in earnings of unconsolidated subsidiaries, net of

 

 

 

  distributions of $725,794 in 2012 and $750,690 in 2011

(581,308)

 

(251,280)

  Gains on sale of real estate

(591,597)

 

(129,088)

  Depreciation and amortization of real estate and equipment

3,573,831

 

3,208,718

  Amortization of deferred expenses

357,583

 

354,022

  Deferred income taxes

1,238,000

 

-0-

  Changes in operating assets and liabilities:

 

 

 

  Accounts, notes and other receivables

4,636,419

 

2,275,674

  Deposits and escrow accounts

508,763

 

(790,222)

  Prepaid expenses

11,510

 

(32,101)

  Deferred expenses

447,584

 

(863,441)

  Cash and cash equivalents – restricted

160,134

 

1,731,917

  Accrued liabilities

(2,770,210)

 

3,337,881

  Deferred income

(8,334)

 

604,812

  Accounts and other payables

258,760

 

(3,432,182)

Net cash provided by operating activities

4,929,998

 

993,295

 

 

 

 

Investing activities:

 

 

 

  Distributions from affiliates

200,000

 

-0-

  Investments in marketable securities

(628,953)

 

(1,220)

  Purchases of equipment and tenant improvements

(227,876)

 

(1,025,846)

  Proceeds from sales of real estate

1,559,658

 

631,450

  Purchase of noncontrolling interest in Rockland Place Developers,

 

 

 

   LLC

-0-

 

(600,000)

  Deconsolidation of CP Associates, LLC

-0-

 

(1,891,798)

  Additions to developed properties and property under construction

(9,033,025)

 

(21,523,984)

Net cash used in investing activities

(8,130,196)

 

(24,411,398)

 

See accompanying notes.

17



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

 

 

2012

 

2011

Financing activities:

 

 

 

Contributions from noncontrolling interests – limited partners

$5,557,738

 

$1,553,927

Purchase of treasury stock

(19,453)

 

-0-

Distribution to noncontrolling interests

(200,000)

 

-0-

Proceeds from:

 

 

 

  Construction loans

8,235,550

 

20,444,074

  Mortgages

550,000

 

-0-

  Other notes

25,000

 

-0-

Principal payments on:

 

 

 

  Construction loans

(6,687,971)

 

(648,580)

  Mortgages

(1,668,799)

 

(1,021,367)

  Other notes

(359,481)

 

(1,223,565)

Advances to related parties and affiliates, net

(32,825)

 

(7,375)

Net cash provided by financing activities

5,399,759

 

19,097,114

 

 

 

 

Net change in cash and cash equivalents

2,199,561

 

(4,320,989)

Cash and cash equivalents, beginning of year

858,175

 

5,179,164

 

 

 

 

Cash and equivalents, end of year

$3,057,736

 

$858,175

 

 

 

 

Cash paid during the year for interest

$7,389,980

 

$6,272,726

Cash paid during the year for income taxes

$80,092

 

$87,902

 

 

 

 

  Non cash investing and financing activities:

 

 

 

    Transfer from accrued liabilities to notes payable – other for

 

 

 

      litigation settlement

-0-

 

$3,676,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

18



 

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

 

1.    Summary of Significant Accounting Policies:

Description of Business

First Hartford Corporation was incorporated in Maine in 1909 and is engaged in the purchase, development, ownership, management and sale of real estate which is considered a single segment.

Principles of Consolidation

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

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Financial Statement Presentation

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

Statements of Cash Flows

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

Revenue Recognition

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

 

19



 

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

 

1.     Summary of Significant Accounting Policies (continued):

 

Revenue Recognition (concluded):

 

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

 

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

 

Service Income

 

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

 

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

 

Other Receivables and Payables

 

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

Cash and Cash Equivalents – Restricted

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

 

 20



 

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

 

1.    Summary of Significant Accounting Policies (continued):

Developed Properties, Equipment and Tenant Improvements

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

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

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 clearly associated with the property under construction, including interest.

 

Deferred Expenses

 

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

 

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

 

Year Ending April 30

2013

$334,583

2014

243,103

2015

173,705

2016

115,694

2017

110,613

 

21



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

 

1.     Summary of Significant Accounting Policies (continued):

Investment in Affiliated Entities

 

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

 

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

 

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

 

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

 

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

 

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

 

22



 

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

1.    Summary of Significant Accounting Policies (continued):

Fair Value Measurements

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

  Level 1 – 

Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

     

 

  Level 2 –

Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant observable inputs are available, either directly or indirectly such as interest rates and yield curves that are observable at commonly quoted intervals; and

     

 

  Level 3 –

Prices or valuations that require inputs that are unobservable.

 

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

The Company’s financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses and debt.  The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying amounts because of their relative short-term nature.  In general, the carrying amount of variable rate debt approximates its fair value.  Further, the carrying amount of fixed rate debt approximates fair value debt since the interest rates on the debt approximates the Company’s current incremental borrowing rate.  Information about the fair values of marketable securities and derivative liabilities is presented below.

Marketable Securities

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

 

 23

 



 

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

1.    Summary of Significant Accounting Policies (continued):

Long-Lived Assets

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

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

  Income Taxes

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

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

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

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

 

Stock Compensation

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

Earnings (loss) per share (EPS)

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

24



 

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

 

1.    Summary of Significant Accounting Policies (concluded):

New Accounting Pronouncements

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

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

2.    Consolidated Variable Interest Entities

The Company’s consolidated financial statements include the accounts of Rockland Place Apartments Limited Partnership (“Rockland”) and Clarendon Hill Somerville Limited Partnership (“Clarendon”).  The Company has consolidated both Rockland and Clarendon based on the express legal rights and obligations provided to it by the underlying partnership agreements and its control of their business activity. 

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

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

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

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

 

25

 



 

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

2.    Consolidated Variable Interest Entities (continued):

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

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

a.      Outstanding debt and taxes, or

b.      Fair market value of the property

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

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

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

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

 

April  30

 

        2012

 

        2011

 

 

 

 

Real estate and equipment, net

$70,112,601

 

$68,919,929

Other assets

    8,187,903

 

    8,761,962

Total assets

  78,300,504

 

  77,681,891

 

 

 

 

Intercompany profit elimination

   (3,156,971)

 

   (3,140,022)

Consolidated

$75,143,533

 

$74,541,869

 

 

 

 

Mortgages and other notes payable

$60,089,702

 

$60,640,156

Other liabilities

    3,382,713

 

    3,380,712

Total liabilities

$63,472,415

 

$64,020,868

 

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

26

 



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

 

2.     Consolidated Variable Interest Entities (concluded):

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

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

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

3.     Construction Loans, Mortgages and Notes Payable:

Information about the Company’s debt follows:

 

2012

 

2011

Construction loans and mortgages payable with interest rates ranging from zero to 11.00% at April 30, 2012 and maturities at various dates through 2056.

 

 

 

$138,267,888

 

$137,839,107

 

 

 

 

Notes payable on Clarendon with interest rates ranging from zero to 4.40% at April 30, 2012 and maturities ranging from 2030 to 2050.

 

 

 

1,704,697

 

      1,679,697

 

 

 

 

Note and pre-judgment interest payable to Richard E. Kaplan in quarterly installments with interest and final payment of $790,423 due November 29,2016

 

 

 

2,578,957

 

      2,938,438

 

 

 

 

 

$142,551,542

 

$142,457,242

 

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

Aggregate principal payments due on the above debt follow:

Year Ending April 30

 

 

 

 

 

2013

 

$   4,822,052

2014

 

38,677,816

2015

 

14,434,457

2016

 

1,808,010

2017

 

2,261,587

Thereafter

 

80,547,620

 

 

$142,551,542

 

 

 27

 



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

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

 

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

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

4.    Public Infrastructure Reimbursements and Other Incentives:

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

Public Infrastructure Reimbursements

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

Other Cash Incentives

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

5.    Pledge of Stock in Subsidiaries:

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

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

Loan for Career Education building -

 

5% of loan balance outstanding

      $512,000

Mortgage – Corporate Office

      $235,000

Construction loan – Edinburg, Texas

  $49,737,000

 

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

 

 28

 



 

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

6.     Related Party Transactions:

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

 

     2012

 

     2011

Management Fees

$63,827

 

$61,407

Service Fees

    5,280

 

    7,714

Total

$69,107

 

$69,121

 

7.    Stock Option Plan:

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

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

8.     Employee Retirement Plan:

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

9.     Income Taxes:

The provision for income taxes consists of:

 

2012

 

2011

 

 

 

 

Current state income taxes

 $     35,054

 

  $148,461

Deferred income taxes

1,238,000

 

          -0-

 

$1,273,054

 

$148,461

 

 

 

 

The components of the net deferred income tax asset follow:

 

 

 

       

Tax effect of net operating loss carry-forwards

$4,452,000

 

$4,980,000

Investment in CP Associates, LLC

     895,000

 

     602,000

Valuation allowance

 (5,347,000)

 

(4,344,000)

 

$-0-

 

$1,238,000

 

 

29



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

9.     Income Taxes (concluded):

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

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

 

2012

 

2011

 

 

 

 

Federal statutory rate (34%)

$(355,000)

 

$(1,657,000)

State tax – net of Federal effect

23,000

 

96,000

Change in valuation allowance on deferred tax assets

1,003,000

 

1,368,000

Losses attributable to noncontrolling interests

474,000

 

228,000

Other

   128,000

 

  113,000

       

Provision for income taxes

$1,273,000

 

$     148,000

 

10.  Leases:

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

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

Year Ending April 30

 

 

 

 

2013

$  5,482,091

 

2014

    5,449,534

 

2015

    5,173,793

 

2016

    4,690,546

 

2017

    4,295,137

 

Thereafter

  15,046,192

 

Total

$40,137,293

 

 

 

 30

 

 



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

11.    Investments in Affiliates:

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

Dover – New Jersey:

As of and for the years ended April 30

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

 

 

2012

2011

 

 

 

Assets

$13,077,126

$13,320,394

Liabilities

18,714,818

  19,099,996

Members’ deficit

(5,637,692)

  (5,779,602)

Revenue

2,519,411

    2,555,375

Operating expenses

1,118,631

    1,253,401

Non-operating expense

(1,008,870)

  (1,019,596)

Net income

391,910

       282,378

 

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

Cranston – Rhode Island:

As of and for the years ended December 31

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

 

 

2011

2010

 

 

 

Assets

$23,798,904

$25,097,019

Liabilities

33,218,817

  33,771,380

Partners’ deficit

(9,419,913)

  (8,674,361)

Revenue

4,817,439

    4,850,573

Operating expenses

2,185,047

    2,159,642

Non-operating expense

(1,862,889)

  (1,894,750)

Net income

769,503

       796,181

 

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

 

 

 

 

31



 

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

11.    Investments in Affiliates (concluded):

CP Associates, LLC – Rhode Island:

As of the years ended December 31

Company ownership – 50% investment.

 

 

2011

2010

 

 

 

Assets

$21,059,293

$21,447,415

Liabilities

24,050,307

23,038,127

Partners’ deficit

(2,991,014)

(1,590,712)

Revenue

3,030,689

3,017,247

Operating expenses

1,195,546

1,188,604

Non-operating expense

2,633,790

1,984,643

Net loss

(798,647)

(156,000)

 

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

 

12.    Concentrations of Credit Risk:

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

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

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

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

13.  Litigation:

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

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

 

32



 

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

13.   Litigation (concluded):

 

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

 

14.    Subsequent Events:

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

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

Petco

Anna’s Linens

Big Lots

Party City

Melrose Fashions

GNC

Burkes Outlet Stores

Carters

                                   

 

 

 

 

 

 

 

 

33



 

PART III

ITEM 10          DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

(a)           Identification of Directors

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

    

Name   

Age   Period of Service

Neil H. Ellis  

84 1966 – Present

Stuart I. Greenwald   

70 1980 – Present

David B. Harding   

67 1998 – Present

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

(b)          Identification of Executive Officers

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

Name

Age

Position

Period of Service

 

 

 

 

Neil H. Ellis

 

84

President

1966 – Present

Stuart I. Greenwald

70

Treasurer/Secretary

1980 - Present

David B. Harding

67

Vice President

1998 - Present

 

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

 

(c)          Identification of Certain Significant Employees

 

Name

Age

Position

Period of Service

John Toic

40

Vice President

2003 - Present

 

(d)         Family Relationships

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

 

 

 

34



 

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

(e)           Business Experience

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

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

           

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

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

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

 

2.             Directorships:

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

 

(f)            Involvement in Certain Legal Proceedings:

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

 

(g)           Promoter and Control Persons:

Not applicable.

(h)           Audit Committee Financial Expert:

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

 

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

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

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

35



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

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

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

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

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

(j)            Code of Ethics

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

ITEM 11.               EXECUTIVE COMPENSATION

(a)  

Summary Compensation Table

Name& Principal Position

Year

Salary

Bonus

Stock Awards

Option Awards

Non-Equity
Incentive
Plan
Compensation

Non-qualified
Deferred
Compensation
Earnings

All Other
Compensation

Total

Neil H. Ellis Director and (CEO)

2012

$251,053

$-0-

$-0-

$-0-

$-0-

$-0-

$-0-

$251,053

 

2011

$251,053

$-0-

$-0-

$-0-

$-0-

$-0-

$-0-

$251,053

Stuart I. Greenwald Director, Treasurer and Secretary

2012

$150,000

$-0-

$-0-

$-0-

$-0-

$-0-

$4,500

$154,500

 

2011

$150,000

$-0-

$-0-

$-0-

$-0-

$-0-

$4,500

$154,500

 

 

 

 

 

 

 

 

 

 

 

36



 

ITEM 11.         EXECUTIVE COMPENSATION (continued):

(a)  

Summary Compensation Table (continued):

Name& Principal Position

Year

Salary

Bonus

Stock
Awards

Option
Awards

Non-Equity
Incentive
Plan
Compensation

Non-qualified
Deferred
Compensation
Earnings

All Other
Compensation

Total

David B. Harding director and Vice President

2012

$176,053

$-0-

$-0-

$-0-

$-0-

$-0-

$5,250

$181,303

 

2011

$176,053

$-0-

$-0-

$-0-

$-0-

$-0-

$5,250

$181,303

 

Directors Compensation

 

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

 (b)          Stock Options

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

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

Option Awards

Stock Awards

Name

Number of Securities Under-lying Un-exercised Options (#) Exercisable

Number of Securities Under-lying Un-exercised Options (#) Unexercis-able

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units That Have Not Vested (#)

Market Value of Shares or Units That Have Not Vested ($)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Stuart I. Greenwald

50,000

0

0

1.10

2/11/14

0

0

0

0

David B. Harding

50,000

0

0

1.10

2/11/14

0

0

0

0

Other Employees

150,000

0

0

1.10

2/11/14

0

0

0

0

 

 

 

 

37



ITEM 11.         EXECUTIVE COMPENSATION (continued):

(c)     Benefits and Prerequisites

Medical

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

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

Disability

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

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

Life Insurance

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

(d)     Automobiles

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

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

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

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

Title

of

Class

Name & Address of

Beneficial Owner of

Identity of Group

Amount and Nature
of Beneficial
Ownerships

(3)

Percent

Of Class

 

 

 

 

Common Stock

Neil H. Ellis

1,353,876 (1)

50.7%

 

43 Butternut Road

 

 

 

Manchester, CT  06040

 

 

 

 

38



 

 

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

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

Title

of

Class

Name & Address of

Beneficial Owner of

Identity of Group

Amount and Nature
of Beneficial
Ownerships

(3)

Percent

Of Class

 

 

 

 

Common Stock

John Filippelli

   307,706 (2)

11.5%

 

85 Pawling Lake

 

 

 

Pawling, NY  12564

 

 

 

 

 

 

Common Stock

Joel Lehrer

    200,000

7.5%

 

231 Atlantic Street

 

 

 

Keyport, NJ  07735-2044

 

 

 

 

 

 

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

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

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

 

(b)             Security Ownership of Directors and Executive Officers:

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

Title of Class

Name & Address of Beneficial Owner of

Identity of Group

Amount and Nature of
Beneficial Ownerships

Percent

Of Class

 

 

 

 

Common

Neil H. Ellis

1,353,876 (1)

50.7%

 

43 Butternut Road

 

 

 

Manchester, CT  06040

 

 

 

 

 

 

Common

All Directors and Officers

1,453,876 (4)

54.4%

 

As a Group (3 in number)

 

 

 

 

 

 

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

 

(c)             Changes in Control

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

 

 

39



 

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

(d)            Equity Compensation Plan Information

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

 

(a)

(b)

(c)

 

 

 

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding securities

reflected in column (a))

Plan category

 

Number of  Securities to

be issued upon exercise

of outstanding options,

warrants and rights.

Weighted-average

exercise price of

outstanding options,

warrants and rights

Equity compensation plans

Approved by security holders

Equity compensation plans not

Approved by security holders

 

 

250,000

 

           0

 

 

$1.10

 

      0

 

750,000

 

            0

Total..........

250,000

 

$1.10

 750,000

 

       

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

 

ITEM 13.               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR  INDEPENDENCE

 

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

 

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

Were paid the following:

Management Fee (at 4%)

 $63,827

Miscellaneous Service 

5,280

 

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

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

(b)             Certain Business Relationships:

Refer to (a) above.

 

 

40



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

 

(c)             Indebtedness of Management:

There is none.

(d)             Transactions with Promoters:

There is none.

(e)             Director Independence:

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

 

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

 

ITEM 14.              PRINCIPAL ACCOUNTING FEES AND SERVICES

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

                                                                                     

 

 

 

2012

2011

Audit Fees (1)

          $98,750

           $80,000

Audit Related Fees (2)

             37,500

             37,500

Tax Fees (3)

-0-

-0-

All Other Fees (4)

             15,000

                    -0-

 

            

 

 

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

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

(3)   No tax services were rendered.

(4)   Includes fees for research.

 

The Board of Directors has:

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

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

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

 

 

 

41



 

 

 

 

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

 

Neil H. Ellis

Stuart I. Greenwald

David B. Harding



 

 

 

 

 

 

 

 

42



PART IV 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Pages

     

(a)

(1)

The following items are included in Part II, Item 8:

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 11

 

 

 

 

 

 

Financial Statements:

 

 

 

 

 

 

 

Consolidated Balance Sheets – April 30, 2012 and 2011

12-13

 

 

 

 

 

 

Consolidated Statements of Operations for the Years

 

 

 

    Ended April 30, 2012 and 2011 

14

 

 

 

 

 

 

Consolidated Statements of Comprehensive Loss for the Years

 

 

 

     Ended April, 30, 2012 and 2011  

15

 

 

 

 

 

 

Consolidated Statements of Changes in Deficiency

 

 

 

      for the Years Ended April 30, 2012 and 2011 

16

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Years

 

 

 

     Ended April 30, 2012 and 2011 

17-18

 

 

 

 

 

 

Notes to Consolidated Financial Statements

19-33

 

 

 

 

 

(2)

Financial statement schedules

 

       

 

 

All financial statement schedules are omitted because they are not required.

 

(b)

Exhibits

 

 

 

 

 

 

 

(3)

Articles of Incorporation and by-laws.

 

       

 

 

Exhibits (3) to Form-K for the Fiscal Year ended April 30, 1984, Pages 1-18 of

 

 

 

Exhibits Binders, incorporated by reference to Securities File Number 0-8862.

 

       

 

(4)

Instruments defining the rights of security holders, including Indentures.

 

       

 

 

Not applicable.

 

       

 

(5)

Voting Trust Agreement.

 

       

 

 

Not Applicable.

 

       

 

(6)

Material Contracts.

 

       

 

 

Not Applicable.

 

       

 

(7)

Statement regarding computation of per share earnings.

 

       

 

 

Not Applicable.

 

 

43



 

 

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

 

(b)  

Exhibits (continued):

     

 

    (8)

Statement regarding computation of ratios.

       
     

Not Applicable.

       
    (9)

Annual report to Security Holders, Form 10-Q or Quarterly Report To Security Holders.

       
     

The annual report to security holders consists of this report (Form 10-K) and the

       
     

President’s letter attached as Exhibit 13.

       
    (10)

Letter regarding change in accounting principle.

       
     

Not Applicable.

       
    (11)

Previously Unfilled Documents.

       
     

Not Applicable.

       
    (12)

Subsidiaries of the Registrant.

       
     

Name of Subsidiary

State in which Incorporated
         
     

First Hartford Realty Corporation    

Delaware
         
     

Lead Tech, Inc.      

Connecticut
         
     

Parkade Center, Inc.    

Texas
         
     

Plainfield Parkade, Inc.      

Connecticut
         
     

Putnam Parkade, Inc.  

Connecticut
         
     

EH&N Construction Company    

Delaware
         
     

Dover Parkade LLC     

Delaware
         
     

DE 150 Corp. 

Delaware
         
     

Brewery Parkade, Inc. 

Rhode Island
         
     

Cranston Parkade, LLC     

Rhode Island
         
     

Tri-City Plaza, Inc.    

New Jersey
         
     

1150 Union Street Corp. 

Massachusetts

 

 

44



 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):

   

(b)

 

Exhibits (continued):

 

 

 

 

 

 

(12)

Subsidiaries of the Registrant (Continued):

       

 

 

 

Name of Subsidiary   

State in which Incorporated
         

 

 

 

CP Associates, LLC  

Rhode Island
       

 

 

 

Trolley Barn Associates, LLC   

Rhode Island
       

 

 

 

Main Street NA Parkade, LLC  

Connecticut
       

 

 

 

Connolly & Partners, LLC   

Massachusetts
         

 

 

 

Cranston/BVT Associates Limited Partnership   

Rhode Island
       

 

 

 

FHRC Management Corp.   

Delaware
       

 

 

 

The Shoppes at Rio Grande Valley, LP  

Texas
       

 

 

 

Rockland Place Apartments, LLC   

Massachusetts
       

 

 

 

Rockland Place Developers, LLC 

Massachusetts 
       

 

 

 

Rockland Place Apartments, LP  

Massachusetts
       

 

 

 

Independence Park Asset Management Co., LLC   

Delaware
       

 

 

 

EH&N U Inc.    

Massachusetts
       

 

 

 

First Harford Plumbing Inc. 

Massachusetts
       

 

 

 

FALAH Corp.     

Massachusetts
       

 

 

 

Clarendon Hill Somerville Limited Partnership   

Massachusetts
         

 

 

 

Clarendon Developer, LLC   

Massachusetts
       

 

 

 

Clarendon Hill Somerville, LLC      

Massachusetts
       

 

 

 

LTI Environmental Services Inc.     

Massachusetts
       

 

 

(13)

Published report regarding matters submitted to vote of Security Holders.

       

 

 

 

Not Applicable.

       

 

 

(14)

Power of Attorney.

       

 

 

 

Not Applicable.

 

 

 

 

 

 

45



 

 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES (continued):

 

 

(b)

Exhibits (continued):

 

 

 

 

(15)

Additional Exhibits.

 

 

 

 

 

Not Applicable.

 

 

 

 

(16)

Information from Reports furnished to State Insurance Regulatory Authorities.

 

 

 

 

 

Not Applicable.

 

 

 

 

(17)

Exhibit 31.1

 

 

 

 

(18)

Exhibit 31.2

 

 

 

 

(19)

Exhibit 32.1

 

 

 

 

(20)

Exhibit 32.2

 

 

 

(c)

 

Other Financial Statements -  Nonconsolidated subsidiaries

 

 

 

 

 

Cranston/BVT Associates Limited Partnership

 

 

 

 

 

Dover Parkade LLC

 

 

 

 

 

CP Associates, LLC

           

 

           

 

 

 

46



 

S I G N A T U R E S

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

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

 

Dated:  September 5, 2012

 

 

 

FIRST HARTFORD CORPORATION

 

 

 

 

 

By: /s/ Neil H. Ellis

 

       Neil H. Ellis

 

       President

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

 

September 5, 2012

 /s/ Neil H. Ellis

 

 Neil H. Ellis

 

Principal and Executive Officer

 

President and Director

 

 

 

 

September 5, 2012 

/s/Stuart I. Greenwald

 

Stuart I. Greewald

 

Principal Financial Officer

 

Secretary, Treasurer and Director

           

 

           

 

47



 

CRANSTON/BVT ASSOCIATES

LIMITED PARTNERSHIP

 

FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2011 AND 2010

 

 

 

 

 

 

 

 

 

 



CRANSTON/BVT ASSOCIATES

LIMITED PARTNERSHIP

 

TABLE OF CONTENTS

 

 

 

 

Page

   

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS    

2

 

 

FINANCIAL STATEMENTS

 

 

 

Balance Sheets  

3

 

 

Statements of Operations         

4

 

 

Statements of Changes in Partners’ Deficit     

5

 

 

Statements of Cash Flows      

6

 

 

 

 7

 

 
 

 

 

 

-1-



 

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

 

To the Partners

Cranston/BVT Associates Limited Partnership:

 

We have audited the accompanying balance sheets of Cranston/BVT Associates Limited Partnership as of December 31, 2011 and 2010, and the related statements of operations, changes in partners’ deficit and cash flows for the years then ended.  These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. 

 

We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 Partnership'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 financial statements referred to above present fairly, in all material respects, the financial position of Cranston/BVT Associates Limited Partnership as of December 31, 2011 and 2010, and its results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

  /s/ J.H. Cohn LLP

 

Glastonbury, Connecticut
September 5, 2012

 

 

 -2-



 

CRANSTON/BVT ASSOCIATES LIMITED PARTNERSHIP

 

Balance Sheets

For the Years Ended December 31, 2011 and 2010

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

Real estate and improvements:

 

 

 

 

Land

 $

     6,530,822

 $

     6,530,822

Land improvements

 

3,804,003

 

3,804,003

Building and improvements

 

17,336,650

 

17,336,650

 

 

27,671,475

 

27,671,475

Less accumulated depreciation and amortization

 

6,517,113

 

5,876,042

 

 

21,154,362

 

21,795,433

 

 

 

 

 

Cash and cash equivalents

 

550,490

 

1,551,984

Tenant accounts receivable, less allowance for doubtful accounts of $60,000 in 2011 and 2010

 

196,103

 

99,894

Rent receivable

 

977,510

 

915,624

Prepaid expenses

 

58,885

 

56,495

Mortgage escrow accounts

 

635,212

 

397,095

Mortgage origination costs, net

 

78,414

 

101,939

Tenant improvements, net

 

13,263

 

26,526

Deferred leasing commissions, net

 

134,665

 

152,029

 

 

2,644,542

 

3,301,586

 

 

 

 

 

Total assets

 $

   23,798,904

 $

   25,097,019

 

 

 

 

 

LIABILITIES AND PARTNERS' DEFICIT

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

Mortgage note payable

 $

   32,545,951

 $

   33,158,970

Accounts payable

 

18,014

 

24,117

Accrued liabilities

 

332,295

 

159,986

Rents collected in advance

 

277,867

 

383,617

Tenant security deposits

 

44,690

 

44,690

 

 

33,218,817

 

33,771,380

 

 

 

 

 

Partners' deficit

 

(9,419,913)

 

(8,674,361)

 

 

 

 

 

Total liabilities and partners' deficit

 $

   23,798,904

   25,097,019

 

 

 

 

 

 

See accompanying notes.

 

-3-

 



 

CRANSTON/BVT ASSOCIATES LIMITED PARTNERSHIP

 

Statements of Operations

For the Years Ended December 31, 2011 and 2010

 

 

 

 

2011

 

2010

Revenues:

 

 

 

 

Rental income

 $

     4,817,439

 $

     4,850,573

 

 

 

 

 

Operating expenses:

 

 

 

 

Rental expense

 

1,268,656

 

1,207,371

Depreciation and amortization

 

695,223

 

706,804

Selling, general and administrative

 

38,607

 

69,269

Management fees - related party

 

182,561

 

176,198

 

 

2,185,047

 

2,159,642

 

 

 

 

 

Income from operations

 

2,632,392

 

2,690,931

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

Interest and other income

 

1,973

 

4,051

Interest expense

 

(1,864,862)

 

(1,898,801)

 

 

(1,862,889)

 

(1,894,750)

 

 

 

 

 

Net income

 $

        769,503

 $

        796,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

-4-



CRANSTON/BVT ASSOCIATES LIMITED PARTNERSHIP

 

Statements of Changes in Partners' Deficit

For the Years Ended December 31, 2011 and 2010

 

 

 

 

 

Cranston

Parkade, LLC

(98% Owner)

 

CP/BVT, Inc.

(2% Owner)

 

Total

Partners'
Deficit

 

 

 

 

 

 

 

Balance, December 31, 2009

 $

(9,140,453)

 $

109,320

 $

(9,031,133)

 

 

 

 

 

 

 

Net income

 

780,257

 

15,924

 

796,181

 

 

 

 

 

 

 

Distributions

 

(435,498)

 

(3,911)

 

(439,409)