Company Quick10K Filing
First Hartford
Price2.45 EPS3
Shares2 P/E1
MCap6 P/FCF-13
Net Debt-9 EBIT18
TEV-3 TEV/EBIT-0
TTM 2018-07-31, in MM, except price, ratios
10-Q 2018-07-31 Filed 2018-09-28
10-K 2018-04-30 Filed 2018-07-30
10-Q 2018-01-31 Filed 2018-03-29
10-Q 2017-10-31 Filed 2017-12-28
10-Q 2017-07-31 Filed 2017-10-10
10-K 2017-04-30 Filed 2017-07-31
10-Q 2017-01-31 Filed 2017-04-24
10-Q 2016-10-31 Filed 2017-01-17
10-Q 2016-07-31 Filed 2016-10-07
10-K 2016-04-30 Filed 2016-08-05
10-Q 2016-01-31 Filed 2016-04-05
10-Q 2015-10-31 Filed 2015-12-28
10-Q 2015-07-31 Filed 2015-09-29
10-K 2015-04-30 Filed 2015-08-05
10-Q 2015-01-31 Filed 2015-04-15
10-Q 2014-10-31 Filed 2015-02-04
10-Q 2014-07-31 Filed 2014-12-12
10-K 2014-04-30 Filed 2014-10-27
10-Q 2014-01-31 Filed 2014-08-07
10-Q 2013-10-31 Filed 2014-06-10
10-Q 2013-07-31 Filed 2014-05-09
10-K 2013-04-30 Filed 2014-03-25
10-Q 2013-01-31 Filed 2013-03-29
10-Q 2012-10-31 Filed 2012-12-19
10-Q 2012-07-31 Filed 2012-10-05
10-K 2012-04-30 Filed 2012-09-06
10-Q 2012-01-31 Filed 2012-04-20
10-Q 2011-10-31 Filed 2012-01-27
10-Q 2011-07-31 Filed 2011-12-14
10-K 2011-04-30 Filed 2011-11-02
10-Q 2011-01-31 Filed 2011-03-31
10-Q 2010-10-31 Filed 2011-01-11
10-Q 2010-07-31 Filed 2010-10-06
10-K 2010-04-30 Filed 2010-08-05
10-Q 2010-01-31 Filed 2010-03-26
10-Q 2009-10-31 Filed 2010-01-13
8-K 2018-10-19

FHRT 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
EX-31 ex31-1.htm
EX-31 ex31-2.htm
EX-32 ex32.htm

First Hartford Earnings 2015-10-31

Balance SheetIncome StatementCash Flow
2501951408530-252013201520172019
Assets, Equity
352719113-42013201520172019
Rev, G Profit, Net Income
1593-3-9-152013201520172019
Ops, Inv, Fin

10-Q 1 q-10312015.htm q-10312015.htm - Prepared by EDGARX.com

 

 

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

FORM 10-Q

(Mark One)

 

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

For the quarterly period ended October 31, 2015.

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

For the transition period from                                                                          to                                                                                           

Commission File Number:                  0-8862                                                                                                                                                  

 First Hartford Corporation

(Exact name of registrant as specified in its charter)

 

 

Maine  

01-0185800

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

149 Colonial Road, Manchester, CT 

06042   

(Address of principal executive offices)                                                                                                         

(Zip Code)

 

(860) 646-6555

(Registrant’s telephone number including area code)

 

(Former name, former address and former fiscal year if changed since last report)

 

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

Yes X       No     

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

Yes          No X

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

Large accelerated filer

Accelerated filer

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

Smaller reporting company X

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

Yes          No X

APPLICABLE ONLY TO CORPORATE ISSUERS

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

2,407,840 as of December 9, 2015

1

 


 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

 

INDEX

 

PART I.

FINANCIAL INFORMATION

PAGE

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Condensed Consolidated Balance Sheets –

October 31, 2015 and April 30, 2015

 

 

3 - 4

 

Condensed Consolidated Statements of Operations for the

Three and Six Months Ended October 31, 2015 and 2014

 

 

5

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

for the Three and Six Months Ended October 31, 2015 and 2014

 

6

 

Condensed Consolidated Statements of Cash Flows for the

Three and Six Months Ended October 31, 2015 and 2014

 

 

7 - 8

 

Notes to Condensed Consolidated Financial Statements

 

9 - 15

Item 2.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

 

 

16 - 22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

22

Item 4.

Controls and Procedures

 

22

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

23

Item 1A.

Risk Factors

 

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

Item 3.

Defaults Upon Senior Securities

 

23

Item 4.

Mine Safety Disclosures

 

23

Item 5.

Other Information

 

23

Item 6.

Exhibits

 

23

 

Signatures

24

 

 

Exhibits

25 - 27

 

 

2

 


 

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

ASSETS

 

October 31, 2015

 

April 30, 2015

Real estate and equipment:

 

 

 

Developed properties and property under construction (including $73,667,959 in October and $72,621,441 in April for VIEs)

$223,612,219

 

$211,318,882

Equipment and tenant improvements (including $2,378,814 in October and $2,353,355 in April for VIEs)

3,709,941

 

3,663,080

 

227,322,160

 

214,981,962

 

 

 

 

Less accumulated depreciation and amortization (including $12,799,018 in October and $11,786,480 in April for VIEs)

40,114,990

 

39,149,517

 

187,207,170

 

175,832,445

 

Property held for sale

 

-0-

 

 

342,175

 

Cash and cash equivalents (including $2,041,218 in October and $1,067,182 in April for VIEs)

6,295,715

 

9,698,341

 

 

 

 

Cash and cash equivalents – restricted (including $412,836 in October and $418,110 in
    April for VIEs)

2,304,500

 

948,721

 

 

 

 

Marketable securities (including $1,256,413 in October and $2,029,684 in April for VIEs)

1,256,413

 

3,964,398

 

 

 

 

Accounts and notes receivable, less allowance for doubtful accounts of

$723,617 as of October 31, 2015 and $694,849 as of April 30, 2015 (including $636,547 in October and $687,468 in April for VIEs)

 

4,059,717

 

 

4,848,217

 

 

 

 

Other receivables

12,198,073

 

12,080,979

 

 

 

 

Deposits and escrows (including $4,986,552 in October and $5,125,568 in April for VIEs)

9,464,342

 

9,671,401

 

 

 

 

Prepaid expenses (including $330,931 in October and $275,419 in April for VIEs)

1,408,213

 

1,184,170

 

 

 

 

Deferred expenses (including $1,382,984 in October and $1,420,572 in April for VIEs)

5,701,530

 

6,004,980

 

 

 

 

Investments in affiliates

100

 

100

 

Due from related parties and affiliates

 

165,009

 

 

664,909

 

Deferred tax asset

2,155,278

 

2,802,007

 

 

 

 

Total assets

$232,216,060

 

$228,042,843

 

See accompanying notes.

3


 

 

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

LIABILITIES AND EQUITY (DEFICIENCY)

 

 

October 31, 2015

 

April 30, 2015

Liabilities:

 

 

 

Mortgages and notes payable:

 

 

 

  Construction loans payable

$61,562,267

 

$55,553,207

  Mortgages payable (including $56,976,590 in October and $57,364,872 in April for VIEs)

141,575,413

 

146,507,036

  Notes payable (including $1,704,697 in October and $1,704,697 in April for VIEs)

1,744,697

 

1,744,697

 

204,882,377

 

203,804,940

 

 

 

 

Accounts payable (including $1,754,490 in October and $1,224,988 in April for VIEs)

3,973,093

 

3,399,900

Other payables

13,148,068

 

13,588,295

Accrued liabilities (including $3,404,025 in October and $3,178,121 in April for VIEs)

7,171,892

 

5,852,198

Accrued cost of derivatives

3,629,278

 

2,515,330

Deferred income (including $237,896 in October and $241,216 in April for VIEs)

557,779

 

546,313

Other liabilities

1,784,084

 

1,961,212

Due to related parties and affiliates (including $423,330 in October and $415,018 in April for VIEs)

575,283

 

486,951

 

235,721,854

 

232,155,139

 

 

 

 

Shareholders’ Equity (Deficiency):

 

 

 

First Hartford Corporation:

 

 

 

Preferred stock, $1 par value; $.50 cumulative and convertible; authorized

   4,000,000 shares; no shares issued and outstanding

-0-

 

-0-

Common stock, $1 par value; authorized 6,000,000 shares; issued 3,298,609

   shares; outstanding 2,408,268 shares as of October 31, 2015 and 2,409,840 as of April 30, 2015

3,298,609

 

3,298,609

Capital in excess of par

5,198,928

 

5,198,928

Accumulated deficit

(8,221,014)

 

(10,368,421)

Accumulated other comprehensive income

98,590

 

95,815

Treasury stock, at cost, 890,341 shares as of October 31, 2015 and 888,769 as of April 30, 2015

(4,974,405)

 

(4,970,082)

Total First Hartford Corporation

(4,599,292)

 

(6,745,151)

Noncontrolling interests

1,093,498

 

2,632,855

 

 

 

 

Total shareholders’ equity (deficiency)

(3,505,794)

 

(4,112,296)

 

 

 

 

Total liabilities and shareholders’ equity (deficiency)

$232,216,060

 

$228,042,843

 

 

 

 

See accompanying notes.

4

 


 

 

 

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

 

 

Three Months Ended

 

Six Months Ended

 

Oct. 31, 2015

 

Oct. 31, 2014

 

Oct. 31, 2015

 

Oct. 31, 2014

Operating revenues:

 

 

 

 

 

 

 

  Rental income

$7,572,094

 

$7,373,174

 

$14,990,653

 

$14,960,799

  Service income

1,937,857

 

1,630,968

 

3,569,893

 

3,752,525

  Sales of real estate

10,246,022

 

-0-

 

11,350,182

 

-0-

  Other income

813,884

 

574,958

 

1,708,558

 

1,193,024

 

20,569,857

 

9,579,100

 

31,619,286

 

19,906,348

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

  Rental expenses

5,422,263

 

5,498,019

 

10,475,250

 

10,699,980

  Service expenses

1,651,656

 

1,001,700

 

3,078,250

 

2,097,980

  Cost of real estate sales

7,738,678

 

-0-

 

8,674,890

 

-0-

  Selling, general and administrative expenses

1,463,014

 

2,031,819

 

3,378,545

 

3,372,183

 

16,275,611

 

8,531,538

 

25,606,935

 

16,170,143

 

 

 

 

 

 

 

 

Income from operations

4,294,246

 

1,047,562

 

6,012,351

 

3,736,205

 

 

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

 

 

 

  Interest expense

(2,255,778)

 

(2,565,745)

 

(4,651,755)

 

(5,068,660)

  Gain on voluntary foreclosure

  Other income

-0-

274,511

 

-0-

202,344

 

2,649,850

381,216

 

-0-

355,342

  Gain on forgiveness of debt

-0-

 

5,315,423

 

-0-

 

5,315,423

Gain (loss) on derivatives

(1,592,818)

 

158,586

 

(1,151,679)

 

111,346

Equity in earnings of unconsolidated
   subsidiaries

194,706

 

132,866

 

357,128

 

416,755

 

(3,379,379)

 

3,243,474

 

(2,415,240)

 

1,130,206

 

 

 

 

 

 

 

 

Income before income taxes

914,867

 

4,291,036

 

3,597,111

 

4,866,411

 

 

 

 

 

 

 

 

Income taxes

1,554,226

 

250,000

 

1,594,111

 

311,937

 

 

 

 

 

 

 

 

Consolidated net income (loss)

(639,359)

 

4,041,036

 

2,003,000

 

4,554,474

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interests

387,370

 

454,132

 

144,407

 

724,004

 

 

 

 

 

 

 

 

Net income (loss) attributable to First Hartford Corporation

$(251,989)

 

$4,495,168

 

$2,147,407

 

$5,278,478

 

 

 

 

 

 

 

 

Net income (loss) per share – basic

$(0.10)

 

$1.86

 

$0.89

 

$2.19

 

 

 

 

 

 

 

 

Net income (loss) per share – diluted

$(0.10)

 

$1.86

 

$0.89

 

$2.19

 

 

 

 

 

 

 

 

Shares used in basic per share computation

2,409,054

 

2,411,965

 

2,409,316

 

2,411,965

 

 

 

 

 

 

 

 

Shares used in diluted per share computation

2,409,054

 

2,411,965

 

2,409,316

 

2,411,965

 

5

 

See accompanying notes.


 

 

 

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

 

 

Three Months Ended

 

Six Months Ended

 

Oct. 31, 2015

 

Oct. 31, 2014

 

Oct. 31, 2015

 

Oct. 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income (loss)

$(639,359)

 

$4,041,036

 

$2,003,000

 

$4,554,474

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

  Unrealized gains (losses) on marketable securities

(152,412)

 

(7,860)

 

(156,260)

 

110,146

 

 

 

 

 

 

 

 

Consolidated comprehensive income (loss)

(791,771)

 

4,033,176

 

1,846,740

 

4,664,620

 

 

 

 

 

 

 

 

Amounts attributable to noncontrolling interests:

 

 

 

 

 

 

 

  Net (income) loss

387,370

 

454,132

 

144,407

 

724,004

  Unrealized (gains) losses on marketable securities

152,412

 

7,899

 

159,035

 

(64,469)

 

 

 

 

 

 

 

 

 

539,782

 

462,031

 

303,442

 

659,535

Comprehensive income (loss) attributable to First Hartford Corporation

$(251,989)

 

$4,495,207

 

$2,150,182

 

$5,324,155

 

 

 

 

 

 

See accompanying notes.

 

6

 


 

 

 

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

 

 

Six Months Ended

 

October 31, 2015

 

October 31, 2014

Operating activities:

 

 

 

 

 

 

 

  Consolidated net income

$2,003,000

 

$4,554,474

 

 

 

 

  Adjustments to reconcile consolidated net income to net cash provided by operating activities:

 

 

 

     Equity in earnings of unconsolidated subsidiaries, net of distributions of

        $180,000 in 2015 and $660,000 in 2014

(177,128)

 

243,245

     Gain on sale of property

(2,675,292)

 

-0-

     Gain on voluntary foreclosure

(2,649,850)

 

-0-

     Depreciation

2,614,911

 

2,550,580

     Amortization

184,876

 

190,758

     Forgiveness of debt

-0-

 

(5,315,423)

     Deferred income taxes

646,729

 

-0-

Changes in operating assets and liabilities:

 

 

 

     Accounts, notes and other receivables

656,642

 

(2,039,768)

     Deposits and escrows

13,742

 

143,437

     Prepaid expenses

(229,985)

 

(250,458)

     Deferred expenses

113,665

 

(2,414,632)

     Cash and cash equivalents – restricted

(1,355,779)

 

(52,058)

     Accrued liabilities

1,319,694

 

616,330

     Accrued cost of derivatives

1,113,948

 

(111,346)

     Deferred income

49,483

 

(170,746)

     Accounts and other payables

132,966

 

5,651,348

 

 

 

 

Net cash provided by operating activities

1,761,622

 

3,595,741

 

 

 

 

Investing activities:

 

 

 

   Investments in marketable securities

(2,730,194)

 

(378,147)

   Proceeds from sale of marketable securities

5,281,919

 

938,911

   Purchase of equipment and tenant improvements

(46,861)

 

(83,554)

   Proceeds from sale of real estate

11,350,182

 

-0-

   Additions to developed properties and properties under construction

(24,009,495)

 

(11,827,652)

    

 

 

 

   Net cash (used in) investing activities

(10,154,449)

 

(11,350,442)

 

 

 

 

 

 

See accompanying notes.

 

7

 


 

 

 

 

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

 

 

Six Months Ended

 

October 31, 2015

 

October 31, 2014

Financing activities:

 

 

 

  Distributions to noncontrolling interests

$(1,235,915)

 

$(694,567)

  Purchase of treasury stock

(4,323)

 

(74)

  Proceeds from:

 

 

 

     Construction loans payable

12,115,497

 

6,971,808

     Mortgage loans payable

1,312,500

 

2,705,986

     Notes payable

-0-

 

-0-

Principal payments on:

 

 

 

     Construction loans payable

(6,106,437)

 

-0-

     Mortgage loans payable

(1,679,353)

 

(1,341,273)

     Notes payable

-0-

 

-0-

Repayments from related parties and affiliates, net

588,232

 

7,379

 

     

Net cash provided by financing activities

4,990,201

 

7,649,259

 

     

Net change in cash and cash equivalents

(3,402,626)

 

(105,442)

 

 

 

 

Cash and cash equivalents, beginning of period

9,698,341

 

6,500,885

 

 

 

 

Cash and cash equivalents, end of period

$6,295,715

 

$6,395,443

 

 

 

 

 

Cash paid during the period for interest

$4,607,903

 

$5,149,081

 

 

 

 

Cash paid during the period for income taxes

$651,564

 

$112,313

 

 

 

 

       
Debt refinancing in 1st quarter:      
New mortgage loans

$39,000,000

 

$-0-

Debt reduced

(39,723,828)

 

(-0-)

Net cash from refinancing in 1st quarter

$(723,828)

 

$-0-

       
       
Debt refinancing in 2nd quarter:      
New mortgage loan

$-0-

 

$10,500,000

Debt reduced

(-0-)

 

(7,794,014)

Net cash from refinancing in 2nd quarter

$-0-

 

$2,705,986

 

                                                                                

 

 

 

See accompanying notes.

 

8

 


 

 

 

 

 

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

1.       Business and Significant Accounting Policies:

 

Business

 

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

 

Principles of Consolidation

 

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

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included.  Operating results for the interim periods are not necessarily indicative of the results that may be expected for the entire year.  The condensed consolidated balance sheet as of April 30, 2015 was derived from the audited financial statements for the year then ended.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015.

 

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

 

Currently, there are no Accounting Standards Updates (ASUs) that the Company is required to adopt which are likely to have a material effect on its financial statements. For further discussions on Accounting Standard Updates, refer to the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015.

 

 

9

 


 

 

 

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

1.       Business and Significant Accounting Policies (continued):

 

Net Income (Loss) Per Common Share

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

       

There were no common stock equivalents outstanding at October 31, 2015 or October 31, 2014.  

 

Financial Instruments and Fair Value

 

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

 

Segment Information

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31

 

October 31

 

 

2015

 

2014

 

2015

 

2014

Revenues:

 

 

 

 

 

 

 

 

Real Estate Operations

 

$18,755,602

 

$8,071,137

 

$28,261,120

 

$16,382,226

Fee for Service

 

1,814,255

 

1,507,963

 

3,358,166

 

3,524,122

Total

 

$20,569,857

 

$9,579,100

 

$31,619,286

 

$19,906,348

 

 

 

 

 

 

 

 

 

Operating Costs & Expenses:

 

 

 

 

 

 

 

 

Real Estate Operations

 

$13,289,999

 

$5,498,019

 

$19,391,496

 

$10,699,980

Fee for Service

 

1,522,598

 

1,001,700

 

2,836,894

 

2,097,980

Administrative Expenses

 

1,463,014

 

2,031,819

 

3,378,545

 

3,372,183

Total

 

$16,275,611

 

$8,531,538

 

$25,606,935

 

$16,170,143

 

 

10

 


 

 

 

 

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

1.       Business and Significant Accounting Policies (concluded):

 

Segment Information (concluded):

 

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

 

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $1,891,664 on October 31, 2015 and $530,611 on April 30, 2015 and receivables of $12,198,073 on October 31, 2015 and $12,080,979 on April 30, 2015.

 

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

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

 

October 31, 2015

 

April 30, 2015

 

 

 

 

Real estate and equipment, net

$65,748,353

 

$65,746,701

Other assets

11,053,921

 

11,041,856

Total assets

76,802,274

 

76,788,557

Intercompany profit elimination

(2,916,344)

 

(2,974,130)

Total assets

$73,885,930

 

$73,814,427

 

 

 

 

Mortgages and other notes payable

$58,681,287

 

$59,069,569

Other liabilities

5,384,326

 

4,644,325

Total liabilities

$64,065,613

 

$63,713,894

 

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

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31, 2015

 

October 31, 2014

 

October 31, 2015

 

October 31, 2014

 

 

 

 

 

 

 

 

 

Dover Parkade, LLC:

 

 

 

 

 

 

 

 

Revenue

 

$656,628

 

$676,556

 

$1,324,796

 

$1,318,700

Expenses

 

447,217

 

530,822

 

970,541

 

1,005,876

Defeasance & refinancing

 

-0-

 

-0-

 

-0-

 

799,313

Net income (loss)

 

$209,411

 

$145,734

 

$354,255

 

($486,489)

 

 

11

 


 

 

 

 

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

3.       Income Taxes:

In the three and six months ended October 31, 2015, the Company had taxable income in excess of the remaining loss carryforwards remaining as of April 30, 2015, resulting in current income tax expense.  The first quarter gain on the voluntary foreclosure of the Putnam, CT shopping center was not taxable as the associated cancellation of debt income would have been reduced by the company’s tax attributes. This reduction of tax attributes along with operating results and the use of an Alternative Minimum tax credit resulted in a minimal income tax expense. Operating results in the second quarter have generated taxable income in excess of the Company’s tax attributes, thus resulting in a higher income tax expense.

 

In the three and six months ended October 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.  However, as a result of a forgiveness of debt by the mortgage holder of the Main Street NA Parkade LLC, the Company recorded a gain through debt forgiveness of $5,315,423.  As a result, the Company recorded tax expense of $250,000, which included an Alternative Minimum Tax of $100,000 and state income tax of $150,000. 

4.       Litigation:

 

There has been no change in litigation since April 30, 2015.

 

5.       Refinancings:

 

West Springfield, MA – Refinance: On August 15, 2014, the Company refinanced the mortgage on their shopping center in West Springfield, MA in the amount of $10,500,000.  A prior mortgage with a remaining balance of $7,794,014 with an interest rate of 5.52% was paid from the proceeds.  The new mortgage has an interest rate of 4.60% with a 30 year amortization and duration of 10 years, calls for interest only payments for the first two years.  Transaction costs of approximately $110,000 will be amortized over the life of the loan.

Cranston, RI – Refinance: On May 28, 2015, the Company refinanced the mortgage on their shopping center in Cranston, RI in the amount of $33,500,000.  A prior mortgage with a remaining balance of $30,235,368 with an interest rate of 5.603% was paid from the proceeds.  The new mortgage has a variable interest rate of 30 day LIBOR plus 1.90% (2.09% at October 31, 2015) and calls for 119 monthly principal payments of $57,279 (along with interest) and one final lump-sum payment of $26,683,779 in May 2025.  Simultaneously, the Company entered into a floating-to-fixed interest rate swap agreement with the bank fixing the interest rate at 4.15%.

CP Associates – Refinance: On June 9, 2015, the Company refinanced a mortgage on their Career Education building in Cranston, RI in the amount of $5,500,000.  A prior mortgage with a remaining balance of $9,442,011 with an interest rate of 1.25% plus 30 day LIBOR (fixed at an effective interest rate of 6.11% through a floating-to-fixed interest rate swap agreement that was also retired) was paid from the proceeds and cash on-hand.  The new mortgage has a fixed interest rate of 3.00% through November 8, 2018, after which it adjusts to be a variable rate equal to 2.50% plus 30 day LIBOR.  Principal payments of $250,000 are due quarterly, with interest payable monthly.  The final payment is due on June 9, 2020, if not sooner paid (there is no prepayment penalty).

12

 


 

 

 

 

 

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

 

6.       Gain on Forgiveness of Debt:

During the three and six months ended October 31, 2014, a 100% owned subsidiary of the Company, Main Street NA Parkade, LLC signed an agreement that the Mortgage loan secured by the property of Main Street NA Parkade located in North Adams, would be reduced from $12,575,423 to $7,260,000.  As of the date hereof, the Note reflects an outstanding principal balance of $7,260,000 due to a reduction of principal indebtedness through debt forgiveness by Lender, which resulted in a gain in the amount of $5,315,423 during the year ended April 30, 2015. During the year ended April 30, 2014, the Company recorded an impairment loss of $4,027,053 on this property.  This impairment reflected the continuing overall economic decline in the geographical area and retail industry that thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center.

TERMS:

Commencing October 1, 2014 through and including January 1, 2020.  Interest shall be 200 basis points in excess of the thirty day LIBOR rate.

Amortization commencing February 1, 2020 through October 1, 2030 (“Maturity Date”) on the basis of a 25 year schedule of amortization with a balloon payment due on October 1, 2030.  Interest during this period shall be 5.5% per annum. 

Call Option – Lender may elect to accelerate this Note and require the Company to prepay without premium the entire unpaid principal balance at any time after March 1, 2017.

The Note is non-recourse.

Amended and Restated Escrow and Security Agreement

Beginning October 1, 2014 and including September 30, 2015 all net cash flow of the property shall be deposited in the Escrow account.

Additional Interest Agreement (AIA) was amended as follows:

Commencing on October 1, 2015 and continuing through September 30, 2019 the Company will remit 50% of the cash flow of the property to Lender.  Lender will apply all such payments received to the outstanding amount due on the date of the next installment due under the loan.

 

13

 


 

 

 

 

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

7.       Purchase of Land:

New Orleans, LA – Land Purchase: On May 29, 2015, the Company purchased a parcel of land in New Orleans, LA, for $7,999,901 including closing costs.  The Company plans to subdivide this lot and oversee construction of a shopping plaza with the goal of either leasing or selling these parcels shortly after construction is completed.  This purchase was financed with advances from new promissory notes of $4,383,502 and working capital of $3,616,399.  Key terms of the construction loans, which in total amount to $13,210,000, are as follows:

 

Note #1

Note #2

Note Amount:

$7,436,645

$5,773,355

 

Initial Term Maturity Date:

April 28, 2016

May 28, 2017

 

Interest Rate:

Lesser of a) thirty day LIBOR plus applicable margin (3.50% prior to subdivision of land, 2.50% after) or b) highest lawful rate, as defined.

Lesser of a) thirty day LIBOR plus applicable margin (3.50% prior to subdivision of land, 2.75% after) or b) highest lawful rate, as defined.

 

Renewal Option:

Initial Term Maturity Date shall be renewed and extended at borrower’s option to November 28, 2016 if agreed-upon conditions are met.

Initial Term Maturity Date shall be renewed and extended at borrower’s option to May 28, 2018 and again until May 28, 2019 if agreed-upon conditions are met.

 

Austin, TX – Land Purchase: On July 30, 2015, the Company purchased a parcel of land in Austin, TX for $1,874,309 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with a loan of $1,312,500 and working capital of $561,809.  Key terms of the mortgage loan are as follows:

 

  Maturity Date:

Balloon payment due January 2017

  Interest Rate: 

1.00% above the Prime Rate, as defined

  Interest Payments: 

Monthly

  Prepayment Penalty:

None

  Guarantee:

Guaranteed by Chairman of the Company

 

Vernon, NJ – Land Purchase: On September 8, 2015, the Company purchased a parcel of land in Vernon, NJ, for $4,175,985 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with an advance from a new construction loan of $2,959,018 and working capital of $1,216,967.  Key terms of the construction loan are as follows:

  Maximum Loan Amount:

$6,281,250

  Maturity Date:

September 1, 2026

  Interest Rate:

2.50% above the LIBOR rate, as defined, but in no event less than 2.90% through September 1, 2016.  Thereafter, 1.85% above the LIBOR rate, as defined.

14

 


 

 

 

 

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

 

7.       Purchase of Land (continued):

Payments:  

Interest only payable monthly through September 1, 2016.  Thereafter, interest plus principal in the amount necessary to amortize the then outstanding principal balance in full over a 30 year period payable monthly.  If not sooner paid, all remaining interest and principal payable on September 1, 2026.

Prepayment Fee:

0.50% prior to September 1, 2018.

 

8.       Gain on Voluntary Foreclosure:

Putnam, CT – Transfer to Lender: On November 1, 2014, a payment was due for the mortgage of the shopping center in Putnam, Connecticut in the amount of approximately $4,700,000.  The rentable space of the shopping center is 57,529 square feet, 46% of which was leased to one store.  That store informed the Company that they were not renewing their lease, which expired on January 31, 2015, and, as a result, the Company found it impossible to refinance the mortgage without finding a replacement tenant.  Therefore, on June 5, 2015, the Company agreed to transfer title of the property to the lender.  The Company recognized a gain of $2,649,850 since the mortgage was non-recourse and was in excess of the book value.  Pre-tax income for this shopping center was $44,645 for the three and six months ended October 31, 2015 and $35,852 and $87,689 for the three and six months ended October 31, 2014, respectively.

 

9.       Subsequent Events:

On December 7, 2015, the Company entered into a $2,000,000 revolving demand loan agreement (“line of credit”) with a regional bank.  There were no borrowings made at inception.  The interest rate on this loan is Wall Street Journal Prime, with a floor of 3.25%.  The loan is unsecured and there are no guarantors.  Interest is to be paid monthly; principal is to be repaid within twelve months or on demand, at the bank’s discretion.  There are no prepayment penalties.  This line of credit will primarily be used from time to time to fund initial investments related to development opportunities.

 

 

 

 

15

 


 

 

 

 

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

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

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

Critical Accounting Policies

There have been no significant changes in the Company’s critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2015 under the subheading “Critical Accounting Policies and Estimates”. 

Results of Operations:

Rental Income

Rental income for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

 

 

Three Months Ended

 

Six Months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

Residential

$2,955,896

 

$2,792,898

 

$6,002,008

 

$5,578,517

Commercial

4,616,198

 

4,580,276

 

8,988,645

 

9,382,282

 

$7,572,094

 

$7,373,174

 

$14,990,653

 

$14,960,799

 

The increase in residential rental income for the three and six months ended October 31, 2015 compared with the prior year was primarily caused by an increase in the subsidy received for the Rockland, MA property, partially offset by increases in concessions and vacancies.

 There were no individually significant variances in commercial residential income in the three and six months ended October 31, 2015 compared with the prior year.  Normal rent rate increases were offset by the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 (see Note 8 of the Financial Statements included within for discussion.)

 

 

 

16

 


 

 

 

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

Service Income

Service income for the three and six months ended October 31, 2015 and 2014 follows:

                               

 

Three Months Ended

 

Six Months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

Management fees

$123,602

 

$123,005

 

$211,727

 

$228,403

Preferred developer fees

1,814,255

 

1,507,963

 

3,358,166

 

3,524,122

 

$1,937,857

 

$1,630,968

 

$3,569,893

 

$3,752,525

 

The increase in preferred developer fees in the three months ended October 31, 2015 compared to the prior year was related to higher fees received from Cumberland Farms; CVS fees were in line with the prior year.  The decrease in preferred developer fees for the six months ended October 31, 2015 compared to the prior year reflected lower fees received from CVS; higher fees received from Cumberland Farms were a partial offset. 

Sales (and Cost of Sales) of Real Estate

On May 28, 2015, the Company sold a parcel of land in Pearland, TX for $1,104,161 (cost of $747,610). 

On August 6, 2015, the Company sold a property in Austin, TX for $10,246,021 (cost of $7,728,203).  A construction loan with a balance of $6,106,437 was paid off with the proceeds.

There were costs related to property sales that occurred in the second half of the fiscal year ended April 30, 2015 totaling $199,077 that were recorded in the six months ended October 31, 2015 as they were not anticipated as of the prior fiscal year end.

The Company did not sell any real estate in the three and six months ended October 31, 2014.

Other Income

The increase in other income for the three and six months ended October 31, 2015 compared to the prior year was primarily at the liquor store, which obtained a liquor license in December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine. 

 

 

 

17

 


 

 

 

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

Operating Costs and Expenses:

Rental Expenses

Rental expenses for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

  Three Months Ended   Six Months Ended
  October 31,   October 31,
 

2015

 

2014

 

2015

 

2014

Residential

$2,814,683

 

$2,952,062

 

$5,336,845

 

$5,713,204

Commercial

2,607,580

 

2,545,957

 

5,138,405

 

4,986,776

 

$5,422,263

 

$5,498,019

 

$10,475,250

 

$10,699,980

 

The decrease in residential rental expenses for the three and six months ended October 31, 2015 from the prior year were mainly from lower asbestos remediation expenses at the Clarendon property as these costs, which are ongoing, were capitalized in the first half of fiscal year 2016 as they were determined to improve the condition and safety of the property and mitigate and prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities.  Also contributing to the decrease were non-recurring sprinkler and fire damage-related expenses at Clarendon in the prior year.  Partially offsetting this decrease were higher voucher incentive payments made to Rockland’s tenants in an effort to maximize subsidy income.  

The increase in commercial rental expenses for the three and six months ended October 31, 2015 from the prior year were mainly due to increased costs related to the expansion of our shopping center in Edinburg, TX, partially offset by the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015.  Also impacting the six month comparison were professional and legal expenses incurred as part of the initial effort to refinance the debt at the Cranston, RI shopping center (the refinancing ultimately happened via another lender - see Note 5 of the Financial Statements included within for discussion).

Service Expenses

The increase in service expenses for the three and six months ended October 31, 2015 and 2014 compared to the prior year reflected higher preferred developer expenses and fees reflecting the ramp-up to full staffing that occurred in the second half of fiscal year 2015 and into fiscal year 2016, as well as salary increases. 

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

The decrease in SG&A expenses for the three months ended October 31, 2015 compared to the prior year was the result of several employees now focused on the Preferred Developer program and thus no longer performing SG&A duties, partially offset by higher expenses at the liquor store in North Adams, MA, which did not obtain a liquor license until December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine.  For the six months ended October 31, 2015, SG&A was essentially flat compared to the prior year due to these same factors.  Also factoring into these variances is the proportion of certain employees’ time allocated to asbestos abatement at Clarendon versus SG&A activities.

18

 


 

 

 

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

Non-Operating Income (Expense):

Interest Expense

Interest expense for the three and six months ended October 31, 2015 and 2014, by type of tenant, follows:

 

 

Three Months Ended

 

Six Months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

Commercial

$1,646,922

 

$1,895,163

 

$3,430,283

 

$3,723,367

Residential

608,856

 

670,582

 

1,221,472

 

1,345,293

 

$2,255,778

 

$2,565,745

 

$4,651,755

 

$5,068,660

 

The decrease in commercial interest expense for the three and six months ended October 31, 2015 compared to the prior year was primarily the result of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 and savings from the refinancings at Cranston and CP Associates (see Note 5 of the Financial Statements included within for discussion).

The decrease in residential interest expense for the three and six months ended October 31, 2015 compared to the prior year was the result of the refinancings at Rockland and Clarendon that occurred in December 2014 and February 2015, respectively.

Gain on Voluntary Foreclosure

See Note 8 of the Financial Statements included within for discussion.

Other Income

Other income for the three and six months ended October 31, 2015 and 2014 follows:

 

Three Months Ended

 

Six Months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

Edinburg EDC contributions

$-0-

 

$120,000

 

$-0-

 

$200,000

Clarendon residual funds

189,912

 

-0-

 

189,912

 

-0-

Investment income

84,599

 

82,344

 

191,304

 

155,342

 

$274,511

 

$202,344

 

$381,216

 

$355,342

 

The Company does not expect any more Edinburg EDC contributions after April 30, 2015.  See Note 4 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2015 for further discussion.

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

 

 

19

 


 

 

 

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

Gain on Forgiveness of Debt

During the three and six months ended October 31, 2014, a 100% owned subsidiary of the Company, Main Street NA Parkade, LLC signed an agreement that the Mortgage loan secured by the property of Main Street NA Parkade located in North Adams, would be reduced from $12,575,423 to $7,260,000.  As of the date hereof, the Note reflects an outstanding principal balance of $7,260,000 due to a reduction of principal indebtedness through debt forgiveness by Lender, which resulted in a gain in the amount of $5,315,423 during the year ended April 30, 2015. During the year ended April 30, 2014, the Company recorded an impairment loss of $4,027,053 on this property.  This impairment reflected the continuing overall economic decline in the geographical area and retail industry that thwarted the Company’s efforts to replace terminating tenants and generate sufficient cash flows to recover the carrying amount of the shopping center.

TERMS:

Commencing October 1, 2014 through and including January 1, 2020.  Interest shall be 200 basis points in excess of the thirty day LIBOR rate.

Amortization commencing February 1, 2020 through October 1, 2030 (“Maturity Date”) on the basis of a 25 year schedule of amortization with a balloon payment due on October 1, 2030.  Interest during this period shall be 5.5% per annum. 

Call Option – Lender may elect to accelerate this Note and require the Company to prepay without premium the entire unpaid principal balance at any time after March 1, 2017.

The Note is non-recourse.

Amended and Restated Escrow and Security Agreement

Beginning October 1, 2014 and including September 30, 2015 all net cash flow of the property shall be deposited in the Escrow account.

Additional Interest Agreement (AIA) was amended as follows:

Commencing on October 1, 2015 and continuing through September 30, 2019 the Company will remit 50% of the cash flow of the property to Lender.  Lender will apply all such payments received to the outstanding amount due on the date of the next installment due under the loan.

Gain (Loss) on Derivatives

The Company, through its 50% owned consolidated subsidiaries, has entered into two separate floating-to-fixed interest rate swap agreements with banks that expire in May 2025 and July 2031.  The Company has determined that these derivative instruments do not meet the requirements of hedge accounting and have therefore recorded the change in fair value of these derivative instruments through income.

 

20

 


 

 

 

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

Equity in Earnings of Unconsolidated Subsidiary

The equity in earnings of unconsolidated subsidiary for the three and six months ended October 31, 2015 and 2014 follows:

 

Three Months Ended

 

Six Months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

Income from Operations

$104,706

 

$72,866

 

$177,128

 

$156,411

Defeasance and Refinancing

-0-

 

-0-

 

-0-

 

(399,656)

Distributions

90,000

 

60,000

 

180,000

 

660,000

 

$194,706

 

$132,866

 

$357,128

 

$416,755

 

The Company has an investment in an affiliated limited liability entity Dover Parkade, LLC, (Dover).  The Company has a 50% interest in Dover which owns a shopping center in Dover Township, NJ.  The operating and financial policies of Dover are not controlled by the Company.  For the years prior to May 1, 2009, the Company was committed to providing funding to this equity method investee.  The Company’s investment was recorded at cost and subsequently adjusted for its share of their net income and losses and distributions. To 2009, losses and distributions from Dover exceeded the Company’s investment.  Since then, distributions from Dover have been credited to income.  The Company does not control the rate of distributions of Dover.  Such distributions are in excess of Dover’s net assets since its accumulated net losses (including significant amounts for depreciation and amortization) have exceeded capital contributions.

During the six months ended October 31, 2014, the equity in earnings of Dover were charged $399,656, which represented 50% of the direct costs of defeasance on the refinancing of the prior mortgage plus some additional defeasance cost.  As a result of the refinancing, the Company received a distribution of $600,000.

Income Taxes

In the three and six months ended October 31, 2015, the Company had taxable income in excess of the remaining loss carryforwards remaining as of April 30, 2015, resulting in current income tax expense.  The first quarter gain on the voluntary foreclosure of the Putnam, CT shopping center was not taxable as the associated cancellation of debt income would have been reduced by the company’s tax attributes. This reduction of tax attributes along with operating results and the use of an Alternative Minimum tax credit resulted in a minimal income tax expense. Operating results in the second quarter have generated taxable income in excess of the Company’s tax attributes, thus resulting in a higher income tax expense.

 

In the quarter and six months ended July 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.  However, as a result of a forgiveness of debt by the mortgage holder of the Main Street NA Parkade LLC, the Company recorded a gain through debt forgiveness of $5,315,423.  As a result, the Company recorded tax expense of $250,000, which included an Alternative Minimum Tax of $100,000 and state income tax of $150,000. 

Capital Resource and Liquidity

At October 31, 2015, the Company had $6,295,715 of unrestricted cash and cash equivalents. This includes $4,064,066 belonging to partnership entities in which the Company’s financial interests range from .01% (VIEs) to 50%.  Funds received from CVS, which are to be paid out in connection with CVS developments, amounted to $1,891,664 and tenant security deposits held by VIEs of $412,836, are included in restricted cash and cash equivalents.

 

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

At October 31, 2015, the Company had $1,256,413 of investments in marketable securities, all of which belongs to partner entities.

The Company believes it has sufficient cash and cash resources to fund operations and debt maturities in the next fiscal year without any new bank borrowings through October 31, 2016. Borrowings for new construction loans or property purchases are unclear at this time.  On December 7, 2015, the Company entered into a $2,000,000 revolving demand loan agreement (“line of credit”) with a regional bank.  There were no borrowings made at inception.  The interest rate on this loan is Wall Street Journal Prime, with a floor of 3.25%.  The loan is unsecured and there are no guarantors.  Interest is to be paid monthly; principal is to be repaid within twelve months or on demand, at the bank’s discretion.  There are no prepayment penalties.  This line of credit will primarily be used from time to time to fund initial investments related to development opportunities.

Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4.  CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.  We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chairman and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15b of the Exchange Act.  Based on the Evaluation, our Chairman and Treasurer concluded that because of weaknesses in our control environment, our disclosure controls were not effective as of the end of the period covered by this report.  Notwithstanding weaknesses in our control environment, as of October 31, 2015, we believe that the condensed consolidated financial statements contained in this report present fairly the Company’s financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting

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

 

 

 

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PART II

OTHER INFORMATION

 

 

Item 1.

LEGAL PROCEEDINGS

 

 

 

There has been no change in litigation since April 30, 2015.

 

 

Item 1A.

RISK FACTORS

 

 

 

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

 

 

Item 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

 

 

None

 

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

 

 

None

 

 

Item 4.

MINE SAFETY DISCLOSURES

 

                               

 

Not applicable

 

 

 

 

Item 5.

OTHER INFORMATION

   

 

None

   

 

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

 

 

None

 

 

Item 6.

EXHIBITS

 

a)      Exhibits:

   

 

Exhibit 31.1

Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.

 

 

 

 

Exhibit 31.2

Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.

 

 

 

 

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.

 

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SIGNATURES

 

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

 

                                                                                                                               

 

 First Hartford Corporation   

 

(Registrant)

 

                                                                                                                               

 

/s/ Neil H. Ellis

                December 28, 2015              
                        Date

Neil H. Ellis, 
Chairman of the Board
and Chief Executive Officer

 
 
 

 

 

/s/ Eric J. Harrington

                December 28, 2015               
                        Date

Eric J. Harrington, Treasurer
and Chief Financial Officer

 

 

 

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