SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended Commission File No. 0-8862
April 30, 1999
FIRST HARTFORD CORPORATION
----------------------------
(Exact name of registrant as
specified in its charter)
Maine 01-0185800
- ------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
P.O. Box 1270, 149 Colonial Road, Manchester, Connecticut 06045-1270
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(860) 646-6555
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
1. Common Stock, per value $1 per share
The registrant hereby indicates by checkmark whether it (1) has filed all
reports required to be filed by Section 11 or 10 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
YES |_| NO |X|
Based on the closing sales price of April 30, 1991, the aggregate market value
of the voting stock held by non-affiliates of the registrant was between 0 and
$350,000.00.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES |_| NO |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report: 3,089,985.
Total number of pages, including cover page 39.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
First Hartford Corporation (the "Registrant") which was incorporated in
Maine in 1909, is engaged in the purchase, development, ownership, management
and sale of real estate. As used herein, the term Registrant shall mean and
refer to First Hartford Corporation and its subsidiaries, unless the context
otherwise requires.
(b) Financial Information about Industry Segments
The Registrant is engaged in the purchase, development, ownership,
management and sale of real estate, therefore, segment information is not
applicable.
(c) Narrative Description of Business
The Registrant is engaged in the acquisition, development and management
of land and properties with the ultimate goals of selling such properties when
profitable opportunities arise or obtaining rental income therefrom.
The real estate, owned and managed by the Registrant through various
subsidiaries, is located in Connecticut, New Jersey and North Carolina. A
subsidiary of the Registrant owns a 1% interest in a partnership which owns a
strip shopping center in Texas. Tenants are obtained through brokers and
employed representatives of the Registrant, by means of newspaper
advertisements, inquiries by potential tenants at the Registrant's on-site
offices, and direct contacts with retail stores, banks and other potential
commercial tenants.
The real estate business of the Registrant is diversified in terms of
geographical location, type of commercial property and form of ownership or
management. The commercial real estate business is not normally thought of as
being divided into significant separate classes of products or services. For the
past three years development has been exclusively on retail.
Operation of the Registrant's real estate business requires construction
materials and suitable land. Construction materials can be obtained from many
sources, but supplies and construction are subject to strikes and delivery
delays which can greatly increase the cost of a project.
Commercial properties are available in the states where the Registrant is
qualified to do business, but all real property, of course, is by its nature
finite and subject to fluctuations in cost
1
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and to unpredictable changes in local zoning ordinances and to restrictions on
planned construction.
All phases of the real estate business are inherently speculative and
intensely competitive with many enterprises, both large and small, engaged in
businesses similar to the Registrant's throughout the United States. The success
of the Registrant, to a large extent, depends upon factors which may be beyond
the control of management. Some of these factors are variable construction
costs, the mortgage market, real estate taxes, income tax laws, government
regulations, the commercial rental market and the economy. The ability of the
Registrant to meet its debt service obligations and to operate profitably is, of
course, also dependent on its ability to attract tenants and to compete
successfully with the numerous other commercial properties available to
prospective tenants. The ability to attract tenants is dependent upon the
changing character of the areas in which the Registrant's properties are
located, the rate of new construction in those areas and the extent of present
and future competition in those areas. The Registrant's holdings are diversified
both geographically and in use and types of occupancy. The Registrant believes
that it thereby increases stability and diminishes the affect of possible
adverse economic conditions in any particular geographic or economic area, but
the Registrant recognizes that diversification by itself will not assure
protection against risk and possible loss.
The real estate business does not experience "backlogs" as that term is
generally understood, nor is it seasonal.
To the Registrant's knowledge, its real estate business is not dependent
upon a single customer or a few customers.
The Registrant has no material patent, license, franchise or concession.
Research and development is not a part of the Registrant's business.
The Registrant anticipates that compliance with any applicable Federal,
state or local provisions regulating discharges into the environment or
otherwise relating to the protection of the environment will not have a material
effect on its capital expenditures, earnings or competitive position.
At April 30, 1999, the Registrant employed approximately 34 persons.
(d) Financial Information About Foreign And Domestic Operations and Export
Sales
2
<PAGE>
The Registrant and its subsidiaries do not engage in operations in foreign
countries. No material part of their sales or revenues is derived from customers
in foreign countries.
ITEM 2. DESCRIPTION OF PROPERTY
The following table shows the location, general character and
ownership status of the materially important physical properties of the
Registrant and its subsidiaries:
Available Space
or Facilities Ownership
Location Use and Major Tenants Status
- -------- --- ----------------- ------
Commercial Properties:
- ----------------------
Lubbock, Strip 162,404 sq. ft. Owned by a partnership
Texas Shopping Walmart 51% in which a subsidiary of the
Center TJ Maxx 15% Registrant is the general
partner with a 1% interest.
Plainfield, Strip 60,150 sq. ft. Owned by a subsidiary of the
Connecticut Shopping Big Y 64% Registrant. There is an
Center CVS 14% outside equity interest in
connection with the financing
Putnam, Shopping 52,877 sq. ft. Owned by a subsidiary of the
CT Center T. J. Maxx 50% Registrant and part of a
Shopping Center complex.
Mt. Olive, Shopping 94,714 sq. ft. Owned by a subsidiary of the
New Jersey Center A & P 59% Registrant.
3
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Waterville Industries, Inc. v. First Hartford Corporation and Finance Authority
of Maine, CV-89-311 (Kennebec County Superior Court, Maine) and 89-0209-B
(United States district Court, District of Maine). Actions commenced July 10,
1989.
These two lawsuits allege violation of environmental laws in connection
with property located in Waterville, Maine. Waterville Industries is the current
owner of property located in Waterville, Maine, which includes two waste
treatment lagoons; the Registrant, through an affiliate, formerly owned the
property, and the Maine Guarantee Authority, predecessor to the Financial
Authority of Maine (FAME) also owned the property prior to its transfer to
Waterville Industries. This lawsuit has been inactive for several years and the
Registrant does not believe that it will be continued.
First Hartford Corporation Pension Plan & Trust, on behalf of itself, Dollar Dry
Dock Bank of New York and all other similarly situated shareholders of Dollar
Dry Dock Bank of New York, Plaintiff-Appellant v. United States, Defendant -
Appellant No. 99-5032 (United States Court of Appeals for the Federal Circuit).
This is an appeal from the United States Court of Federal Claims in 96-CV-801,
Senior Judge Robert J. York. This was a suit to recover damages sustained by
Dollar Dry Dock Bank of New York, ("Dollar") and its shareholders resulting from
the United States abrogation and repudiation of its contractual obligations to
the institution. The Federal Deposit Insurance Corporation ("FDIC") breached the
Amended and Restated Assistance Agreement ("Agreement") between the FDIC and
Dollar. The Agreement gave Dollar the right to treat certain identified
supervisory goodwill as a regulatory asset to be amortized over eighteen years.
On December 19, 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). As interpreted by the FDIC, FDICIA
prohibited inclusion of supervisory goodwill in calculations of a bank's
regulatory capital. Within weeks after enactment of the FDICIA, the FDIC
recommended that the New York State Superintendent of Banks seize Dollar and
simultaneously appoint FDIC as receiver of Dollar even though Dollar's liquidity
was strong and its deposit base steady. On February 21, 1992, the institution
was seized and FDIC was appointed receiver. The initial suit was dismissed on
November 20, 1998. At this time, the Registrant does not assume a favorable
outcome for this matter. The loss incurred by the plan of approximately
$1,000,000 was reimbursed by the Registrant.
OTHER PROCEEDINGS
For proceedings involving officers and directors, see Item 10(f). on page
27.
The Registrant is also involved in other legal proceedings which have
arisen during the normal course of its business,
4
<PAGE>
including disputes over tax assessments, commercial contracts, lease agreements,
construction contracts and personal injuries, but the Registrant does not
believe that any of these proceedings will have a material impact on its
consolidated financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The last meeting of security holders was held on February 13, 1986. The
Registrant did not solicit proxies and the Board of Directors as previously
reported were re-elected in its entirety:
Neil H. Ellis
Leonard E. Seader (Deceased August 30, 1997)
Stuart Greenwald
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Registrant's common stock, $1 par value, is traded over-the-counter.
Any bids would be contained in the National Daily Quotation Service of the
National Association of Securities Dealers (pink sheets).
The Registrant has paid no cash dividends in the last five years.
Small sales of the common stock have occurred from time to time, we
believe the range to be 1/8 to 1/2.
The number of shareholders of record for the Registrant's common stock as
of April 30, 1999, is 931.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
For the Years Ended April 30, 1999, 1998, 1997, 1996, and 1995
The selected financial data set forth below for the years ended April 30,
1999, 1998, 1997, 1996 and 1995 are derived from the Registrant's financial
statements. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
included in Item 7 and "Financial Statements and Supplementary Data" included in
Item 8 which are incorporated therein by reference.
<TABLE>
<CAPTION>
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues of the
Registrant $ 2,864,744 $ 26,096,474 $ 16,447,667 $ 8,531,021 $ 13,880,594
Income (Loss) from
continuing operations (507,501) 9,160,515 480,655 2,169,856 6,823,182
Extraordinary
(Losses) Net -0- - 0 - - 0 - - 0 - (3,500,000)
Net Income (Loss) (507,501) 9,160,515 480,655 2,169,856 3,323,182
Weighted Average Number
of Shares Outstanding 3,089,985 3,089,985 3,089,985 3,089,985 3,089,985
Income (Loss) Per Share
Income (loss) Before Extraordn ($ .16) $ 2.96 $ .16 $ .70 $ 2.21
Extraordinary Losses -- -- -- -- (1.13)
------------ ------------ ------------ ------------ ------------
Total ($ .16) $ 2.96 $ .16 $ .70 $ 1.08
============ ============ ============ ============ ============
Balance Sheet Data
Properties under Construction
and Investment in
Undeveloped
Properties $ 11,641,378 $ 2,948,678 $ 1,104,498 $ 5,602,287 $ 725,583
Developed Properties Net 8,179,545 5,269,443 10,974,977 11,404,208 11,745,099
Total Assets 22,876,192 9,788,054 14,415,518 21,159,309 15,668,170
Construction Loans, Notes,
Mortgages Payable and
Finance Obligations 21,829,694 10,147,730 20,091,162 24,692,576 21,342,074
Accounts Payable and Accrued
Liabilities 3,740,021 3,152,503 10,832,085 12,381,880 11,519,713
Shareholders' Deficit $ (4,528,147) $ (4,020,646) $(13,181,161) $(13,661,816) $(13,750,844)
============ ============ ============ ============ ============
</TABLE>
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Result of Operations
The year ended April 30, 1999 produced a loss of $507,501 or (.16) per
share compared to a profit of approximately $8,623,480 or 2.79 per share for the
prior year.
The year ended April 30, 1998 is not easily comparable to the current
period because it contains gains from the sale of Real Estate of $4,787,000 as
well as non-recurring gains of $9,643,000 from mortgage transactions. On the
expense side there were costs of the settlement with the Pension Benefit
Guarantee Corp. and related legal expenses, the total cost of which was
approximately one million dollars. There were also substantial rental income and
expenses resulting in operating losses.
With rental and management income greatly reduced from previous year
levels, the Registrant believes operating losses will occur for the immediate
future. As additional properties come on line, profitability will increase.
Revenues in 1998 were approximately $9,000,000 greater than 1997 due to
the Non Recurring gain on the purchase and collection of mortgages. Cost of
sales $7,909,093 in 1998 versus $11,282,261 in 1997 cannot be compared due to
the age and cost of the assets. The 1997 sale was new construction and never had
an opportunity to grow in value.
With the exception of operating expenses that were inflated in 1998 by
legal expenses and settlement costs with the PBGC as stated above, the other
expenses are in line with the sale of rental properties in 1997 and 1998.
Capital Resources and Liquidity
In the recent years, the Registrant has pursued an aggressive path to end
litigation and pay down its debt. Management believes both of those objectives
were met, as there is no material litigation currently on the horizon and debt
has been reduced as follows:
Year ended 1997 (Decrease)
Loans, Notes, Mortgages, etc. ($4,601,000)
Accounts Payable & Accrued Liabilities ($1,550,000)
Year ended 1998 (Decrease)
Loans, Notes, Mortgages, etc. ($9,943,000)
Accounts Payable & Accrued Liabilities ($7,679,582)
Year ended 1999 Increase
Loans, Notes, Mortgages, etc. $11,682,000
Accounts Payable & Accrued Liabilities $ 588,000
7
<PAGE>
For the year ended April 30, 1999, property assets of new developments
increased by $11,602,000 causing almost all of the increase in the 1999
liabilities. To achieve the repayment of debt, virtually all of our partnership
interests and most of our developed properties had been sold. The Registrant is
currently on a path to attempt to rebuild its asset base. Shopping centers are
under construction in Putnam, Connecticut and Mount Olive, New Jersey. In the
year ended April 30, 2000, the Registrant expects to be in the ground with as
many as three new centers. Two of these will be with Joint Venture partners.
Capital resource and liquidity have always been a major impediment of the
Registrant. Reputation, industry contacts and capital resources are the key
elements of the real estate development business. Management has continued to
explore new lenders and believes we will continue to find capital resources at
reasonable rates. Liquidity is worked on a daily basis through tight cash
management and the Registrant believes that will be adequate. In the event that
it is not, the Registrant will seek to bring a partner into one of the existing
properties or an outright sale.
Y2K Readiness
Although the Registrant believes any possible time sensitive records could
be easily managed, it has ordered new software which is Y2K compliant.
It is unknown if Y2K will effect any of its suppliers. If there is a
disruption because of suppliers inability to ship, the Registrant could suffer
delays in construction resulting in additional interest, cost or loss of rents.
8
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data begin on the following page.
I N D E X
Pages
-----
Independent Auditors' Report 10
Consolidated Balance Sheets - April 30, 1999 and 1998 11-12
Consolidated Statements of Income (Loss) - Years Ended
April 30, 1999, 1998 and 1997 13
Consolidated Statements of Shareholders' Equity (Deficiency)
for the Years Ended April 30, 1999, 1998 and 1997 14
Consolidated Statement of Cash Flows for the Year Ended
April 30, 1999 and 1998 15-16
Notes to Consolidated Financial Statements 17-25
There are no Supplementary Data Schedules necessary.
Schedule IX Short Term Borrowings 35
Schedule XI Real Estate and Accumulated Depreciation 36
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As of January 1999, the Company has engaged Kostin, Ruffkess Company, LLC
as accountants. The Company has filed a Form 8-K with the Commission reflecting
the engagement of accountants. There are no disagreements of any matters of
accounting principles or practices or financial statement disclosure and none
are contemplated.
9
<PAGE>
[LETTERHEAD OF KOSTIN, RUFFKESS & COMPANY, LLC]
To The and Stockholders of
First Hartford Corporation and Subsidiaries
Manchester, Connecticut
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of First Hartford
Corporation and Subsidiaries as of April 30, 1999, and the related consolidated
statements of income, shareholders' equity (deficit) and cash flows and the
related schedules listed in Item 14(a)(2) of the annual report on Form 10-K for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements and related schedules based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements and related
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements and related schedules. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Hartford
Corporation and Subsidiaries as of April 30, 1999, and the results of its
consolidated operations and consolidated cash flows for the year then ended, in
conformity with generally accepted accounting principles. Further, it is our
opinion that the schedules referred to above present fairly, in all material
respects, the information set forth therein in compliance with the applicable
accounting regulation of the Securities and Exchange Commission.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
financial statement, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 9. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
West Hartford, Connecticut
July 22, 1999
10
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1999 AND 1998
ASSETS
(Unaudited)
1999 1998
----------- -----------
Real estate and equipment:
Developed properties $ 7,379,545 $ 4,469,443
Equipment and leasehold improvements 117,311 168,726
----------- -----------
7,496,856 4,638,169
Less accumulated depreciation
and amortization 941,535 938,132
----------- -----------
6,555,321 3,700,037
Properties under construction and
investment in undeveloped properties 11,641,378 2,948,678
----------- -----------
18,196,699 6,648,715
Cash 106,017 4,118
Accounts and notes receivable, less allowance
for doubtful accounts of $46,000 in 1999
And $52,200 in 1998 69,953 144,115
Deposits, escrows and prepaid and
deferred expenses 1,167,942 757,939
Due from related parties and affiliates 1,729,140 622,476
Deferred Tax Assets 1,606,441 1,610,691
----------- -----------
$22,876,192 $ 9,788,054
=========== ===========
(Continued)
The accompanying notes are an integral part of the consolidated
financial statements.
11
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - APRIL 30, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
1999 1998
------------ ------------
Liabilities:
Mortgages and notes payable:
Construction Loan Payable $ 10,161,257 $ 1,575,925
Mortgages payable 7,849,778 4,717,963
Notes Payable - Other 3,818,659 3,853,842
------------ ------------
21,829,694 10,147,730
Accounts payable 3,101,020 2,281,671
Accrued liabilities 639,001 870,832
Due to related parties and affiliates
1,834,624 508,467
------------ ------------
27,404,339 13,808,700
Commitments and contingencies
Shareholders' equity (deficit)
Common stock, $1 par; Authorized 6,000,000
shares; Issued 3,322,213 shares 3,322,213 3,322,213
Capital in excess of par 4,857,645 4,857,645
Deficit (10,639,881) (10,132,380)
------------ ------------
(2,460,023) $ (1,952,522)
Less 232,228 shares of common
stock held in treasury, at cost 2,068,124 2,068,124
------------ ------------
(4,528,147) (4,020,646)
------------ ------------
$ 22,876,192 $ 9,788,054
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
12
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Unaudited) (Unaudited)
1999 1998 1997
------------ ------------ ------------
Revenues:
Sale of real estate $ 472,000 $ 12,696,700 $ 11,100,000
Construction 200,179 197,081 243,643
Rental 1,167,616 2,261,985 2,610,505
Other 544,702 330,276 808,094
Non-Recurring Items 480,247 10,610,432 1,685,425
------------ ------------ ------------
2,864,744 26,096,474 16,447,667
------------ ------------ ------------
Cost and expenses:
Cost of sales, real estate 464,005 7,909,043 11,282,261
Construction 113,483 133,020 97,190
Operating 878,323 2,398,474 1,973,488
Interest 761,440 1,254,142 1,712,077
Depreciation and
amortization 204,655 425,775 552,935
Selling, general and
administrative 926,523 1,029,945 1,218,019
Taxes 109 458 71,510 325,069
------------ ------------ ------------
3,457,887 13,221,909 17,161,039
------------ ------------ ------------
Income before income
taxes provision (benefit) (593,143) 12,874,565 (713,372)
Income taxes provision
(benefit) (85,642) 3,714,050 (1,194,027)
------------ ------------ ------------
Net income (loss) ($ 507,501) $ 9,160,515 $ 480,655
============ ============ ============
Basic Earning per share and
diluted earnings per share $ (0.16) $ 2.96 $ .16
============ ============ ============
Weighted average number of
shares outstanding 3,089,985 3,089,985 3,089,985
============ ============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
13
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Capital
in excess Treasury
Common stock of par Deficit stock Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1996 (Unaudited)
- as reported $ 3,322,213 $ 4,857,645 $(23,731,982) $ (2,068,124) $(17,620,248)
Accounting Change -- -- 3,958,432 -- 3,958,432
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1996 (Unaudited)
- restated 3,322,213 4,857,645 (19,773,550) (2,068,124) (13,661,816)
Net Income -- -- 480,655 -- 480,655
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1997 (Unaudited) 3,322,213 4,857,645 (19,292,895) (2,068,124) (13,181,161)
Net Income, as restated for 1998 -- -- 9,160,515 -- 9,160,515
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1998 (Unaudited) 3,322,213 4,857,645 (10,132,380) (2,068,124) (4,020,646)
Net Loss -- -- (507,501) -- (507,501)
------------ ------------ ------------ ------------ ------------
Balance, April 30, 1999 $ 3,322,213 $ 4,857,645 ($10,639,881) ($ 2,068,124) ($ 4,528,147)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
14
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Cash flows from operating activities: 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) ($ 507,501) $ 8,623,480 $ 480,655
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 193,595 421,302 548,462
Amortization 11,060 4,473 4,473
Deferred tax asset 4,250 3,569,081 (1,221,340)
Forgiveness of accounts payable (480,247) -- --
Changes in assets and liabilities:
Accounts receivable, net 74,162 10,672 (12,633)
Deposits, escrows, prepaid and
deferred expenses (421,063) 50,853 133,587
Accrued liabilities (231,831) (7,409,189) (1,093,674)
Decrease in:
Accounts payable 1,299,596 (270,393) (456,121)
------------ ------------ ------------
Net cash provided by (used in)
operating activities (57,979) 5,000,279 (1,616,591)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of Investments -- -- 2,098,211
Purchases of equipment and leasehold
improvements (22,410) (65,196) (149,421)
Proceeds from sale of real estate net
of selling expenses 420,664 7,562,594 7,076,904
Additions to developed properties (12,139,833) (2,289,509) (2,646,912)
------------ ------------ ------------
Net cash provided by (used in)
investing activities: ($11,741,579) $ 5,207,889 $ 6,378,782
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
15
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Cash flows from financing activities: 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Proceeds from:
Construction Loan Payable $ 13,960,332 $ 1,575,925 $ 2,129,177
Mortgage Payable 3,725,000 --
Notes payable 900,000 819,046 770,100
Principal payments on:
Construction loans payable (5,375,000) -- (5,848,315)
Mortgages payable (593,185) (11,748,199) (145,778)
Notes payable (935,183) (1,258,862) (1,506,600)
Proceeds from notes payable -- 668,659 --
Advances to/from related parties and
affiliated partnerships 219,493 (476,767) (47,400)
------------ ------------ ------------
Net cash provided by (used in )
financing activities 11,901,457 (10,420,198) (4,648,816)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 101,899 (212,030) 113,375
Cash and cash equivalents, beginning of year 4,118 216,148 102,773
------------ ------------ ------------
Cash and cash equivalents, end of year $ 106,017 $ 4,118 $ 216,148
============ ============ ============
Supplemental data:
Cash paid during the year for interest $ 720,090 $ 477,144 $ 822,390
============ ============ ============
Cash paid during the year for taxes $ 126,370 $ 114,388 $ 118,765
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
16
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
1. Summary of Significant accounting policies:
Description of business:
First Hartford Corporation (the Company) was incorporated in Maine in
1909, and is engaged in the purchase, development, ownership, management and
sale of real estate.
Principles of consolidation:
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries, including partnerships in which the Company
is a majority owner. All significant intercompany transactions and accounts have
been eliminated in the consolidated financial statements, including construction
revenues and costs of development for the Company's own use (rental/future
sale). The Company records at cost its investment in partnerships in which it is
not a majority owner.
Financial Statement Presentation:
Because the Company is engaged in the development and sale of real estate
in 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.
Real Estate and Equipment:
Properties under construction and investment in undeveloped properties,
developed properties and equipment and leasehold improvements are recorded at
the lower of cost or net realizable value.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid securities purchased with a maturity of 3 months or less to be
cash equivalents.
17
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
1. Summary of significant accounting policies (continued): Real Estate and
Equipment (continued):
Properties under construction amounted to $11,641,378 and $2,948,678 at
April 30, 1999 and 1998.
Following accounting practices of the real estate industry, interest and
property taxes are capitalized for those projects which have a current
development plan. In addition, properties under construction include revenue and
operating expenses through substantial completion of the property. When property
is substantially completed, the costs of property constructed for the Company's
own use are transferred to developed properties and depreciation commences.
Interest incurred at April 30, 1999 was $761,440 of which $415,311 was
capitalized. Interest incurred at April 30, 1998 was $1,254,142 of which
$120,430 was capitalized. Property Taxes capitalized at April 30, 1999 and 1998
was $44,539 and $-0- respectively.
Depreciation is provided using the straight line method for financial
reporting purposes based on the following estimated useful lives:
Description Range in Years
Developed properties 40
Equipment and leasehold
improvements 3 - 10
Leasing commissions and financing costs (included in deposits, escrows,
and prepaid and deferred expenses in the accompanying balance sheets) are
amortized using the straight-line method over the terms of the related leases
and mortgages, respectively. In addition, the Company capitalizes predevelopment
costs relating to potential new development projects. If the project is
abandoned, the related costs will be expensed.
Maintenance and repairs are charged to operations as incurred; renewals
and betterments are capitalized.
The cost of assets retired or otherwise disposed of and the related
accumulated depreciation is eliminated from the accounts. Income or loss
resulting from the disposal of properties and equipment is included in the
consolidated statements of income (loss).
18
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
1. Summary of significant accounting policies (continued):
Revenue recognition:
Since the Registrant is primarily involved in development for its own use
(rental/future sale), construction revenue is recorded only upon sale of the
property built for sale to third parties. 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
Registrant provides for estimated losses on contracts in the year such losses
become known. There are no properties built for sale to third parties during the
years ended April 30, 1999, 1998 and 1997.
Rental revenues are recognized as income under the operating method as the
rentals become due. Other income includes management and service fees and
interest income which is recognized over the period in which the service is
provided or the interest is earned.
Off Balance Sheet Risk
During the years ended April 30, 1999 and 1998, the Company had an amount
in excess of $100,000 in a single bank. Amounts over $100,000 are not insured by
the Federal Deposit Insurance Corporation. These balances fluctuate greatly
during the year and can exceed this $100,000 limit. Management regularly
monitors the financial institution, together with its cash balances, and tries
to keep this potential risk to a minimum.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and 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.
19
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
2. Construction loans, mortgages, and notes payable:
1999 1998
---- ----
Construction Loans and
Mortgage notes ranging from 6.35%
to 8.875%. Maturities are at
various dates through 2009 $18,011,035 $ 6,293,888
The loans are secured by the
respective real estate and
guaranteed by the President of
the Company
Notes payable, at interest rates
of 1 1/2% over the prevailing
prime rate and fixed
rates of 6% - 8% maturing at various
dates or demand. The loans are
unsecured and guaranteed by the
President of the Company 3,818,659 3,853,842
----------- -----------
$21,829,694 $10,147,730
=========== ===========
Aggregate principal payments due on the above debt during the next five
years are as follows:
Year Ended April 30
-------------------
2000 $ 270,140
2001 1,242,903
2002 370,545
2003 402,358
2004 3,580,226
Included in notes payable are $2,250,000 of non-interest bearing notes to
an affiliate with no certain date of payment.
3. Pledge of stock of subsidiaries:
For the past ten years and probably longer, the Company had not been able
to obtain financing (secured or unsecured) without the personal guarantees of
Neil Ellis, the president of the Company. To some degree, the Registrant
recently has been able to obtain financing without that guarantee but it
continues to be a necessary component to most loans. In the past, we have
disclosed stock pledges of subsidiaries to protect Mr. Ellis from personal
losses due to his guarantees. These pledges will stay in place until his
guarantees are eliminated.
20
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
4. Related party transactions:
Amounts included in revenue resulting from transactions with companies
affiliated by common ownership and/or management are as follows:
1999 1998 1997
Rental Income -- 72,000 --
Management and
service fees 351,485 49,247 566,192
Maintenance/Repairs 13,555 --
Interest income 28,160 28,152 28,160
Sale of Partnership
Interest -- -- 1,014,658
---------- ---------- ----------
$ 393,200 $ 149,399 $1,609,010
========== ========== ==========
Amounts due to/from affiliates and related parties represent transactions
between affiliated and related entities under common ownership and/or management
in line with business transactions which generate the revenues noted above. The
Company and its subsidiaries also have received cash advances from other
entities affiliated with Neil Ellis, President of the Company and performed
services for these entities. These advances/loans are non-interest bearing and
have no specific repayment terms.
5. Accrued liabilities:
1999 1998
Accrued:
Federal income taxes $ 54,950 $188,162
Taxes-other 188,494 199,282
Interest 270,978 338,610
Other 124,579 144,778
-------- --------
$639,001 $870,832
======== ========
21
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
6. Non-Recurring Items:
Income from non-recurring items are as follows:
1999 1998 1997
Income - Partnership
distributions from
sales of partnership
assets $ -- $ -- $ 1,014,658
Gains on purchase of
mortgage -- 9,643,397 --
Forgiveness of debt -- 967,035 508,800
Miscellaneous -- -- 161,967
Forgiveness of
accts payable 480,247 -- --
----------- ----------- -----------
$ 480,247 $10,610,432 $ 1,685,425
=========== =========== ===========
In the year ended April 30, 1998, the Registrant purchased three mortgages
from a third party who won them at a HUD auction. The three properties (two
wholly owned by the Registrant through subsidiary companies and one only
partially owned) were sold to another third party. The gain represented the
difference between the amount the Registrant received from the mortgage payments
and the purchase price of the mortgages.
7. Employee Retirement Plan:
The Company had a single employer defined benefit non contributory pension
plan. As of January, 1986 the benefits of the plan have been frozen. The Pension
Benefit Guaranty Corporation (PBGC) had started to make the benefit payments to
the participants at January 1, 1994.
In June, 1997 the PBGC had become interim Trustee of the Plan and in July,
1997 notified participants that they would seek to terminate the Plan.
In January, 1997, the Company had come to settlement terms with the
Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL).
Under the settlement, the Company has given the PBGC a 10 year Note of
approximately $670,000 (6% interest payable quarterly) which is guaranteed by a
Bond of an Insurance Company. The Company has given cash to the Insurance
Company which was then invested in a zero coupon bond to yield $670,000 at
maturity.
22
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
8. Commitment and Contingencies:
The Company is also involved in other legal proceedings which have arisen
during the normal course of its business including disputes over tax
assessments, commercial contracts, lease agreements, construction contracts and
personal injuries, but the Company does not believe that any of these
proceedings will have a material impact on the consolidated financial position.
9. Going concern:
Since the 1992 - 1994 period when the deficit in equity exceeded
$23,000,000, the Company has achieved substantial improvements that has reduced
the deficit to under $4,528,000. The improvements were a result of selling
properties and partnership interest. On a short term basis, it is unrealistic to
expect that the Company can continue to generate sales of any magnitude on its
existing asset base. Unless cash flow can be generated from other services,
conditions raise doubt about the Company's ability to continue as a going
concern and meet its obligations as they become due.
10. Accounting Change
In the current year, the Company retroactively applied SFAS 109 (See Note
11) to the beginning of fiscal year 1997. The adoption of SFAS 109 resulted in
the recognition of $3,958,432 of net deferred tax assets. The effect on net
income for 1997 was an increase of $1,221,390 while for 1998, the adoption
decreased net income by $3,569,081.
23
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
11. Income Taxes
The Company follows the requirements of Statement Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which requires
the use of an asset and liability approach that provides for the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
The income tax provision (benefit) comprised is the following:
1999 1998 1997
Current provision (benefit) $ (89,892) $ 144,969 $ 27,313
Deferred 4,250 3,569,081 (1,221,340)
----------- ----------- -----------
$ (85,642) $ 3,714,050 $(1,194,027)
=========== =========== ===========
The components of the net deferred tax asset the following:
1999 1998
Tax effect of net operating loss
carryforwards $ 3,212,883 $ 3,221,383
Valuation allowance (1,606,442) (1,610,692)
----------- -----------
$ 1,606,441 $ 1,610,691
=========== ===========
The Company has set up an allowance of fifty percent (50%) against the
deferred tax asset since the likelihood of realization cannot be determined.
The difference in the statutory tax rate of 34% and the Company's
effective tax rate of 0% is due to the increases in the operating loss
carryforwards offset against expiring net operating loss carryforwards.
At April 30, 1999, the Company has net operating loss carryforwards of
approximately $9,500,000. Approximately $4,700,000 expire in 2004, $1,200,000
expire in 2007 and $3,600,000 expire in 2012.
12. Leases
The Company leases commercial real estate under various operating leases
expiring in various years through 2019. The real estate available for lease have
a carrying value of $16,620,562 (some of which is still under construction) and
accumulated depreciation of $851,585.
24
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
(Information with Respect to the Years Ending April 30, 1998 and 1997 and every
page of note is unaudited)
12. Leases (Continued)
Minimum future rentals to be received on non-cancellable leases as of
April 30, 1999 for each of the next five years are as follows:
2000 $2,363,792
2001 $2,577,121
2002 $2,391,723
2003 $2,316,924
2004 $2,301,325
13. Investments
The Company has performed services for a partnership in exchange for a one
percent general partner interest. The Partnership owns a strip shopping center
in Lubbock, Texas.
The Company is contingently liable for the satisfaction of all liabilities
of the Partnership. Summarized unaudited financial data for the Partnership as
of April 30, 1998 is as follows:
(Unaudited)
Assets $4,264,035
==========
Liabilities $7,038,134
Partners' capital (2,774,099)
----------
$4,264,035
==========
Revenues $1,223,868
Expenses (1,094,493)
----------
Net Income $ 129,375
==========
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
The directors of the corporation, their ages and positions and the periods
during which each has served as such are as follows:
Name Age Position Period of Service
Neil H. Ellis 71 President l966 - Present
Stuart I. Greenwald 57 Treasurer/Secretary 1980 - Present
David B. Harding 54 1992 - 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 the 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 71 President 1968 - Present
Stuart I. Greenwald 57 Treasurer/Secretary 1978 - 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.
Leonard E. Seader, a director since 1973, and an officer since 1976 died on
August 30, 1997.
(c) Identification of Certain Significant Employees
There are no significant employees not already mentioned above.
(d) Family Relationships
There are no family relationships among any directors or executive
officers.
26
<PAGE>
(e) Business Experience
1. The following is a brief description of the background of each director
or executive officer.
Mr. Ellis has been President of the Registrant for more than five
years. He is also President and director of Green Manor Corporation, a holding
company, owned by him and his wife.
Mr. Greenwald has been Treasurer of the Registrant for more than
five years and also holds the position of Secretary. He is also
Secretary/Treasurer of First Hartford Realty Corporation, a subsidiary of the
Registrant, which position he has held for more than five years.
Mr. Harding has been the President of Richmond Realty, a Real Estate
Management Company since January, 1996. Richmond manages certain properties of
the Registrant as well as properties of others. Prior to that, he has worked for
the Registrant in the area of finance for three years.
2. Directorships
No directors hold any other directorships, except directorships in
subsidiaries of the Registrant and the aforementioned Green Manor Corporation
and Richmond Realty.
(f) Involvement in Certain Legal Proceedings
No director or executive officer has been involved in any of the following
legal proceedings except as noted:
1. Federal Bankruptcy or State Insolvency Proceedings, except as and to
the extent they were involved as executive officers of the Registrant in its
1981 Reorganization proceedings, as executive officers of Parker Street Corp.
and Putnam Parkade, Inc. in their Chapter 11 proceedings, and as executive
officers of the general partner or managing agent of the following limited
partnerships in their Chapter 11 proceedings:
Allen Park Associates
Briar Knoll Associates Limited Partnership
Graham Village Associates
Hartford-Lubbock Limited Partnership
Highridge Associates Limited Partnership
Park West Associates
Presidential Gardens Associates
Sovereign Group 1984-2 Limited Partnership
Springfield Associates
2. No director or executive officer has been involved in any criminal
proceedings in the last five years.
27
<PAGE>
3. Temporary or permanent injunctions concerning securities dealings or
business practices, except for SEC v. First Hartford Corporation Civil Action
No. 89-3156-NHJ (D.DC. 1989) in which the Registrant consented to entry of Final
Judgment of Permanent Injunction requiring the Registrant to file its periodic
reports with the SEC on a timely basis, specifically, its Annual Report on form
10-K for its fiscal year ended April 30, 1989 and its Quarterly Reports on form
10-Q within 120 days from entry of the Judgment on November 30, 1989.
4. Orders, judgments or decrees of State or Federal authority barring,
suspending or otherwise limiting any securities dealing or business practices or
barring association with persons engaged in such activities, except for the
action described in 3. above.
5. Any findings in a civil action or by the SEC that such person violated
any Federal or State securities law, except for the action described in 3.
above.
ITEM 11. REMUNERATION
There is set forth below information relating to all direct remuneration
paid by the Registrant during the year ended April 30, 1999 to each director and
each executive officer of the Registrant whose aggregate remuneration totaled
$60,000 and to all directors and officers of the Registrant as a group.
Name or Number of Persons Other
in Group and Capacity Salary Compensation(1)
--------------------- ------ ---------------
Neil H. Ellis, President $106,996
Stuart Greenwald, Treasurer $ 78,062
(1) To assist management of the Registrant in carrying out its responsibility
and to improve job performance, the Registrant provides certain of its
officers with automobiles. The Registrant cannot specifically or precisely
ascertain the amount of personal benefit, if any, derived by those
officers from such automobiles. However, after reasonable inquiry, the
Registrant has concluded that the amount of any such personal benefit is
immaterial and does not in any event exceed $10,000 as to all officers. No
provision has therefore been made for any such benefit.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth information as of the date hereof with
respect to all persons known to the Registrant to be beneficial owners of more
than 5% of the Registrant's outstanding shares of common stock:
28
<PAGE>
Title Name & Address of Amount and Nature
of Beneficial Owner or of Beneficial Percent
Class Identity of Group Ownerships of Class
----- ----------------- ---------- --------
Common Stock Neil H. Ellis 1,324,387 (1) 42.9%
43 Butternut Road
Manchester, CT 06040
(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).
(b) Security Ownership of Management
The following table sets forth information as of the date hereof with
respect to all shares beneficially owned by all directors and directors and
officers of the Registrant as a group:
Title Name & Address of Amount and Nature
of Beneficial Owner or of Beneficial Percent
Class Identity of Group Ownerships of Class
----- ----------------- ---------- --------
Common Neil H. Ellis 1,324,387 (1) 42.9%
43 Butternut Road
Manchester, CT 06040
Common All Directors 1,324,387 (1) 42.9%
and Officers
as a Group
(3 in number)
(c) Changes in Control
The Registrant is aware of no arrangements which may result at a
subsequent date in change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
Since the filing of the Petition for Reorganization in February of 1981,
and due to the uncertainty surrounding the financial stability of the
Registrant, lenders, required by the Registrant to finance the purchase and
development of real estate, have required the personal guarantee of Neil H.
Ellis, President and Director of the Registrant, on any loans that they make. As
consideration for this personal guarantee, the
29
<PAGE>
Registrant has proceeded in its real estate development by one of two methods.
The first method involves having the loans made to a corporation owned directly
by Mr. Ellis. Mr. Ellis then grants to the Registrant a free option to purchase
the stock of the corporation to which the loans have been made, at the lower of
cost or market value. Unless the transaction is beneficial to the Registrant, it
need not exercise the option. The second method involves lending the money
directly to the subsidiaries of the Registrant which develop the property, and
pledging to Mr. Ellis the stock of the subsidiaries until such time as the
guaranteed loans are satisfied.
The Registrant and its subsidiaries have received from or made cash
advances to other companies which are owned or controlled by Neil Ellis,
President of the Registrant. The Registrant has also purchased from or sold
property to, as well as performed services for these companies.
(b) Certain Business Relationships
Refer to (a) above.
(c) Indebtedness of Management
There is none.
(d) Transactions with Promoters
There are none.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Pages
-----
(a) (1) The following financial statements are
included in Part II, Item 8:
Financial Statements:
Report of Independent Auditor 10
Consolidated Balance Sheets - April 30, 1999 and 1998 11-12
Consolidated Statements of Income (Loss) -
Years Ended April 30, 1999, 1998 and 1997 13
Consolidated Statements of Shareholders' Equity
(Deficit) for the years Ended April 30, 1999, 1998 and 1997 14
Consolidated Statement of Cash Flows for the
years ended April 30, 1999 and 1998 15-16
Notes to Consolidated Financial Statements 17-25
(2) The following financial statement schedules
for the year ended April 30, 1999 are
submitted herewith:
Schedule IX - Short Term Borrowings 35
Schedule XI - Real Estate and Accumulated
Depreciation 36
All other schedules are omitted because they are not required, not
applicable, or the information is otherwise shown in the financial statements or
notes thereto.
(b) Reports on Form 8-K:
A report on Form 8-K dated January 22, 1991 was filed by the Registrant
reporting the bankruptcy filing of the Registrant's former Accountants,
Laventhol and Horwath. A report on Form 8-K dated August 4,1999 was filed by the
Registrant appointing Kostin, Ruffkess & Company, LLC as new accountants.
31
<PAGE>
(c) Exhibits
Exhibit Index 32
(3) Articles of Incorporation and by-laws.
Exhibit (3) to Form 10-K for the Fiscal Year
ended April 30, 1984, Pages 1-18 of Exhibits
Binder, incorporated by reference to Securities
File Number 0-8862.
(4) Instruments defining the rights of security
holders, including Indentures.
Not Applicable
(9) Voting Trust Agreement.
Not Applicable
(10) Material Contracts.
Not Applicable
(11) Statement regarding computation of per share
earnings.
See Item 6 of this report.
(12) Statement regarding computation of ratios.
Not Applicable
(13) 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. 37
(18) Letter regarding change in accounting principle.
Not Applicable
(19) Previously unfiled Documents.
Not Applicable
(22) Subsidiaries of the Registrant. 38
32
<PAGE>
(23) Published report regarding matters submitted to vote of Security
Holders.
Not Applicable
(24) Consents of experts and counsel.
Consent of Kostin, Ruffkess & Company, LLC
(25) Power of Attorney.
Not Applicable
(28) Additional Exhibits.
Not Applicable
(29) Information from Reports furnished to State Insurance Regulatory
Authorities.
Not Applicable
(d) Other Financial Statements
Not Applicable
33
<PAGE>
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, Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, Thereunto Duly Authorized.
Dated: August 13, 1999
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.
August 13, 1999 /s/ Neil H. Ellis
----------------------------------------
Neil H. Ellis
Principal Executive Officer
President and Director
August 13, 1999 /s/ Stuart I. Greenwald
----------------------------------------
Stuart I. Greenwald
Principal Financial Officer
Principal Accounting Officer
Secretary, Treasurer and Director
34
<PAGE>
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
YEARS ENDED APRIL 30, 1999, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Weighted Maximum Amount Average Amount Weighted Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate End of Interest During the During the During the
Short-Term Borrowings(1) Period Rate Period Period(2) Period(3)
- ------------------------ ------- -------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Year Ended April 30, 1999
Banks $11,061,257 8.45% $11,061,257 $ 7,517,698 8.5%
Year Ended April 30, 1998
Banks $ 2,448,756 10% $ 2,448,756 $ 1,051,097 10%
Year Ended April 30, 1997
Banks $ 150,000 9.77% $ 785,000 $ 2,531,134 9.47%
Year Ended April 30, 1996
Banks $ 361,500 9.25% $ 480,000 $ 239,708 9.9%
</TABLE>
(1) Notes payable to banks represent obligations payable under credit
agreements to various banks. Borrowings are arranged on an as needed basis at
various terms.
(2) The average amount outstanding during the year represents the average
daily principal balances outstanding during the year.
(3) The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by the average
short-term borrowings.
35
<PAGE>
First Hartford Corporation and Subsidiaries
Schedule XI
Real Estate and Accumulated Depreciation
April 30, 1999
<TABLE>
<CAPTION>
Initial
Encumbrances Cost To Company
------------ ---------------
Bldgs.
Constr. Mortgage, Notes and
Loans Payable Land Imp.
----- ------- ---- ----
<S> <C> <C> <C> <C>
Property under constr
Shopping Center - NJ $10,161,257 $ 0 $ 1,815,000 $ 9,826,378
----------- ----------- ----------- -----------
10,161,257 1,815.000 9,826,378
Developed Properties
Shopping Ctr
Connecticut 7,674,774 582,010 6,794,184
7,674,774 582,010 6,794,184
----------- ----------- ----------- -----------
$10,161,257 $ 7,674,774 $ 2,397,010 $16,620,562
=========== =========== =========== ===========
<CAPTION>
Gross Amount at Which
Carried at Close of Period
-------------------------- Life On
Which Depr.
In Latest
Bldgs. Income
and Accum. Date of Date Statement
Land Imp. Total Depr. Constr. Acquired Is Computed
---- ---- ----- ----- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Property under constr
Shopping Center - NJ $ 1,815,000 $ 9,826,378 $11,641,378
----------- ----------- -----------
1,815,000 9,826,378 11,641,378
Developed Properties
Shopping Ctr
Connecticut 582,010 6,794,184 7,376,194 851,585 1990-1998 40 Years
582,010 6,794,184 7,376,194 851,585
----------- ----------- -----------
$ 2,397,010 $16,620,562 $19,017,572 $ 851,585
=========== =========== =========== ===========
</TABLE>
36
FIRST HARTFORD CORPORATION ANNUAL REPORT
TO SHAREHOLDERS FOR THE YEAR ENDED APRIL 30, 1999
TO OUR SHAREHOLDERS:
As you know from our reading our annual reports, your Company has struggled
through the last number of years. As a direct result of the banking crisis of
the early 90's we not only lost our banking relationships, but were forced to
repay considerable amounts of debt.
We are pleased to report that our net worth deficit, which as of 4/30/93 was
$23,587,276 has been reduced to a net worth deficit of $4,528,147. We believe
this to be major progress towards returning your Company to profitability and a
positive net worth position.
Although we are still suffering from an insufficient working capital position,
we have taken on a number of new projects which we hope will be profitable in
the coming years. For the first time in a number of years, I say as the
President of the Company, that we can be cautiously optimistic about our future.
Respectfully submitted,
FIRST HARTFORD CORPORATION
Neil H. Ellis
President
/s/ Neil H. Ellis, 1999
-----------------
37
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State in which Incorporated
------------------ ---------------------------
Adeps, Inc. Connecticut
First Hartford Realty Corporation Delaware
Parker Street Corp. Connecticut
Lead Tech, Inc. Connecticut
Parkade Center, Inc. Texas
Parkade Corp. North Carolina
Hawthorn Management Services, Inc. Connecticut
Plainfield Parkade, Inc. Connecticut
Merchants Landing Condominium Corporation Rhode Island
Putnam Parkade, Inc. Connecticut
Waterford Parkade, Inc. Connecticut
New First Hartford Realty Corp. Delaware
DE 149 Corp. Delaware
EH&N Construction Company Delaware
New Hawthorn Management Services, Inc. Delaware
38
We consent to the incorporation by reference in this annual report (Form 10-K)
of First Hartford Corporation and Subsidiaries of our report dated July 22,
1999, included in the 1999 Annual Report to the Shareholders of First Hartford
Corporation and Subsidiaries.
/s/ Kostin Ruffkess & Company, LLC
West Hartford, Connecticut
July 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> APR-30-1999
<CASH> 106,017
<SECURITIES> 0
<RECEIVABLES> 115,953
<ALLOWANCES> 46,000
<INVENTORY> 11,641,378
<CURRENT-ASSETS> 175,970
<PP&E> 7,496,856
<DEPRECIATION> 941,535
<TOTAL-ASSETS> 22,876,192
<CURRENT-LIABILITIES> 3,740,021
<BONDS> 21,829,694
0
0
<COMMON> 1,254,089
<OTHER-SE> (5,782,236)
<TOTAL-LIABILITY-AND-EQUITY> 22,876,192
<SALES> 472,000
<TOTAL-REVENUES> 2,864,744
<CGS> 577,488
<TOTAL-COSTS> 1,082,978
<OTHER-EXPENSES> 1,035,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 761,440
<INCOME-PRETAX> (593,143)
<INCOME-TAX> (85,642)
<INCOME-CONTINUING> (507,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (507,501)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
