| Summary of Significant Accounting Policies | 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, all of which is considered the Real Estate Operation segment. The Company has a second segment Fee
for Service in which the Company is engaged as a preferred developer for CVS and Cumberland Farms. (see Service Income to
follow). Principles of Consolidation The accompanying 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,. The latter includes those in which the Company has been determined to be the primary beneficiary
of a variable interest entity or otherwise meets certain criteria as a sole general partner or managing member in accordance with
the consolidation guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. As such, included
in the consolidated financial statements are the accounts of Rockland Place Apartments Limited Partnership and Clarendon Hill Somerville
Limited Partnership. The Companys ownership percentage in these variable interest entity partnerships is nominal. All intercompany
balances and transactions have been eliminated in consolidation. Estimates The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Financial Statement Presentation Because the Company is engaged
in the development and sale of real estate at various stages of construction, the operating cycle may extend beyond one year. Accordingly,
following the usual practice of the real estate industry, the accompanying consolidated balance sheets are unclassified. Statements of Cash Flows For purposes of the statements
of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less
to be cash equivalents. Revenue Recognition Rental Income Rental
income is recognized on a straight-line basis over the terms of the respective leases and consists of base rent and reimbursements
for certain costs such as real estate taxes, utilities, insurance, common maintenance and other recoverable costs as provided
in the lease agreements. There are no contingent rents. If conditions of rent are not met, certain tenants may have rights to
pay percentage rent not to exceed stated rent. Currently, there are a very limited number of tenants on percentage rent. Service Income - The Company is party to a Preferred Developer Agreement with CVS. Under this agreement, the Companys
fee for such services provided is recognized as earned when services, as outlined in the development agreement,are provided.
Fees earned related to the development of pharmacy stores for CVS during the years ended April 30, 2015 and 2014 were $5,276,194
and $4,514,015 respectively, which is included in service income in the consolidated statements of operations. The Company
is also a party to a Preferred Developer Agreement with Cumberland Farms Inc. Fees earned during the years ended April 30,
2015 and April 30, 2014 were $1,535,000 and $675,000 respectively. The Company also provides management
and maintenance services to others. Fees for such services provided are recognized in service income as earned when services are
provided. Sales of Real Estate
The Company recognizes sales of real estate as revenue upon the transfer of title and when substantially all performance requisites
have been fulfilled. For the years ended April 30, 2015 and 2014, the Company had sales of $30,401,052 and $4,562,596, respectively.
The cost of the property sold was $22,372,594 and $3,631,374 for 2015 and 2014, respectively. None of the property sold was otherwise
providing ongoing cash flows to the Company. Construction Income - The Company
primarily develops real estate for its own use. However, revenues from long-term projects built for third parties are recognized
on the percentage-of-completion method of accounting based on costs incurred to date in relation to total actual costs and estimated
costs to complete. Revisions in costs and profit estimates are reflected in operations during the accounting period in which the
facts become known. The Company provides for estimated losses on contracts in the year such losses become known. There were no
long-term construction projects or revenue for the years ended April 30, 2015 and 2014. Other Receivables and Payables Pursuant to the Companys Preferred Developer Agreement with CVS, the Company is obligated to fund allowable costs incurred
in connection with the identification and development of new retail pharmacy stores for which it receives direct reimbursements
from CVS. Payables for allowable costs incurred in connection with these activities but not yet funded were $12,484,551 and
$14,845,000 as of April 30, 2015 and 2014 respectively, and have been included as other payables in the consolidated
balance sheets. Related reimbursements due from CVS were $12,080,979 and $15,405,000 as of April 30, 2015 and 2014, respectively,
and have been included in other receivables in the consolidated balance sheets. Cash and Cash Equivalents
Restricted Cash and cash equivalents
restricted, consist of funds received from CVS in connection with the Companys Preferred Developer Agreement. Such amounts
are to be used for the payment of costs incurred by the Company for the development and construction of CVS retail pharmacy stores.
The restricted cash also includes Tenant Security Deposits held by the VIEs. Developed Properties, Equipment
and Tenant Improvements Developed properties, equipment
and tenant improvements are recorded at cost. Depreciation and amortization
are provided using the straight-line method based on the following estimated useful lives.
Description Years
Developed properties 15 40
Equipment 3 10
Tenant improvements Lesser of improvement life or lease term Expenditures for major renewals
and betterments, which extend the useful lives of developed properties, equipment and tenant improvements, are capitalized. Expenditures
for maintenance and repairs are charged to operations as incurred. Property Under Construction The Company capitalizes
costs directly associated with property under construction. Such costs include materials, construction labor and payroll
cost, allocation of salaries and payroll cost from direct activities such as engineering, purchasing and legal and services
provided by subcontractors. Material carrying costs for property taxes, insurance and interest are also capitalized during
the period of active construction until construction is substantially complete. The Company capitalizes labor
cost for direct work by offsite staff on specific projects. In the year ended April 30, 2015, $189,223 was capitalized. For the
year ended April 30, 2014 $-0- was capitalized. Property Held for Sale The Company classifies property
as held for sale if management commits to sell the property to an identified buyer, the property is available for
immediate sale in its present condition subject only to terms that are usual and customary for sales of such property, and the
sale is probable within one year. Deferred Expenses Expenditures directly related
to real estate under consideration for development are deferred and included in deferred expenses in the consolidated balance sheets.
These costs include option payments, attorneys fees, architect and engineering fees, consultants, etc., but only to the
extent they are from outside sources. If development of the real estate commences, all of the accumulated costs are reclassified
to property under construction in the consolidated balance sheets. If the project is later abandoned, all of the accumulated costs
are charged to expense. Leasing costs incurred, primarily
commissions, are capitalized for signed leases. Financing costs including legal fees and other costs relating to the acquisition
of debt financing are deferred. Leasing and deferred financing costs are included in deferred expenses in the accompanying consolidated
balance sheets. Such costs are amortized using the straight-line method over the terms of the related leases and debt, respectively.
The unamortized balance of such cost was $2,775,267 and $2,366,155 as of April 30, 2015 and 2014, respectively. Amortization expense
was $382,156 and $441,346 for the years ended April 30, 2015 and 2014, respectively. Amortization expense for the
next five years is expected to be as follows:
Year Ending April 30,
2016 $ 330,734
2017 312,565
2018 263,875
2019 197,728
2020 125,077
Thereafter 1,545,288
Total $ 2,775,267 Investment in Affiliated
Entities The Company has an investment
in an affiliated limited liability entity Dover Parkade, LLC, (Dover). The Company has a 50% interest in Dover which
owns a shopping center in Dover Township, NJ. The operating and financial policies of Dover are not controlled by the Company.
For years prior to May 1, 2009, the Company was committed to provide funding to this equity method investee. The Companys
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 Companys investment. Since then, distributions from Dover have been credited
to income. The resulting carrying value of this investment of ($1,961,212) as of April 30, 2015 and ($1,911,832) as of April 30,
2014 is included in other liabilities. On October 4, 2011, the Company
entered into a partnership with a nonprofit entity which purchased a 99 year leasehold interest in a 200 unit subsidized housing
project in Claymont, Delaware. The Company is a non-controlling .01% limited partner in the entity. The Companys investment
is carried at cost of $100. A subsidiary of the Company is the managing agent. The Company recorded equity
in earnings of unconsolidated subsidiaries of $790,620 and $423,713 for the years ended April 30, 2015 and 2014, respectively,
which includes significant distributions. Fair Value Measurements Certain assets and liabilities
are presented at fair value on a recurring basis. In addition, fair values are disclosed for certain other assets and liabilities.
In all cases, fair value is determined using valuation techniques based on a hierarchy of inputs. A summary of the hierarchy follows:
Level 1 Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant observable inputs are available, either directly or indirectly such as interest rates and yield curves that are observable at commonly quoted intervals; and
Level 3 Prices or valuations that require inputs that are unobservable. In certain cases, the inputs
used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value
hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that
is significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The Companys financial
instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses and
debt. The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying
amounts because of their relative short-term nature. In general, the carrying amount of variable rate debt approximates its fair
value. Further, the carrying amount of fixed rate debt approximates fair value debt since the interest rates on the debt approximates
the Companys current incremental borrowing rate. Information about the fair values of marketable securities and derivative
liabilities is presented below. Level 1 Marketable Securities Common and Preferred
Stocks The Company determines the
appropriate classifications of its investments in marketable debt and equity securities at the time of purchase and re-evaluates
such determinations at each balance sheet date. As of April 30, 2015 and 2014, investments consist of equity securities, which
are classified as available for sale. Investments in marketable securities are stated at fair value. Fair value for marketable
securities is based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1). Net unrealized holding
gains and temporary losses on equity securities are included as a separate component of the deficiency. Net unrealized gains of
$269,975 as of April 30, 2015 and losses of $202,728 as of April 30, 2014 are included in accumulated other comprehensive (loss)
income. Gains or losses on securities sold are based on the specific identification method. Level 2 Derivative Instruments During fiscal year 2006, the
Company entered into two separate floating-to-fixed interest rate swap agreements with a bank which expire in June 2015 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 in the consolidated statement of operations. The
gain /(loss) on derivatives incurred during the years ended April 30, 2015 and 2014 totaled ($104,157) and $1,245,207, respectively,
and the Company has recorded a liability of $2,515,330 and $2,411,173 in the consolidated balance sheets, which represents the
fair value of the interest rate swaps as of April 30, 2015 and 2014, respectively. Level 3 Debt A VIE of the Company assumed
a third mortgage note with MHFA on November 1, 2006, having a balance of $18,315,482. The note bears interest at the rate of 5.36%
per annum. The VIE has the right to purchase the note upon maturity for the fair value of the note as determined by an appraiser.
The mortgage loan was recorded at its estimated fair value on the date of acquisition. The fair value of the third mortgage note
has been determined based on the fair value of the property on the acquisition date less the primary loan balances. The third mortgage
note is revalued at each reporting period. As of April 30, 2015, the carrying amount of the loan was $1,828,910. There have been no significant
transfers between Level 1 and Level 2. Long-Lived Assets Long-lived assets held and
used in operations are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount
might not be recovered. Income Taxes Deferred income taxes are provided
on the differences between the financial statement and income tax bases of assets and liabilities and on net operating loss carryforwards
using the enacted tax rates. A valuation allowance is provided
for deferred income tax assets for which realization is not likely in the near term. As of April 30, 2015 and 2014,
the Company has no significant uncertain income tax positions. The Company recognizes interest and penalties on any uncertain
income tax positions as a component of income tax expense. During the years ended April 30, 2015 and 2014, the Company did not
recognize any interest or penalties related to unrecognized tax benefits. The Company received a notice
from the Internal Revenue Service dated November 29, 2012 that the Service has completed its examination of the Companys
Federal income tax return for the period ended April 30, 2010. The examination resulted in no change in reported tax. The determination
does not include any partnerships in which the Company has an interest. Otherwise, tax returns for fiscal years after 2010 are
open to examination by Federal, local and state authorities. Stock Compensation Share-based compensation cost
is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees
requisite service period (generally the vesting period of the equity grant). Earnings (loss) per share
(EPS) Basic earnings (loss) per share
amounts are determined using the weighted-average outstanding common shares for the year. Diluted earnings (loss) per share amounts
include the weighted-average outstanding common shares as well as potentially dilutive common stock options and warrants using
the treasury stock method. There were no options outstanding at April 30, 2015 or April 30, 2014. New Accounting Pronouncements In April 2014, the Financial
Accounting Standards Board (FASB) issued amendments to guidance for reporting discontinued operations and disposals
of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have)
a major effect on an entitys financial results or a business activity classified as held for sale should be reported as
discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures
for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively
for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted
only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have
a material impact on the Companys consolidated financial statements. In May 2014, the FASB issued
a standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts with customers.
The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration of which the entity expects to be entitled in exchanged for those goods
or services. The standard is effective beginning January 1, 2017, with no early adoption permitted. The amendments may be applied
retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial
application. We are currently evaluating the adoption method options and the impact of the new guidance on our consolidated financial
statements. In February 2015, the FASB
issued a standard that amends the current consolidation guidance. The amendments affect both the variable interest entity (VIE)
and voting interest entity (VOE) consolidation models. The changes are extensive and apply to all companies. The need to assess
an entity under the different consolidation model may change previous consolidation conclusions. The standard is effective in fiscal
periods beginning after December 15, 2015 with early adoption permitted. The Company is currently evaluating the impact of the
new guidance on its consolidated financial statements. In April 2015, the FASB issued
ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,
which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated
debt liability, and amortization of those costs should be reported as interest expense. This ASU is effective for financial statements
issued for annual and interim periods beginning after December 15, 2015, and early adoption is permitted. The new guidance should
be applied on a retrospective basis for each period presented in the balance sheet. The company is currently evaluating the impact
of adopting this guidance. |
