Manufactured Housing Properties Inc. (MHPC)

[OilStockReport]

Liquidity and Capital Resources

Operating activities. Net cash used in operating activities from continuing operations for the year ended December 31, 2010 was $393,000 compared to net cash used of $1,505,000 for the year ended December 31, 2009. This net increase in operating cash flows reflected relative improvements in the levels of cash generated by both of the Company’s operating segments. Net cash used in operating activities from discontinued operations was zero for the year ended December 31, 2010 compared to $25,000 for the year ended December 31, 2009.

Investing activities. Net cash provided by investing activities for the year ended December 31, 2010 was $1,474,000 compared to $1,318,000 for the year ended December 31, 2009. The primary sources of net cash provided by investing activities in both years were the conversions of previously restricted cash to unrestricted cash subsequent to the March 2008 sale of PEI. Such conversions consisted of a two-year escrow account expiring in 2010 in the amount of $1.6 million and a one-year tax reserve account expiring in 2009 in the amount of $1.5 million (see Note 4). Offsetting these conversions were capital expenditures for property and equipment in the amounts of $140,000 and $172,000 for the years ended December 31, 2010 and 2009, respectively.

Financing activities. Net cash used in financing activities for the year ended December 31, 2010 was $1,082,000 compared to net cash provided by financing activities of $151,000 in the year ended December 31, 2009. This relative decrease in financing cash flows was primarily due to the payment of unsecured notes payable to certain related and unrelated parties in March 2010 (see Note 6).

Following the sale of PEI in March 2008, we have remaining long term debt obligations to banks and other lenders (see Note 6). A substantial portion of our long term debt is in the form of a bank credit facility secured by CYMRI’s producing oil and gas properties. Borrowings under the bank credit agreement amounted to $2,951,000 as of December 31, 2010 and are subject to a borrowing base, which is periodically redetermined, based on oil and gas reserves. The bank credit agreement does not require monthly principal payments so long as outstanding borrowings are less than a declining borrowing base. As of December 31, 2010, the borrowing base stood at $2,951,000, with a scheduled maturity date in April 2011, however, the bank has informally agreed to extend the maturity on a month-to-month basis provided CYMRI makes monthly payments of $25,000 principal plus accrued interest during the extension period. The Company is currently seeking commitments from other financial institutions for a new credit facility to replace the maturing credit agreement.

The CYMRI bank credit agreement requires the maintenance of certain financial covenants regarding interest coverage level, total debt level, and the level of administrative expenses. Due primarily to operational circumstances occurring in early 2010, CYMRI did not meet these financial covenants under the credit agreement as of December 31, 2010. The bank is aware of these covenant violations, however, it has not requested, nor does the Company expect it to request, accelerated payment of this debt, which is classified in our current liabilities, as a result of both the covenant violations and the scheduled maturity.

As of December 31, 2010, we also had outstanding institutional borrowings of $1,807,000 under a factoring facility, which is secured by accounts receivable of Decca, our Canadian Energy Services subsidiary (see Note 6). This factoring agreement with a Canadian factoring company became effective in October 2010 and provides for a revolving borrowing base of 75% of qualifying accounts receivable up to $4,000,000 (Cdn) at an annual interest rate of 18.25%, compounded daily, for a minimum of 15 days. The factoring agreement includes customary restrictive covenants on Decca’s operations but does not include any financial covenants. The factoring agreement replaced a revolving bank credit agreement which expired in September 2010.

We also have other debt amounts outstanding to the sellers of acquired businesses and to stockholders as more fully described in Note 6 and reflected in the table below (however, we have no off Balance Sheet arrangements). The following table sets forth the contractual obligations under our long-term debt and operating lease agreements as of December 31, 2010 (in thousands):

See More:

http://www.sec.gov/Archives/edgar/data/1277998/000107997411000262/stratum10k123110_3262011.htm