MAIL STOP 7010
March 1, 2006
Charles G. Masters
Chief Executive Officer
Cytation Corp.
4902 Eisenhower Blvd., Suite 185
Tampa, FL 33634
RE: Cytation Corporation
Information Statement on Schedule 14C
Filed February 14, 2006
File No. 0-05388
Dear Mr. Masters:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
INFORMATION STATEMENT ON SCHEDULE 14C
General
1. Please provide us with the balance sheets, income statements,
and
statements of equity of Cytation and Deer Valley as they would
have
appeared just prior to the reverse merger on January 18, 2006. In
addition, please provide us with these same statements on a
consolidated basis as they will appear after the reverse merger.
Please ensure that your accounting complies with the following
bullet
points:
* Prior to the date of the reverse merger, the historical
financial
statements are required to be those of Deer Valley (the accounting
acquirer) and should only include the historical results and
operations of Deer Valley;
* The historical financial statements (Deer Valley) are required
to
reflect the shares issued by Cytation "to acquire" Deer Valley as
outstanding for all periods presented in a manner similar to a
stock
split. This may require a recalculation of the weighted average
shares outstanding for EPS purposes. Differences in the par value
of
Deer Valley`s and Cytation`s stock should be offset to additional
paid-in capital;
* The historical financial statements (Deer Valley) are required
to
reflect the reverse merger of Cytation (the accounting acquiree)
on
the acquisition date. On the acquisition date, Cytation`s
outstanding shares should be reflected as being issued by Deer
Valley
to acquire Cytation. Since Cytation had limited assets and
operations, it appears to us that the shares issued to acquire
Cytation should be recorded at Cytations`s net book value;
* Subsequent to the date of the reverse merger, the historical
financial statements are required to be those of Deer Valley (the
accounting acquirer) and Cytation (the accounting acquiree) on a
consolidated basis.
2. Please revise the disclosure throughout so that it is
consistent
with an information statement in which you are not seeking
proxies.
For example, on page 4 you refer to shareholders who abstain from
voting and you repeatedly state how the board of directors
recommends
that shareholders vote on the particular proposals.
3. From the table on page 19 that lists the voting securities and
the
voting restrictions on your preferred stock, it is not clear that
a
majority of the shareholders have consented to the transaction.
Please illustrate how you have determined that you have received
the
required number of consents, or amend on Schedule 14A. If you
have
the requisite number of votes or consents, you should highlight
this
in the disclosure and identify the individuals who have provided
the
necessary approval.
4. We note the Summary Term Sheet`s placement as an exhibit to
this
Information Statement. Please place the Summary Term Sheet on the
first or second page of the Information Statement. Also, briefly
disclose the details of the financing for this transaction.
Please
refer to Item 1001 of Regulation M-A.
5. We note your statement that between 2002 and 2004, Cytation was
engaged in the business of providing consulting advice to
companies
wishing to be public reporting companies. Please briefly
elaborate
on the nature of the business conducted by Cytation during this
time
period. For instance, disclose that Cytation was a Business
Development Company under the Investment Company Act of 1940.
Please
refer to Item 14(b)(3) of Schedule 14A.
6. Please disclose all of the information required by Item
1004(a)(2)
of Regulation M-A.
7. Please disclose whether any federal or state regulatory
requirements must be complied with or approval obtained in
connection
with the acquisition of Deer Valley Homebuilders, Inc. Refer to
Item
14(b)(5) of Schedule 14A.
8. Please disclose the information required by Item 1005(b) and
1011(a)(1) of Regulation M-A.
9. If applicable, please disclose the information required by Item
3
of Schedule 14A.
10. We note the disclosure on page 29 that some of your senior
management will receive substantial additional payments from the
acquisition of Deer Valley. Because the increased number of
authorized common and preferred stock will facilitate this
acquisition, where your board recommends approval of these
proposals,
please briefly disclose all of the specific interests that your
officers and directors have in this transaction.
11. Please disclose the information required by Item 9(e) of
Schedule
14A.
Proposal 2, page 5
12. Disclose whether you currently have any plans to issue any
preferred stock.
Proposal 3, page 6
13. Disclose whether you currently have enough common stock
available
to satisfy the conversion provisions of your outstanding
convertible
securities. Please also disclose whether you currently have any
other plans to issue common stock.
Management, page 10
14. Please disclose the nature of the business conducted by Ranger
Industries, Inc., Clayton Homes, Inc., Southern Energy, Inc.,
Cavalier Homes, Inc., Mirabilis Ventures, Inc., and Daedalus
Consulting, Inc.
Audit Committee, page 14
15. Please disclose whether you have a written audit committee
charter. Please refer to Item 7(d)(3) of Schedule 14A.
Nominating Committee, page 14
16. Please describe the procedure to be followed by shareholders
in
making board recommendations. Please refer to Item 7(d)(2)(ii)(G)
of
Schedule 14A.
Change in Control and Acquisition, page 21
Additional Warrant, page 22
17. It does not appear that the common stock issuable upon
exercise
of the warrant is reflected in the beneficial ownership table on
page
19. Please advise.
Description of Business, page 22
18. Please disclose the basis for your statement that Deer Valley
is
a leading manufacturer of factory built homes in the southeastern
and
south central housing markets.
Products, page 25
19. Please explain the difference between multi-floor and multi-
section homes and define what these terms mean.
Manufactured and Home - Industry Overview, page 27
20. Please update the figures included in the third paragraph and
discuss the recent negative trends for sales of multi-section
homes.
Warranty, Quality Control and Service, page 27
21. Disclosure in the third paragraph of this section implies that
you have multiple manufacturing facilities. Please clarify, if
true,
that you currently have one manufacturing facility.
Capital Structure, page 30
Preferred Shares, page 31
22. Please tell us in detail how you intend to account for your
convertible preferred stock, including whether you will classify
the
convertible preferred stock as a liability or equity. Please tell
us
if your convertible preferred stock has any nondetachable
conversion
features that would be deemed to be beneficial. Provide us with
detailed computations which support your conclusion that you did
or
did not have any beneficial conversion features related to your
convertible preferred stock. Paragraph 5 of EITF 98-5 states that
embedded beneficial conversion features are calculated at the
commitment date as the difference between the conversion price and
the fair value of the common stock, multiplied by the number of
shares into which the security is convertible. Note, however,
that
paragraph 5 of EITF 00-27 states that the effective conversion
price,
instead of the specified conversion price, should be used to
compute
the intrinsic value of the embedded beneficial conversion feature.
See paragraphs 6-7 of EITF 00-27 for an example on how to perform
this calculation. In addition, tell us how you have considered
SFAS
133, EITF 00-19, and EITF 01-06 in accounting for any embedded
derivatives related to this convertible preferred stock.
Options and Warrants Convertible into Common Shares, page 33
23. For each issuance of warrants, please disclose the fair value
of
the warrants at the date of issuance, and the reason for issuance.
Please also disclose whether you used the Black-Scholes model for
your issuances of warrants, including the assumptions you used.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Notice Regarding Forward Looking Statements, page 36
24. Please remove the word "will" from the list of words in the
first
paragraph of this section.
25. Please revise the Management`s Discussion and Analysis section
to
provide a fuller discussion and analysis of known trends, demands,
commitments, events and uncertainties that management views as
most
critical to the company`s revenues, financial position, liquidity,
plan of operations and results of operations; rather than a mere
narrative recitation of the financial statements. In an effort to
assist you in this regard when responding to the comments below,
please refer to the Commission Guidance Regarding Management`s
Discussion and Analysis of Financial Condition and Results of
Operations, Release Nos. 33-8350 (December 19, 2003) at
http://www.sec.gov/rules/interp/33-8350.htm.
26. We note that the purchase of the Sulligent Property is valued
at
is priced at $725,000 and is set to close on or before April 30,
2006. Please disclose whether you plan to pay cash and/or issue
securities for the acquisition of this property.
27. Item 303(b)(1) of Regulation S-B requires disclosure regarding
changes in financial condition and results of operations for each
of
the last two fiscal years. Please note that a change in
operations
does not exempt you from meeting the requirements set forth in
Item
303. Please revise accordingly.
28. Please discuss in greater detail the business reasons for the
changes between periods in revenues, cost of sales, and selling,
general and administrative expenses. In doing so, please disclose
the amount of each significant change in line items between
periods
and the business reasons for it. In circumstances where there is
more than one business reason for the change, attempt to quantify
the
incremental impact of each individual business reason discussed on
the overall change in the line item. For example, in regards to
selling, general and administrative expenses, please individually
quantify the increase that was attributable to payroll and related
expenses, professional fees, and other general corporate expenses.
See Item 303(b) of Regulation S-K and Financial Reporting
Codification 501.04.
Liquidity and Capital Resources, page 38
29. Please update this section to the latest practicable date.
30. Please discuss in your liquidity section the changes in your
operating, investing, and financing cash flows as depicted in your
statement of cash flows. See the SEC Interpretive Release No. 33-
8350.
Financing, page 38
31. Please disclose the purposes for issuing the letters of credit
described in this section.
Exhibit 99.1
Pro Forma Balance Sheet as of September 30, 2005
32. Please revise your pro-forma balance sheet to disclose the
computations for the adjustment to your Series A preferred stock.
Please include these computations within your footnote 2. Please
also include footnotes for the adjustments to your Series B and C
preferred stock.
33. The footnotes to your pro-forma adjustments should clearly
explain the assumptions involved. It is unclear how the amounts
related to adjustments 3-5 are calculated. Please revise your
presentation to clearly explain these adjustments and show the
calculations.
34. The explanation included within footnote 5 appears to
correlate
with adjustment 6 in your pro-forma balance sheet. In addition,
you
have six adjustments in your pro-forma balance sheet, but only
five
explanations. Please ensure that there is a footnote for each
adjustment.
35. Please note that the reverse merger of Cytation and Deer
Valley
is a recapitalization; therefore, Cytation should be recorded at
the
book value of its` net tangible assets, with no goodwill recorded.
This is in contrast to a business combination recorded at fair
value,
where goodwill is recorded. As such, please do not include your
proposed pro-forma adjustment to goodwill of $3,554,808 in your
pro-
forma balance sheet.
Pro Forma Consolidated Statements of Operations
36. Please include footnotes within your pro-forma statements of
operations to clearly explain the adjustments to your income tax
expense. In addition, it is unclear why the pro-forma adjustment
to
income tax expense for the twelve months ended December 31, 2004
is
$99,190. Based upon Note 6 in the financial statements presented
in
Exhibit 99.2, the adjustment appears to be $317,500. Please
revise
or advise.
37. Please disclose in your footnotes how you calculated the
number
of weighted average common and common equivalent shares
outstanding
for the nine months ended September 30, 2005 and the year ended
December 31, 2004.
Exhibit 99.2
Deer Valley Homebuilders Financial Statements
Balance Sheets, page 3
38. Since you have treasury stock, the number of shares issued is
not
equal to the number of shares outstanding. Please revise the
common
stock description on the face of your balance sheet accordingly.
Statements of Stockholders` Equity, page 6
39. Please include a column that shows the changes during each
period
in the number of shares held as treasury stock.
Note 1 - Nature of Business, Basis of Presentation, Unaudited Pro
Forma Financial Information and Summary of Significant Accounting
Policies, page 8
Property, Plant and Equipment, page 9
40. The range of useful lives for your property and equipment of
five
to forty years is very broad. Please separately disclose the
range
of useful lives for each category presented on page 11. For
categories that still have very broad useful lives, you should
separately discuss the types of assets that fall in each part of
the
range.
Income Taxes, page 10
41. You disclose that you elected to be taxed under the provision
of
Subchapter S of the Internal Revenue Code. Please tell us how the
reverse merger effected your prior election to be an S
corporation.
If you are going to convert or have converted to a C corporation,
please disclose how you will account for any undistributed
earnings
as of the conversion date. Please also revise your pro forma
financial statements so that any undistributed earnings or losses
still reflected in the retained earnings and accumulated deficit
line
item are removed with a corresponding adjustment to APIC as of the
conversion date. Refer to SAB Topic 4:B.
New Accounting Pronouncements, page 10
42. Please revise your disclosure to clarify if you actually did
adopt SFAS 123R in January 2005.
Note 9 - Repurchase Agreements, page 14
43. You disclose that you have not recorded a liability related to
your repurchase agreements. Please tell us how your current
accounting complies with FIN 45.
Note 10 - Related Party Transactions, page 15
44. In regards to your consulting agreement with the father of
your
president/majority stockholder, please tell us the nature of work
being performed by this individual. Please provide an estimate as
to
the monthly commitment, in terms of hours, that this individual
provides as consulting to you. Also, please tell us if any
minimum
commitment of hours is included in the consulting agreement, and
if
so, how you are enforcing this requirement.
Note 11 - Subsequent Events, page 15
45. You disclose that as a condition of the common stock purchase
agreement you entered into with your stockholders/employees, each
stockholder/employee will enter into a five year employment
agreement
and will be entitled to participate in a price adjustment target
account. Please also disclose how you will account for the
employment agreements and the price adjustment target accounts.
Please supplementally tell us the accounting literature you
referenced to support your conclusion and how you applied that
literature.
FORM 8-K/A FILED FEBRUARY 21, 2006
General
46. Please similarly amend your Form 8-K for each comment above
that
also impacts disclosures presented in your Form 8-K.
Closing Comments
Please respond to these comments by filing an amendment to
your
filing and providing the supplemental information requested.
Please
provide us with a supplemental response that addresses each of our
comments and notes the location of any corresponding revisions
made
in your filing. Please also note the location of any material
changes made for reasons other than responding to our comments.
Please file your supplemental response on EDGAR as a
correspondence
file. We may raise additional comments after we review your
responses and amendment.
To expedite our review, you may wish to provide complete
packages to each of the persons named below. Each package should
include a copy of your response letter and any supplemental
information, as well as the amended filing, marked to indicate any
changes.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
Please contact Craig Slivka, Staff Attorney, at (202) 551-3729
or
in his absence Chris Edwards, Special Counsel, at (202) 551-3742
with
any questions.
Sincerely,
Pamela A. Long
Assistant Director
cc: Brent A. Jones, Esq.
(813) 223-9620
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Charles G. Masters
Cytation Corp.
Page 1 of 9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE