Cytation Corporation
4902 Eisenhower Blvd.
Suite 185
Tampa, Florida 33634
(813) 885-5998
June 20, 2006
United States Securities and Exchange Commission
Division of Corporation Finance
Attn: Pamela Long, Assistant Director
100 F Street, N.E.
Washington, D.C. 20549-7010
RE: CYTATION CORPORATION
INFORMATION STATEMENT ON SCHEDULE 14C
FILED JUNE 20, 2006
FILE # 000-05388
Dear Ms. Long,
We received your letter dated June 19, 2006 commenting on our response
letter dated June 15, 2006. In addition, we refer to your comment letter dated
June 9, 2006 commenting on the Revised Information Statement on Schedule 14C
("Schedule 14C") filed on June 2, 2006 by Cytation Corporation (the "Company").
In connection with your comments, we have indicated the necessary changes which
we have made to the Schedule 14C in response to the suggestions in your letter.
We have filed a copy of this letter as correspondence on EDGAR.
OUR RESPONSE TO YOUR COMMENT LETTER DATED JUNE 19, 2006 FOLLOWS BELOW.
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Capital Structure
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1. Pursuant to EITF 00-27 and EITF 98-5, we have calculated the relative fair
value of the Series A Warrants, Series B Warrants, and Series D Warrants to
be $23,645,158, in the aggregate, and the Series A Preferred Stock to be
$7,456,215. Based on such relative fair values, we have calculated the
effective conversion price of our Series A Preferred Stock to be $0.18. As
a result, pursuant to paragraph 5-7 of EITF 00-27, we have determined that
the beneficial conversion feature is the total relative fair value of the
Series A Preferred Stock, or $1,787,029. Exhibit A attached hereto details
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our initial journal entries recording the relative fair value of the
preferred stock and warrants, and subsequent journal entry reflecting the
value of the beneficial conversion feature. We have also determined that
the discount of $7,456,215 must be amortized. Using an amortization period
of 73 days for the period from January 18 to April 1, we have amortized
$1,491,243, of which $1,133,837 relates to the discount on the warrants and
$357,406 relates to the beneficial conversion feature. We have revised our
statement of operations to reflect a deemed dividend to preferred
shareholders and decrease our net income (loss) available to common
stockholders. We have included detailed calculations on Exhibit A attached
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hereto.
OUR RESPONSES TO YOUR COMMENT LETTER DATED JUNE 9, 2006 FOLLOW BELOW.
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2. We have revised the Schedule 14C to consistently reflect all Series BD-1,
BD-2, BD-3, BD-4, and BD-5 warrants issued by the Company in connection
with the Series A Convertible Preferred Stock financing and the Series D
Convertible Preferred Stock financing.
3. We have not made any revisions based upon your comment number 3. Please
note that the 2-for-1 stock dividend was declared and issued in November
2005. All Series A Convertible Preferred Stock was issued on or after
January 18, 2006. As a result, the 2-for-1 stock dividend had no effect on
the conversion price of the Series A Convertible Preferred Stock.
Exhibit 99.4
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Consolidated Pro Forma Balance Sheet
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4. Pursuant to 3-12(c)(1) of Regulation S-X, we have not presented a pro-forma
balance sheet as of April 1, 2006 in the Schedule 14C because the
acquisition that occurred in January 2006 is fully reflected in the balance
sheet as of April 1, 2006 attached to the Schedule 14C.
Pro Forma Consolidated Statement of Operations
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5. Pursuant to 3-12(c)(2) of Regulation S-X, we have not presented a pro-forma
income statement for the three month period ending as of April 1, 2006
because our income statement from the three month period ending April 1,
2006, which is attached to the Schedule 14C, includes revenues and expenses
from the acquired entity for the period from January 1, 2006 through April
1, 2006.
Exhibits 99.5-99.7
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Cytation Corporation Financial Statements for the Quarter Ended April 1, 2006
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6. We have included the footnote disclosures for the interim period ended
April 1, 2006.
Quarterly Report on Form 10-QSB for the period ended April 1, 2006
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General
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7. We will be filing an amendment to our Quarterly Report on Form 10QSB for
the period ending April 1, 2006, which will reflect the revisions discussed
above.
8. We have added as Footnote 5., a disclosure concerning our product
warranties pursuant to FIN 45.
If you should have any questions regarding our amended Schedule 14C, please
do not hesitate to contact me.
Sincerely,
/s/ Charles G. Masters
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Charles G. Masters
President & Chief Executive Officer
Cytation Corporation
Cc: Bush Ross, P.A.
EXHIBIT A
WARRANTS RISK FREE FAIR VALUE TOTAL
NUMBER YEARS VOLATILITY STRIKE $ STOCK $ RATE PER WARRANT FAIR VALUE
--------- ------- ----------- --------- -------- ----- ------------ ----------
Class A Warrants 9,941,639 5 years 32% $ 1.50 $ 2.48 4.82% $ 1.39 13,818,878
Class B Warrants 4,970,824 7 years 32% $ 2.25 $ 2.48 4.84% $ 1.19 5,915,281
Class C Warrants 2,000,000 5 years 32% $ 0.75 $ 2.48 4.82% $ 1.90 3,800,000
Class D Warrants 2,000,000 7 years 32% $ 0.75 $ 2.48 4.82% $ 1.96 3,920,000
Class E Warrants 880,540 3 years 32% $ 3.00 $ 2.48 4.82% $ 0.50 438,421
Class BD-1 Warrants 919,162 5 years 32% $ 0.75 $ 2.48 4.82% $ 1.90 1,746,408
Class BD-2 Warrants 919,162 5 years 32% $ 1.50 $ 2.48 4.82% $ 1.39 1,277,635
Class BD-3 Warrants 459,581 7 years 32% $ 2.25 $ 2.48 4.84% $ 1.19 546,901
Class BD-4 Warrants 66,121 5 years 32% $ 1.50 $ 2.48 4.84% $ 1.39 91,908
Class BD-5 Warrants 66,121 3 years 32% $ 3.00 $ 2.48 4.84% $ 0.50 32,922
Preferred Stock $7,456,215
Transaction Costs -
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Total Preferred
after costs $7,456,215
Total Fair Value of Class A,
B, and D Warrants $23,654,158 76.0% 5,669,186 Warrants 18-Jan 1-Apr 73 1,133,837
365
20%
Fair Value Preferred Stock $ 7,456,215 24.0% 1,787,029 Preferred 18-Jan 1-Apr 73 357,406
365
20%
Total Fair Value $31,110,373 100% $7,456,215 Cash $1,491,243
7,456,215 $5,964,972
Journal Entry:
Cash 7,456,215
Preferred Stock 1,787,029
APIC 5,669,186
To record initial entry based on relative fair value
APIC 935,245
Cash 935,245
To record transaction costs
Preferred Stock 1,787,029
APIC 1,787,029
to record beneficial conversion feature on preferred
Retained Earnings 1,491,243
Preferred Stock 1,491,243
To record amortization of beneficial conversion feature
VOLATILITY CALCULATION
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2005
Industry Competitor Symbol Volatility
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Cavalier Homes, Inc. CAV 27.90%
Cavco Industries, Inc. CVCO 34.20%
Southern Energy Homes, Inc. SEHI 32.60%
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31.57%