SecProbe.io

CORRESP
1
filename1.htm

    October
      27, 2006

    John
      Reynolds, Assistant Director

    John
      Zitko

    Securities
      and Exchange Commission

    100
      F
      Street, NE

    Washington,
      DC 20549

              RE:

              Fortress
                America Acquisition Corporation
                (“FAAC”)

    Preliminary
      Proxy Statement on Schedule 14A

    Filed
      August 10, 2006

    Form
      10-K
      for the period ending December 31, 2005

    File
      No.
      0-51426

    Dear
      Mr.
      Reynolds and Mr. Zitko:

    Thank
      you
      for your letter dated September 22, 2006 setting forth comments on the
      above-referenced Preliminary Proxy Statement on Schedule 14A.

    On
      behalf
      of Fortress America Acquisition Corporation (“FAAC”), we are filing herewith
      Amendment No. 1 to the Preliminary Proxy Statement (“Amendment No. 1”). We are
      also providing to the Staff three unmarked copies of Amendment No. 1 and three
      copies of Amendment No. 1 that are marked to show changes from the Preliminary
      Proxy Statement. Please note that the system used by FAAC's financial printer
      to
      mark changes generally marked entire paragraphs rather than individual words,
      as
      having changed. Unless otherwise indicated, all references to page numbers
      in
      the below responses to your comments are to pages of the marked version of
      Amendment No. 1 provided herewith.

    This
      response letter has been filed via EDGAR, tagged as “CORRESP.” The attachments
      to this letter have not been provided via EDGAR. Instead, we are delivering
      an
      original of this letter, together with all attachments, by hand.

    We
      look
      forward to working with you in connection with your ongoing review of the Proxy
      Statement and its ultimate clearance.

    General

            1.

              Other
                than page references to locations within the Preliminary Proxy, please
                supply all information currently missing but noted with place
                holders.

    Response:
      In
      response to this comment, FAAC has supplied missing information in the Proxy
      Statement, except that information relating to the date of the stockholders
      meeting, the record date for determining stockholders entitled to notice of
      and
      to vote at the meeting, the date of the Proxy Statement, the date of mailing
      of
      the Proxy Statement, the details of the audit committee and related information
      has been omitted because none of that information has yet been determined.
      This
      information will be included in a subsequent filing.

      John
        Reynolds

      John
        Zitko

      October
        27, 2006

      Page
        2

    Questions
      and Answers About the Acquisition, page 4

            2.

              Please
                include disclosure concerning the additional requirement that less
                than
                20% of shareholders exercise their conversion rights within the discussion
                on page six contained under the question “What vote is required in order
                to approve the acquisition?”

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      6 of
      the Proxy Statement to include the requested additional disclosure.

    Selected
      Historical and Pro Forma Combined Financial Information, page
      16

            3.

              Please
                revise your disclosure regarding FAAC on page 17 to eliminate the
                reference to revenue for each period. We note that interest income
                would
                not be classified as revenue in the financial statements of
                FAAC.

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      18
      of the Proxy Statement to eliminate the references to revenue.

            4.

              Please
                revise your pro forma statement of operations disclosures on page
                18 to
                include earnings per share.

    Response:
      In
      response to this comment, FAAC has revised the pro forma statement of operations
      disclosures appearing on page 19 of the Proxy Statement to include earnings
      per
      share information.

    Forward
      Looking Statements, page 21

            5.

              We
                note the risk factor included at the top of page 25 which states
                that one
                customer of TSS/Vortech comprised 78% of its revenue for the year
                ended
                December 31, 2005 and that such customer accounted for 49.1% and
                20.3% of
                TSS/Vortech’s revenues in 2004 and 2003 per your disclosure on page 80. We
                further note your disclosure on page 80 that “TSS/Vortech expects that it
                will not recognize significant revenues under these contracts after
                the
                first quarter of 2007.” Please add the disclosure contained on page 80
                noted above within the risk factor currently on page
                25.

    Response:
      FAAC
      has
      revised the risk factor appearing on page 27 of the Proxy Statement in response
      to this comment and to reflect updated expectations regarding this customer.

    Background
      of the Acquisition, page 36

            6.

              Please
                disclose whether Focus Enterprises is in any way an affiliate of
                FAAC,
                TSS/Vortech, or any of the affiliates, officers, directors, insiders
                or
                material shareholders of any of such entities. Provide similar disclosure
                with respect to Business Valuation
                Center.

        John
          Reynolds

        John
          Zitko

        October
          27, 2006

        Page
          3

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on pages
      41
      and 48 of the Proxy Statement to include the requested disclosure.

            7.

              Disclose
                when the target company characteristics set forth on pages 36-7 were
                established and by whom such characteristics were
                developed.

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      42
      of the Proxy Statement to include the requested disclosure.

            8.

              It
                appears that in late February of 2006, FAAC revised its offer to
                TSS/Vortech in response to TSS/Vortech’s statement that they were going to
                accept a competing offer. Revise the disclosure to describe in more
                detail
                the terms and structure of the initial offer made by FAAC, the revisions
                made by FAAC to the offer, and the additional adjustments made in
                the
                terms of the transaction that were ultimately agreed upon. In particular,
                discuss the process and factors which resulted in the consideration
                including cash, stock and debt
                components.

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      43
      of the Proxy Statement to include the requested disclosure.

            9.

              Briefly
                detail the reasons why the meetings between FAAC and the three major
                customers of TSS/Vortech were
“successful.”

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      44
      of the Proxy Statement to include the requested disclosure.

            10.

              We
                note the discussion on page 38 indicating that the Membership Interest
                Purchase Agreement originally executed on June 5, 2006, was amended
                twice.
                Please disclose the particular information/circumstances that caused
                or
                prompted such renegotiation. Please disclose the material changes
                that
                occurred in each amendment and the reasons
                therefore.

    Response:
      In
      response to this comment, FAAC has revised the disclosure appearing on page
      44
      of the Proxy Statement to include the requested disclosure.

            11.

              In
                connection with the preceding comment, please provide the Staff with
                a
                legal analysis as to the necessity and timing of filing a Form 8-K
                in
                connection with the July 31, 2006 amendment of the Membership Interest
                Purchase Agreement.

      John
        Reynolds

      John
        Zitko

      October
        27, 2006

      Page
        4

    Response:
      Item
      1.01
      of Form 8-K requires disclosure of amendments that are “material to the
      registrant” to “a material definitive agreement not made in the ordinary course
      of business of the registrant”. Although FAAC believes that the Membership
      Interest Purchase Agreement is a “material definitive agreement” within the
      meaning of Item 1.01, it does not believe that the amendments made in the July
      31, 2006 amendment and restatement of the Membership Interest Purchase Agreement
      are material to FAAC because those amendments did not change the economic
      substance of the acquisition arrangements in a material manner but, instead,
      more closely aligned the documentation to the underlying economic substance.
      In
      particular, the July 31, 2006 amendments primarily removed the earn-out portion
      of the acquisition consideration, which had been included the Membership
      Interest Purchase Agreement, and included substantially identical terms in
      the
      employment agreements of each of the selling members. The payment of the
      earn-out amounts to each selling member had been conditioned, in general, upon
      the continued employment of such selling member. This condition was retained
      when the payment terms were added to the employment agreements. By more closely
      aligning the acquisition documents with the underlying economic arrangements,
      FAAC believes that these documents, and their accounting and tax treatment,
      will
      be more readily understood.

    Fairness
      Opinion, page 42

            12.

              We
                again note your disclosure on pages 25 and 80, concerning TSS/Vortech’s
                dependence upon a single customer for the year ended December 31,
                2005 and
                that TSS/Vortech expects that it will not recognize significant revenues
                from that customer after the first quarter of 2007. It would also
                appear
                from your discussion that two of the three valuation models used
                (Analysis
                of Comparables and Precedent Merger and Acquisition Analysis) do
                not take
                into account the termination of the revenue stream represented by
                the
                afore-mentioned customer and the third (Discounted Cash Flow Analysis)
                was
                calculated as of December 31, 2005, a point at which significant
                revenues
                could still be expected from the relevant
                contracts.

    With
      respect to each of the models presented, please include disclosure as to the
      manner by which the cessation of such customer’s contracts was taken into
      account and reflected in the resultant valuation.

    Response:
      FAAC
      has
      revised the valuation analysis appearing on page 52 of the Proxy Statement
      to
      address this comment. FAAC has made related changes to the disclosures on page
      91 in “Management’s Discussion and Analysis of Financial Condition and Results
      of Operation of TSS/Vortech”.

    Pro
      Forma Condensed Consolidated Financial Statements, page 59

            13.

              The
                staff notes that situations in which it is appropriate to allocate
                the
                entire (or the bulk of the entire) purchase price to goodwill are
                rare. In
                addition, registrants are expected to rigorously support the fair
                value of
                any indefinite-lived identifiable intangible asset. We note your
                disclosure that a substantial portion of the excess purchase price
                will be
                allocated to non-amortizable intangible assets. As such, we presume
                that
                this conclusion is merely a function of the preliminary nature of
                the
                allocation and that prior to finalizing the allocation you will search
                for
                and identify all of the assets acquired and liabilities assumed,
                including
                intangible assets that meet the recognition criteria in paragraph
                39 of
                SFAS 141, regardless of whether they had been recorded in the financial
                statements of TSS/Vortech. Consider the need to clarify or elaborate
                upon
                the disclosure in the second sentence of the third paragraph on this
                page.

      John
        Reynolds

      John
        Zitko

      October
        27, 2006

      Page
        5

    Response:
      In
      response to this comment and as it had previously planned, FAAC has revised
      the
      pro forma adjustment disclosure included in the “Unaudited
      Pro
      Forma Condensed Consolidated Financial Statements” beginning
      on page
      66 of the Proxy Statement to reflect its updated estimated allocation of the
      purchase price. Its estimated allocations are based on an allocation report
      provided by Business Valuation Center, which FAAC engaged to identify all assets
      to be acquired and liabilities to be assumed. The pro forma financial statement
      disclosure reflects the allocations provided by Business Valuation Center.
      Based
      on the allocations to identifiable assets made in the report, FAAC believes
      that
      it will record approximately $17.0 million of goodwill. Accordingly, FAAC
      believes that the second sentence of the third paragraph on this page is
      accurate.

            14.

              We
                note your disclosure regarding pro forma adjustment (b) on page 66.
                Please
                tell us why the average trading price of FAAC common stock for the
                20
                trading days prior to the public announcement was used to determine
                the
                value of the stock issued, as opposed to the market price for a reasonable
                period before and after the announcement date of the acquisition
                as
                required by paragraph 22 of SFAS 141. Please clarify and revise your
                disclosures accordingly.

    Response:
      The
      original pro forma disclosure in the Proxy Statement valued the FAAC common
      stock issued using the average trading price of the stock for the 20 trading
      days prior to public announcement because that is the approach used in the
      acquisition agreement. In response to this comment, the pro forma disclosure
      has
      b