SecProbe.io

CORRESP
1
filename1.htm

      Unassociated Document

    December
      8, 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

    Amendment
      1 Filed October 30, 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 November 30, 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. 2 to the Preliminary Proxy Statement (“Amendment No. 2”). We are
      also providing to the Staff four unmarked copies of Amendment No. 2 and four
      copies of Amendment No. 2 that are marked to show changes from the Preliminary
      Proxy Statement. 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. 2 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 clearance as soon as practicable. As the Staff is aware,
      given
      the deadline FAAC faces for completion of the transaction that is the subject
      of
      the Proxy Statement, prompt clearance of the Proxy Statement is extremely
      important to the FAAC investors.

    General

              1.

              Please
                disclose whether Evergreen Capital LLC and/or Focus Enterprises,
                Inc. is
                registered as a broker dealer. If either or both are not, please
                provide
                the Staff with a legal analysis as to the necessity for each to register
                as a broker dealer, with specific reference to all of the activities
                disclosed in your Proxy Statement.

    Response:
      Focus
      Enterprises, Inc. (“Focus”) and Evergreen Capital LLC (“Evergreen”) are
      discussed separately below.

        John
          Reynolds

        John
          Zitko

        December
          8, 2006

        Page
          2

    Focus
      Enterprises, Inc.

    Focus
      has
      informed FAAC that it is a registered broker-dealer. Disclosure to this effect
      has been added on page 37 of Amendment No. 2.

    Evergreen
      Capital LLC

    Evergreen
      is not registered as a broker-dealer and disclosure to this effect has been
      added on page 38 of Amendment No. 2. The following is in response to the Staff’s
      request for an analysis as to the necessity of Evergreen to register as a
      broker-dealer in connection with the acquisition of TSS/Vortech by FAAC.

    Background

    As
      disclosed under “Background of the Acquisition,” Evergreen became aware that
      FAAC was seeking an acquisition in the homeland security space and mentioned
      the
      opportunity to the members of TSS/Vortech. Evergreen had not been retained
      by
      TSS/Vortech at the time of the introduction. Because the initial introduction
      of
      FAAC occurred through a member of Evergreen’s Board of Advisors, Evergreen
      principals participated in the introductory meeting. At that time, no particular
      acquisition structure was contemplated, and the parties did not contemplate
      the
      sale of TSS/Vortech securities except in the context of a sale of the companies’
assets or membership interests to a single acquirer. The decision to effect
      the
      acquisition by means of the sale of membership interests of TSS/Vortech was
      made
      solely by FAAC and TSS/Vortech without the recommendation of Evergreen. The
      fees
      payable by TSS/Vortech to Evergreen will consist of a finder’s fee or, in the
      event that a transaction does not occur, consulting fees based on the hourly
      rates charged by Evergreen personnel. This fee arrangement would have applied
      if
      the parties had chosen to effect the transaction by means of an asset sale
      or
      merger rather than a sale of membership interests. As disclosed in Amendment
      No.
      2, Evergreen has agreed to accept payment of a portion of its fees in up to
      67,825 shares of restricted FAAC stock in order to preserve the cash portion
      of
      the acquisition consideration for the members of TSS/Vortech. Further, as
      described on pages 38 through 40 of Amendment No. 2, Evergreen participated
      in
      certain meetings and conference calls during which the acquisition of
      TSS/Vortech by FAAC was discussed, and also provided the members of TSS/Vortech
      with financial and tax related consulting services in connection with the
      proposed transaction.

    Analysis

    Section
      15(a)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”) provides
      that “it shall be unlawful for any broker or dealer which is . . . a person
      other than a natural person . . . to make use of the mails or any means or
      instrumentality of interstate commerce to effect any transactions in, or to
      induce or attempt to induce the purchase or sale of, any security… unless such
      broker or dealer is registered [with the Commission].”

        John
          Reynolds

        John
          Zitko

        December
          8, 2006

        Page 3

    According
      to Section 3(a)(4) of the Exchange Act, the definition of a broker consists
      of
      the following five elements:

            ·

              any
                person

            ·

              engaged
                in the business

            ·

              of
                effecting transactions

            ·

              in
                securities

            ·

              for
                the account of others

    In
      order
      to determine whether a person or entity acts as a broker or dealer, the
      Commission has looked at the activities that the person or entity actually
      performs. In connection with so-called “finder” or “business broker” activities,
      the Commission has granted no-action relief in circumstances similar to those
      here. For instance, the Commission did not require broker-dealer registration
      of
      a finder, acting as a business broker, whose activities consisted mainly of
      selling businesses that were going concerns. International
      Business Exchange Corporation,
      SEC
      No-Action Letter (Dec. 12, 1986). The Commission based its decision on the
      following factors:

            ·

              the
                finder had a limited role in negotiations between the purchaser and
                seller;

            ·

              the
                businesses represented by the finder were going concerns and not
“shell”
                corporations;

            ·

              only
                assets were advertised or otherwise offered for sale by the finder;

            ·

              transactions
                effected by means of securities conveyed all of a business’s equity
                securities to a single purchaser or group of purchasers formed without
                the
                assistance of the finder;

            ·

              the
                finder did not advise the two parties whether to issue securities
                or
                assess the value of any securities sold;

            ·

              the
                finder’s compensation did not vary according to the form of conveyance
                (i.e., securities rather than assets); and

            ·

              the
                finder did not assist purchasers in obtaining financing, except to
                the
                extent of providing a list of potential lenders, such as banking
                and
                venture capital firms, that expressed an interest in extending credit,
                at
                the request of the purchaser or seller.

        John
          Reynolds

        John
          Zitko

        December
          8, 2006

        Page
          4

    See
      also Victoria
      Bancroft,
      SEC
      No-Action Letter (August 9, 1987).

    TSS/Vortech
      is aware that the Commission has taken the position that a finder that was
      “actively involved in securities transactions, by negotiating their terms,
      providing advice regarding their terms [and] providing other assistance” may be
      required to register as a broker-dealer. See
      Davenport Management, Inc.,
      SEC
      No-Action Letter, [1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) 76,643 at
      77,737 (April 13, 1993). See
      also.,
      Fulham
      & Co.,
      SEC
      No-Action Letter (December 20, 1972) (noting that a finder was considered a
      broker because the finder arranged the structure of the offerings and in some
      cases negotiated on behalf of the issuer of the securities). However, as regards
      to its work for TSS/Vortech, Evergreen did not actively “negotiate” the terms of
      the transaction or propose or advise either FAAC or TSS/Vortech to issue, sell
      or accept securities, although its representatives were present at certain
      meetings and participated in conference calls during which the terms of the
      transaction were discussed. Notwithstanding such participation, the members
      of
      TSS/Vortech controlled the discussions and negotiated the terms of the
      acquisition and used Evergreen’s consulting services only in a supporting role.
      In this regard, there were a number of meetings and calls at which Evergreen
      representatives were not present and at which the terms of the acquisition
      were
      established and agreed to. In considering Evergreen’s activities as described in
      Amendment No. 2, TSS/Vortech respectfully requests the Staff to consider that
      Thomas Rosato, TSS/Vortech’s Chief Executive Officer and co-owner, is a
      certified public accountant with over 30 years of accounting and management
      experience. He has owned, operated and sold a number of business entities.
      Mr.
      Rosato, along with Gerard Gallagher, TSS/Vortech’s President and Chief Operating
      Officer, conducted and controlled the significant negotiations with FAAC. Both
      Mr. Rosato and Mr. Gallagher were aware that Evergreen is not a registered
      broker-dealer, and neither is in need of the protections that broker-dealer
      registration is designed to provide.

    We
      also
      understand that the Commission considers the payment of transaction-based
      compensation to a business broker or finder as a factor in considering whether
      registration is required. See e.g.,
      Herbruck, Alder & Co.,
      SEC
      No-Action Letter (June 4, 2002). In this case, if the acquisition is
      consummated, Evergreen’s consideration will consist of a finder’s fee payable
      upon closing. In particular, the fees payable to Evergreen will consist of
      cash
      of $475,000 and up to 67,825 shares of restricted FAAC stock in order to
      preserve the cash portion of the acquisition consideration for the members
      of
      TSS/Vortech. In the event that a transaction does not occur, Evergreen will
      receive consulting fees based on the hourly rates charged by Evergreen
      personnel. In either case, the public stockholders of FAAC will not be affected
      by the payment of fees to Evergreen, as these fees are the responsibility of
      Mr.
      Rosato and Mr. Gallagher. Under these circumstances, TSS/Vortech submits that
      the compensation arrangements with Evergreen are akin to the payment of
      transaction based consideration contemplated by the
      International Business Exchange
      no-action letter discussed above.

        John
          Reynolds

        John
          Zitko

        December
          8, 2006

        Page
          5

    Conclusion

    TSS/Vortech
      understands that the activities of unregistered business brokers such as
      Evergreen may implicate the need for broker-dealer registration in some
      circumstances. Our position is that, under the totality of the facts and
      circumstances, Evergreen’s activities were limited so as not to require
      registration in this case.

    Further,
      as noted above, TSS/Vortech respectfully submits that the Commission’s investor
      protection concerns are not implicated in these circumstances. Finally,
      regardless of the Staff’s view as regards Evergreen’s activities, TSS/Vortech
      respectfully submits that this transaction should not be penalized by additional
      processing delays associated with Evergreen’s status.

              2.

              We
                note your added disclosure on page 41 of your Proxy Statement that
                you
                “had not, prior to the effectiveness of [y]our registration statement,
                selected any acquisition target or contacted, directly or indirectly,
                any
                agents of any targets.”

    However,
      we also note that your Director C. Thomas McMillen appears to have purchased
      1.25 billion shares of common stock of an entity called Celerity Systems, Inc.
      from Cornell Capital soon after the effectiveness of your Initial Public
      Offering, thus becoming a control person, President, Chief Executive Officer
      and
      Chairman of the Board of Celerity. At the time such acquisition and change
      in
      control was disclosed, Celerity proposed to change its name to Homeland Security
      Capital Corporation and “announced…its intention to pursue a new strategic
      direction: to focus on owning and operating small and mid-sized growth
      businesses that provide homeland security solutions through innovative
      technologies to both the public and private sector and to drive growth through
      management, strategic guidance, capital and financial support, and government
      marketing expertise.”

    Mr.
      McMillen’s intentions with respect to such activities do not appear to have been
      disclosed in your IPO registration statement.

    In
      light
      of the short time frame between your initial public offering and Mr. McMillen’s
      acquisition of Celerity Systems, Inc. and the apparent overlap in business
      activities carried out by both FAAC and Homeland Security Capital Corporation,
      please disclose the timeline relating to the acquisition of Mr. McMillen’s
      interest in Celerity/Homeland, including the dates of all contacts and
      negotiations with Cornell Capital. We may have further comment.

    Response:
      In
      response to this comment, FAAC has added disclosure regarding discussions among
      Mr. McMillen, Cornell Capital and Homeland on pages 108 and 109 of Amendment
      No.
      2.

        John
          Reynolds

        John
          Zitko

        December
          8, 2006

        Page
          6

    As
      noted
      in the Staff’s comment and in the supplemented disclosure referred to above, Mr.
      McMillan did not enter into agreements with Cornell Capital and