SecProbe.io

CORRESP
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filename1.htm

October 21, 2014

United States Securities and Exchange Commission

Division of Corporate Finance

100 F Street, N.E.

Washington, D.C. 20549

 Attention: Mara L. Ransom, Assistant Director

Dietrich King, Legal Branch Chief

Daniel Porco, Staff Attorney

 Regarding: Great American Group, Inc.

Registration
Statement on Form S-1

Filed September
18, 2014

File No.
333-198814

Dear Ms. Ransom:

This letter is in response to the comments
received from the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”)
in the Staff’s comment letter to the Great American Group, Inc. (the “Company”) dated October 8, 2014,
with respect to the Registration Statement on Form S-1 (File No. 333-198814) filed by the Company on September 18, 2014
(the “Registration Statement”). For convenience, the text of the Staff’s comment appears below in boldface
type, with the Company’s response immediately below the comment in regular type. Capitalized terms used in the Company’s
response and not defined herein have the meanings given to them in the Registration Statement.

General:

Given the size of the offering relative
to the number of shares presently outstanding held by non-affiliates, as well as the nature of the offering and identity of the
selling shareholders, we are concerned that this transaction could be a primary offering on behalf of the registrant. Please provide
us with a detailed analysis as to why the proposed offering is not a primary offering on your behalf and thus should be appropriately
characterized as a transaction eligible to be made pursuant to Rule 415(a)(1)(i) under the Securities Act. We may have further
comments after reviewing your response. Please refer to Question 612.09 of our Compliance & Disclosure Interpretations for
Securities Act Rules, which can be found on our website, www.sec.gov.

Response:

The Company acknowledges the Staff’s
comment, but for the reasons set forth below respectfully submits to the Staff that the offering contemplated by the Registration
Statement is a valid secondary offering by or on behalf of the selling stockholders named therein that may be registered for resale
on a continuous basis pursuant to Rule 415(a)(1)(i) promulgated under the Securities Act.

Background of the Private Placement

As described in the Registration Statement,
on June 5, 2014 (the “PIPE Closing Date”), the Company closed the Private Placement pursuant to which
it issued and sold to investors (the “Investors”) an aggregate of 10,289,300 shares of the Company’s common
stock (collectively, the “Private Placement Shares”), at a purchase price of $5.00 per share (“Price
Per Share”), in a private placement offering commonly known as a “PIPE.” The Private Placement was
completed pursuant to the terms and provisions of the Securities Purchase Agreement entered into among the Company and the Investors
on May 19, 2014 (the “Purchase Agreement”). The Price Per Share was the result of arms-length negotiations
between the Company and the Investors. The Investors primarily responsible for negotiating the Price Per Share were sophisticated
institutional investors (the “Institutional Investors”). The Price Per Share represented a 19% premium to the
last reported sales price of the Company’s common stock as of closing on May 19th
($4.20 on a post 1-for-20 reverse-split basis).

At the closing of the Private Placement
on June 5, 2014, the Company received aggregate gross proceeds of approximately $51.4 million. The Company used approximately $30
million of the net proceeds from the Private Placement to repay certain indebtedness and expects to use all remaining net proceeds
for working capital and general corporate purposes.

On June 18, 2014 (“Acquisition
Closing Date”), the Company completed the acquisition of B. Riley and Co., Inc. (“BRC”) pursuant
to the terms of the Acquisition Agreement (the “Acquisition Agreement”), dated as of May 19, 2014, by and among
the Company, Darwin Merger Sub I, Inc., a wholly owned subsidiary of the Company, B. Riley Capital Markets, LLC, a wholly owned
subsidiary of the Company (“BCM”), BRC, B. Riley & Co. Holdings, LLC (“BRH”), Riley Investment
Management LLC (“RIM,” and collectively with BRC and BRH, the “B. Riley Entities”) and Bryant
Riley, a director of the Company and principal owner of each of the B. Riley Entities.

Prior to and after the Acquisition, each
of the Company and BRC were and are operating businesses with meaningful revenues, lengthy operating histories and adequate cash
and assets to sustain their operations indefinitely.

The total preliminary purchase price for
the B. Riley Entities was $21.0 million, which was paid in the form of 4,191,512 newly issued shares of the Company’s common
stock (“Acquisition Shares”). The number of Acquisition Shares and the deemed $5.00 value were based on arms-length
negotiation between the Special Committee of the Board of Directors of the Company and the principals of the B. Riley Entities,
which pricing is consistent with the Price Per Share simultaneously negotiated with the Institutional Investors on behalf of the
Investors. The number of shares issued to the B. Riley Entities’ owners was fixed and not subject to an adjustment based
upon the subsequent trading price of the Company’s stock. The Company obtained a fairness opinion from an independent valuation
firm which indicated that the value obtained by the Company from the Acquisition is greater that the value paid by the Company
(i.e., the price paid in the Acquisition was fair to the Company and its stockholders).

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Although 38 of the selling stockholders
are affiliates of a broker-dealer, they are affiliates of a broker-dealer solely because they are employees, officers or directors
of the Company (the “Employee Holders”), a division of which is a broker-dealer.

On June 5, 2014, the Company entered into
the Registration Rights Agreement (the “Registration Rights Agreement”) with the Investors and certain parties
to the Acquisition Agreement, and the shares of the Company’s common stock (“Shares”) purchased or acquired
by them, as applicable, became subject to the Registration Rights Agreement. As required by the Registration Rights Agreement,
the Company filed the Registration Statement on September 18, 2014. The Shares subject to the Registration Statement
have been subject to market risk since the PIPE Closing Date and Acquisition Closing Date, respectively.

As of the closing of the Acquisition, there
were 15,977,482 Shares, which number includes the 10,289,300 Private Placement Shares and the 4,191,512 Acquisition Shares (the
Private Placement Shares and the Acquisition Shares together, the “Shares to be Registered”).

Rule 415 Analysis

Rule 415(a)(1)(i) promulgated under
the Securities Act provides that securities may be registered for an offering to be made on a continuous or delayed basis in the
future, provided that the registration statement pertains only to securities “which are to be offered or sold solely by or
on behalf of a person or persons other than the registrant, a subsidiary of the registrant or a person of which the registrant
is a subsidiary.” In other words, Rule 415(a)(1)(i) permits an issuer to register securities to be sold on a delayed
or continuous basis by selling stockholders in a secondary offering.

In the event an offering purported to be
a secondary offering is re-characterized as a primary offering on behalf of the issuer, (i) the offering would have to be
made on a fixed price basis and the selling stockholders would be unable to sell their securities at prevailing market prices,
(ii) the selling stockholders may be deemed to be “underwriters” with respect to the offering, and as a result,
exposed to potential liabilities under Section 11 of the Securities Act and (iii) in accordance with the Staff’s
long-standing interpretive position, Rule 144 promulgated under the Securities Act would never be available to the selling
stockholders to effect resales of their securities. In this regard, and as noted by the Staff in Securities Act Rules Compliance
and Disclosure Interpretation 612.09 (“C&DI 612.09”), the Staff’s interpretation of the availability
of Rule 415(a)(1)(i) can have a significant impact on the ability of smaller public companies, such as the Company, to raise
capital and on the ability of a selling stockholder to effect resales of its securities.

In C&DI 612.09, the Staff recognized
the importance of the characterization of an offering as a primary or secondary offering and identified the relevant factors to
be considered in analyzing the characterization of an offering. C&DI 612.09 provides as follows:

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“It is important to identify
whether a purported secondary offering is really a primary offering, i.e., the selling shareholders are actually underwriters
selling on behalf of an issuer. Underwriter status may involve additional disclosure, including an acknowledgment of the seller’s
prospectus delivery requirements. In an offering involving Rule 415 or Form S-3, if the offering is deemed to be on behalf of the
issuer, the Rule and Form in some cases will be unavailable (e.g., because of the Form S-3 “public float” test for
a primary offering, or because Rule 415(a)(1)(i) is available for secondary offerings, but primary offerings must meet the
requirements of one of the other subsections of Rule 415). The question of whether an offering styled a secondary one is really
on behalf of the issuer is a difficult factual one, not merely a question of who receives the proceeds. Consideration should
be given to (i) how long the selling shareholders have held the shares, (ii) the circumstances under which they received
them, (iii) their relationship to the issuer, (iv) the amount of shares involved, (v) whether the sellers are in
the business of underwriting securities, and finally, (vi) whether under all the circumstances it appears that the seller
is acting as a conduit for the issuer.” (emphasis added)

The Company has reviewed the factors set
forth in C&DI 612.09 and analyzed each of those factors as applied to the Shares to be Registered, which analysis is set forth
below. Based on the Company’s consideration of the totality of the facts and circumstances applicable to the Shares to be
Registered and each of the factors set forth in C&DI 612.09, the Company believes that the proposed resale of the Shares to
be Registered by the selling stockholders as contemplated by the Registration Statement should be characterized as a secondary
offering, and that all of the Shares to be Registered can be registered for resale by the selling stockholders pursuant to Rule 415(a)(1)(i).

 (a) How long the selling stockholders have held the Shares.

Presumably, the longer the Shares have
been held, the less likely it is that the selling stockholders are acting as a mere conduit for the issuer. In this case, 139 days
have passed since the PIPE Closing Date and 126 days have passed since the Acquisition Closing Date. During such time and until
the Registration Statement is declared effective, the selling stockholders have borne and continue to bear market risk for the
Shares to be Registered. While four of the selling stockholders transferred their Private Placement Shares, all such transfers
were to an affiliate of the initial purchaser. The Company is not aware of any other sales or transfers of the Shares to be Registered.
Several of the selling stockholders, including certain of the Institutional Investors, have owned Shares for a long period of time
prior to acquiring the Private Placement Shares. This evidences a long-term investment intent by investors who are not motivated
by a desire for immediate trading profits. Further, for the reasons discussed below, the Company does not expect substantial resales
of the Shares to be Registered to occur in the near future.

 · The Shares Historically Traded in Low Volumes: Although the Shares are quoted on the OTC
Bulletin Board, the trading volume of the Shares has historically been very low. According to Yahoo! Finance, the three-month average
daily trading volume of the Company’s common stock as of October 10, 2014, was 1,088 Shares. The Company respectfully submits
that the selling stockholders’ ability to resell the Shares to be Registered will be severely limited because the market
simply could not absorb such sales, even if such Shares are registered. For example, if the selling stockholders were to attempt
to liquidate their positions in the Shares to be Registered in the open market, and assuming that no other person sold any Shares,
it would take them approximately 53 years to sell the Shares to be Registered at the current daily trading volume. Given the length
of time it would take the selling stockholders to liquidate their positions, it is not credible to conclude that they have purchased
or acquired the Shares to be Registered for the purpose of quickly exiting their positions. In this situation, common in many PIPE
transactions, the concept that the selling stockholders have “freely tradable” shares is more theoretical than real.
For all practical purposes, the selling stockholders are largely prevented from liquidating substantial portions of their investments
for the near future, regardless of whether the Shares to be Registered are registered.

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 · Rule 144 Holding Period: Rule 144 creates a safe harbor from the Section 2(a)(11) definition
of “underwriter” which includes, among other conditions, a 6-month holding period. A person satisfying the applicable
conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an
underwriter of the securities for purposes of Section 2(a)(11). In this instance, most of the selling stockholders have held
the Shares to be Registered for approximately four and one-half months which is approaching the length of time required for the
Rule 144 exemption. The length of time which the Shares to be Registered have been held alone suggests that the selling stockholders
are not, and should not be deemed, underwriters for purposes of the Registration Statement.

 · Representations Made by Each of the Selling Stockholders: Each of the selling stockholders
represented to the Company in the Purchase Agreement or in the Acquisition Agreement, as applicable, that it acquired the Shares
to be Registered upon the closing of the Private Placement or the Acquisition, as applicable, for its own account and not with
a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities
laws. Each of the selling stockholders further represented that, as of the PIPE Closing Date or the Acquisition Closing Date, as
applicable, it did not have any agreement or understanding, directly or indirectly, with any person to distribute any of the Shares
it purchased in the Private Placement or acquired pursuant to the Acquisition, as applicable.

Moreover, the Company notes that there
is no mandatory holding period for a PIPE transaction such as the Private Placement to be characterized as a valid secondary offering.
As a result, the 139-day period that has already elapsed since the PIPE Closing Date and the additional future period that the
Company expects to elapse before resales of the Shares to be Registered are permitted to be sold under the Registration Statement
is substantially longer than the holding period required by the Staff for a valid PIPE transaction. As noted by the Staff in Securities
Act Forms Compliance and Disclosure Interpretation 116.19 (“C&DI 116.19”), a valid secondary offering could
occur immediately following the closing of a private placement. C&DI 116.19 provides as follows:

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“In a PIPE transaction,
a company will be permitted to register the resale of securities prior to their issuance if the company has completed a Section
4(2)-exemp