SecProbe.io

CORRESP
1
filename1.htm

Clifford E. Neimeth

Tel 212-801-9383

Fax 212-805-9383

neimethc@gtlaw.com

    April
16, 2018

VIA
EDGAR AND EMAIL

Division of Corporation Finance

Office of Mergers & Acquisitions

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Attention:  Nicholas P. Panos, Esq., Senior Special
Counsel

Joseph McCann, Esq., Attorney-Advisor

 Re: Aqua Metals, Inc.

Preliminary Opposition Proxy Statement
on Schedule 14A

Filed by Kanen Wealth Management,
LLC on April 11, 2018

Gentlemen:

We are counsel to Aqua Metals, Inc.
(the “Company” or “Aqua Metals”). On behalf of the Company,
we are providing this correspondence to the staff (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) in respect of the Preliminary Proxy Statement on Schedule 14A (the
“Opposition Proxy Statement”) filed with the Commission on April 11, 2018 by Kanen Wealth Management, LLC
and certain other participants (collectively, “Kanen”) in connection with the solicitation of proxies by
Kanen in opposition to the five director candidates nominated by the Board of Directors of Aqua Metals (the
“Board”) for election at the Company’s 2018 annual meeting of stockholders (the “Annual
Meeting”).

The purpose of this correspondence is to
respectfully bring to the Staff’s attention those instances where the Company believes the Opposition Proxy Statement contains
false and misleading statements or omissions that are material to, and unless remedied, could prevent an informed vote of the Company’s
stockholders at the Annual Meeting. The Company believes that these materially false and misleading statements and omissions violate
Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-9 thereunder,
and should be corrected before Kanen is permitted to mail definitive proxy materials to Aqua Metals’ stockholders. In addition,
the Company believes that Kanen has violated Section 13(d) of the Exchange Act and Regulation 13D thereunder by failing, in the
context of a contest for corporate control, to promptly amend the Schedule 13D filed by Kanen with the Commission on February 22,
2018, as amended (the “Schedule 13D”), as described in more detail below.

Securities and Exchange Commission

April 16, 2018

Page 2

The Company respectfully notes that in light
of its substantially disaggregated, primarily retail-level stockholder base, unlike  an issuer with a heavy concentration of
institutional owners (who may be readily capable of recognizing proxy contest – “campaign style” – rhetoric,
innuendo and unsubstantiated allegations portrayed as bald assertions of putative fact), a majority of the Company’s investors
(to whom Kanen’s proxy materials will be disseminated) have a heightened need for protection from unfair, confusing, misleading
and inaccurate disclosures in order to make a fully informed voting decision at the Annual Meeting.

 I. The Opposition Proxy Statement Contains Materially False and Misleading Statements and Material Omissions

The Company believes that the Opposition
Proxy Statement contains a number of false and misleading statements and material omissions, as described below. For your convenience,
these disclosures are identified below in numbered paragraphs containing specific references to the pages and paragraphs where
such disclosures appear in the Opposition Proxy Statement. These disclosures are immediately followed by the Company’s observations
and commentary with respect thereto.

Please note that the Company may have comments
and observations with respect to several additional disclosures made by Kanen in the Opposition Proxy Statement (specifically,
in respect of certain financial and operational information relating to the Company). In such case, the Company will provide such
additional comments and observations to the Staff by means of separate EDGAR correspondence within the next 48 hours.

1.       Kanen’s Current Disclosure: The second sentence of the first paragraph of the Letter to Stockholders that
accompanies the Opposition Proxy Statement (the “Letter to Stockholders”) states: “Our interests are
aligned with the interests of all Aqua Metals stockholders …”

Company Comment: The Company
believes that is an overbroad and conclusory statement of supposed fact, without any support for the statement or explanation of
why Kanen’s interests are “aligned” with those of other Aqua Metals’ stockholders. Although Kanen has made
a significant, albeit very recent investment in the Company, the Company’s investors (many of whom are retail-level investors
who have held their positions for a longer period of time than Kanen) may have different investment objectives, cost bases and
exit horizons than Kanen. The Company also believes that this statement was intended to imply and suggest as fact that, unlike
the interests of Kanen’s director nominees, the interests of the director candidates nominated by the Board are not aligned
with those of the Company’s stockholders and, therefore, the Board’s director nominees are either conflicted in some
fashion or otherwise incapable of effectively representing the interests of the Company’s stockholder base. The Company notes
that three of the Board’s five director nominees have been determined to be independent directors under applicable Nasdaq
rules, and the Company believes that Mr. Eric Prouty will also qualify as an independent director under the Nasdaq listing standards
if he is elected to the Board at the Annual Meeting. In addition, all of the Company’s current directors own equity (or rights
to purchase equity) in the Company. Accordingly, the Company believes that the foregoing disclosure should be deleted or clarified
accordingly.

Securities and Exchange Commission

April 16, 2018

Page 3

2.       Kanen’s
Current Disclosure: The fifth sentence of the third paragraph of the Letter to Stockholders states: “While the
Board’s recent plan to implement a transition of Dr. Clarke from his current position as President, CEO and Chairman of the
Board of Aqua Metals represents progress, it is disappointing that Aqua Metals’ Board acted only in response to our
nomination of director candidates.” (Emphasis added)

Company Comment: The Company
believes that this statement is materially false and misleading. The plan to transition Dr. Stephen Clarke from his position as
President, CEO and Chairman of the Board announced by the Company on March 27, 2018 was the result of a comprehensive and continuing
search for a successor CEO that has been ongoing since January 29, 2018, when the Board authorized an external executive search
firm and corporate governance consultant previously engaged by the Board in late 2017 to provide advice and assistance on board
composition matters and corporate governance best practices. As disclosed in the Opposition Proxy Statement, Kaned delivered its
notice of nomination of director candidates to the Company on March 23, 2018. (Opposition Proxy Statement, page 5) Thus, the foregoing
statement is factually inaccurate and misleading on its face.

The Company believes that this inaccurate
disclosure should be revised to delete the portion stating that the Board acted only in response to Kanen’s nomination of
director candidates.

3.       Kanen’s
Current Disclosure: The penultimate sentence of the third paragraph of the Letter to Stockholders states: “Our
proxy contest will seek to refresh the Board with highly-qualified independent directors and provide just the type of pressure
and impetus this Company needs to try to get back on track.”

Company Comment: The Company
believes that the conclusory phrase “independent directors” used in reference to Kanen’s director nominees is
a self-serving and wholly subjective characterization that is presented as a legal conclusion, without any factual support or explanation
of why Kanen’s director nominees are independent and by whom and under what legal standards their independence has been determined.
There is no disclosure of Mr. Kanen’s business, personal and financial history with such nominees and/or how he chose them
to participate in his opposition solicitation. If there are no such relationships, material or otherwise, the Company believes
Kanen should so state.

Securities and Exchange Commission

April 16, 2018

Page 4

Moreover, the Company believes that the
phrase “independent directors” used in reference to all of Kanen’s director nominees is false. Firstly,
one of Kanen’s director nominees is David L. Kanen, the Portfolio Manager and President of Kanen Wealth Management, LLC,
an investment advisory firm. The Company believes that if Mr. Kanen is elected to the Board at the Annual Meeting, as the founder
and, to the Company’s knowledge, sole principal of his investment advisory firm, there is a overwhelming risk that in his
decisions as a director of the Company he will be motivated by the interests of his firm and its investors, rather than the best
interests of the Company’s public stockholders. Unlike a financial institution, hedge fund, private equity firm or other
similar organization of substantial size with many principals, partners, members and employees, in this case David L. Kanen is
“the fund.” None of the customary information screens, confidentiality agreements and other fiduciary conflict safeguards
that typically would be implemented to ensure that Company and Board-level information obtained by a director-nominee of a fund
is not misappropriated or disclosed to the fund, can reasonably apply here.

Secondly, the Opposition Proxy Statement
omits to disclose that two of Kanen’s director nominees, Anthony Ambrose and Alan B. Howe, have previously participated as
Kanen’s director nominees in proxy contests involving other public companies. In particular, in September 2016, Kanen nominated
Messrs. Ambrose and Howe (together with four other candidates) for election to the board of directors of Magicjack Vocaltec Ltd.
in connection with an election contest that ultimately resulted in the appointment of Mr. Howe and one other director nominated
by Kanen to Magicjack’s board pursuant to a settlement agreement entered into between Magicjack and Kanen in February 2017.

The Company believes that these facts indicate
the possibility that close personal and/or professional ties exist between Mr. Kanen and each of Messrs. Ambrose and Howe, which
creates a significant risk that if they are elected to the Board at the Annual Meeting, they will be operate under Mr. Kanen’s
influence or otherwise be biased in favor of Mr. Kanen’s investment firm and its investors, which could render them incapable
of making independent decisions in the best interests of the Company’s stockholders based solely on the corporate merits
of the matters presented to them in their Company director capacities.

The Company believes that the foregoing
information is material and should be disclosed by Kanen to the Company’s stockholders in connection with any voting decision
they intend to make at the Annual Meeting. Accordingly, the foregoing disclosure should, at a minimum, be revised to specify the
factual and legal basis for characterizing all of Kanen’s director nominees as “independent directors” as well
as to disclose in more detail Kanen’s relationships with Messrs. Ambrose and Howe.

4.       Kanen’s
Current Disclosure: The fourth bullet point on page 4 of the Opposition Proxy Statement states: “On March 8, 2018,
Mr. Kanen discussed with Mr. DiVito the need for a new CEO and expressed concern regarding the excessive director compensation.”
The Opposition Proxy Statement further states on page 6: “We believe that the Board is earning too much for a tiny, unprofitable
company. The Company’s independent Board members are currently earning approximately $150,000 (including grants of options),
whereby companies’ board members this size typically make $25,000 to $40,000.”

Securities and Exchange Commission

April 16, 2018

Page 5

Company Comment: These self-serving,
subjective and conclusory statements are presented without adequate factual support. In particular, the allegation that the compensation
of the Company’s directors is “excessive” does not appear to be based on any comparison to any identifiable peer
group, benchmark or index. Rather, Kanen purports to compare the Company’s director compensation to that at “companies
of this size.” This rather vague description fails to explain what criteria (e.g., asset value, revenues, EBITDA, number
of employees, etc.) were used by Kanen to select such comparable companies. Without any disclosure of such criteria, the statistical
data provided by Kanen as factual support for the conclusion that the Company’s director compensation is “excessive”
is misleading and confusing. Accordingly, the foregoing disclosure should be revised to specify the criteria used by Kanen to identify
the comparable companies used in its analysis of the Company’s director compensation.

5.       Kanen’s
Current Disclosure: The seventh bullet on page 4 states: “On March 20, 2018, Mr. Kanen received an email from
Mr. DiVito and Mark Slade, a board member of the Company, stating that while the Board agreed to Dr. Clarke and Mr. Murphy serving
as Mr. Kanen’s point of contacts for further negotiations, upon further reflection the Board decided Mr. DiVito and Mr. Slade
would now be a joint point of communication for Mr. Kanen. To the representatives of Kanen, this again demonstrated that the Board
had procrastinated in diminishing the authority of Dr. Clarke and searching for a new CEO.”

Company Comment: While attention-grabbing
and constituting unsubstantiated innuendo, Kanen’s conclusion that the Board has “procrastinated” in diminishing
the authority of the Company’s CEO and searching for a new CEO is a total non-sequitur. In other words, it seems to
be completely disconnected from its purported factual predicate. The Company does not believe that the fact that the Company has
designated Messrs. DiVito and Slade, two of the Company’s independent directors, to be the Company’s appropriate points
of contact for communicating with an activist stockholder has anything to do with the Board’s determinations as to the scope
of authority of the Company’s CEO or the publicly announced search process conducted by the Board to identify a successor
CEO. Accordingly, the Company believes that the last sentence of the foregoing statement is utterly confusing and misleading and
should be deleted in its entirety.

6.       Kanen’s
Current Disclosure: The fourth bullet on page 5 of the Opposition Proxy Statement states: “On March 27, 2018,
the Company issued a press release announcing that the Board has approved and is implementing a plan to transition Dr. Clarke from
his current position as President, CEO and Chairman of the Board. Given the information Mr. Kanen received on March 12, 2018, the
announcement perplexed Kanen because just a week and a half prior, Dr. Clarke was the “point of contact” in negotiations.
To Kanen, it seemed that the Company’s management was contradicting themselves by saying a “transition was in the works
from late 2017. Furthermore, it begs the question as to whether or not the incumbent Board would have affected the needed change
absent the pressure from Kanen.”

Securities and Exchange Commission

April 16, 2018

Page 6

Company Comment: These statements
are yet another example of utterly confusing and misleading allegations that are non-sequiturs and completely disconnected
from the factual assertions Kanen purports to make. The Company believes that these statements, once again, are intended to support
Kanen’s argument that the Company’s publicly announced CEO succession plan is the result solely of Kanen’s change-in-control
campaign and agitation activities. It is unclear how or why the fact that Dr. Clarke informed Mr. Kanen on March 12, 2018 that
he and Mr. Murphy would be