Edgar Filing: AQUACELL TECHNOLOGIES INC

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SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the registrant [_]
Filed by a party other than the registrant [X]

Check the appropriate box:

[X] Preliminary proxy statement. (AMENDMENT)
[_] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2)).
[_] Definitive proxy statement.
[_] Definitive additional materials.
[_] Soliciting material under Rule 14a-12.

AQUACELL TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)

HAROLD W. PAUL, LLC
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of filing fee (check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computes
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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AQUACELL TECHNOLOGIES, INC.

10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
__________________________

NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
_________________________

November 25, 2003
_________________________

NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders ("Annual Meeting") of AquaCell Technologies, Inc.
(the "Company") will be held at The Center Club, 650 Town Center
Drive, Costa Mesa, California 92626 on November 25, 2003, at
11:00 a.m., for the following purposes, all as more fully
described in the attached Proxy Statement:

1. To elect two directors to serve for the ensuing three-
year period and until their successors are elected and qualified;

2. To ratify the appointment of Wolinetz, Lafazan &
Company, PC as independent accountants for 2004;

3. To ratify the issuance of 1,703,031 shares of common
stock in connection with a private placement completed in
September, 2003 to comply with AMEX Rule 713.

4. To ratify the amendment of the Company's 1998
Incentive Stock Plan; and

5. To transact such other business as may properly
come before the meeting and any and all adjournments thereof.

The Board of Directors has fixed the close of business on
October 3, 2003, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment thereof.

You are earnestly requested to date, sign and return the
accompanying form of proxy in the envelope enclosed for that
purpose (to which no postage need be affixed if mailed in the
United States) whether or not you expect to attend the meeting in
person. The proxy is revocable by you at any time prior to its
exercise and will not affect your right to vote in person in the
event you attend the meeting or any adjournment thereof. The
prompt return of the proxy will be of assistance in preparing for
the meeting and your cooperation in this respect will be
appreciated.

By Order of the Board of Directors

Karen B. Laustsen, Secretary

Rancho Cucamonga, California
October 23, 2003

AQUACELL TECHNOLOGIES, INC.

10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
__________________________

PROXY STATEMENT
__________________________

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 25, 2003
__________________________

This Proxy Statement and the accompanying form of proxy is
furnished to stockholders of AquaCell Technologies, Inc.
("Company") in connection with the solicitation of proxies, in
the accompanying form, by the Board of Directors of the Company
for use in voting at the Annual Meeting of Stockholders to be
held at The Center Club, 650 Town Center Drive, Costa Mesa,
California 92626 on November 25, 2003, at 11:00 a.m., and at any
and all adjournments thereof. Any proxy given pursuant to this
solicitation may be revoked by the person giving it by giving
notice to the Secretary of the Company in person, or by written
notification actually received by the Secretary, at any time
prior to its being exercised. Unless otherwise specified in the
proxy, shares represented by proxies will be voted FOR the
election of the nominees listed herein.

The Company's executive offices are located at 10410
Trademark Street, Rancho Cucamonga, CA 91730. On or about October
23, 2003, this Proxy Statement and the accompanying form of
proxy, together with a copy of the Annual Report of the Company
for the fiscal year ended June 30, 2003, are to be mailed to each
stockholder of record at the close of business on October 3,
2003.

VOTING SECURITIES

The Board of Directors has fixed the close of business on
October 3, 2003, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record at the close of business on
that date will be entitled to vote at the Annual Meeting or any
and all adjournments thereof. As of October 3, 2003, the Company
had issued and outstanding 10,454,255 shares of Common Stock, the
Company's only class of voting securities outstanding. Each
stockholder of the Company will be entitled to one vote for each
share of Common Stock registered in his name on the record date.
The presence, in person or by proxy, of a majority of all of the
outstanding shares of Common Stock constitutes a quorum at the
Annual Meeting. Proxies relating to "street name" shares that are
returned to the Company but marked by brokers as "not voted" will
be treated as shares present for purposes of determining the
presence of a quorum on all matters but will not be treated as
shares entitled to vote on the matter as to which authority to
vote is withheld by the broker ("broker non-votes"). The election
of directors requires a plurality vote of those shares voted at
the Annual Meeting with respect to the election of directors.
"Plurality" means that the individuals who receive the largest
number of votes cast "FOR" are elected as directors.
Consequently, any shares not voted "FOR" a particular nominee
(whether as a result of a direction to withhold authority or a
broker non-vote) will not be counted in such nominee's favor. All
other matters to be voted on will be decided by the affirmative
vote of a majority of the shares present or represented at the
Annual Meeting and entitled to vote. On any such matter, an
abstention will have the same effect as a negative vote, but
because shares held by brokers will not be considered entitled to
vote on matters as to which the brokers withhold authority, a
broker non-vote will have no effect on the vote. Stockholders
who purchased shares of common stock in the September 2003
private placement must abstain from voting on Proposal No. 3.

The following table sets forth certain information as of
October 3, 2003 (on which date 10,454,255 shares of the Company's
Common Stock were outstanding), with respect to (i) those persons
or groups known to the Company to beneficially own more than 5%
of the Company's Common Stock, (ii) each director and nominee,
(iii) each executive officer whose compensation exceeded $100,000
in fiscal 2003, and (iv) all directors and executive officers as
a group. The information is determined in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934 based
upon information furnished by the persons listed or contained in
filings made by them with the Securities and Exchange Commission.

Except as indicated below, the stockholders listed possess sole
voting and investment power with respect to their shares.

Shares of Percentage of
Common Stock Common Stock,
Beneficially Warrants and
Name and Address Owned Options
--------------------------------------------- -------------- -------------

James C. Witham............................. 2,017,030 (1) 19.34%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Karen B. Laustsen........................... 576,172 5.52%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Gary S. Wolff............................... 488,367 4.68%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Glenn A. Bergenfield........................ 374,500 (2)(3) 3.52%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Dr. William DiTuro.......................... 337,500 (2)(4) 3.16%
10410 Trademark Street
Rancho Cucamonga, CA 91730

All officers and directors as agroup
(five persons).............................. 3,793,569 34.84%

(1) Includes an aggregate of 480,000 shares owned of record
by Witham Group, LLC and JW Acquisitions, LLC which are
entities in which Mr. Witham controls 100% of the outstanding
equity.

(2) Includes 75,000 options exercisable within 60 days.

(3) Includes 75,000 series A convertible preferred shares and
75,000 common stock purchase warrants exercisable within 60
days.

(4) Includes 80,000 series A convertible preferred shares and
80,000 common stock purchase warrants exercisable within 60
days.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

Our Restated Certificate of Incorporation provides for three
classes of directors. Directors Witham and Bergenfield have been
appointed to Class I and will serve until the meeting of
stockholders in 2003; directors Laustsen and DiTuro have been
appointed to Class II and will serve until the meeting of
stockholders in 2005; and director Wolff has been appointed to
Class III and will serve until the annual meeting of stockholders
in 2004. After these directors' terms expire, newly elected
directors shall serve for three year terms or until their
successors are duly elected and qualified.

Two persons will be elected at the Annual Meeting to serve
as directors for a term of three years. The Board of Directors
has nominated James C. Witham and Glenn A. Bergenfield as the
candidates for election. Unless authority is withheld, the
proxies solicited by the Board of Directors will be voted FOR the
election of these nominees. In case either nominee becomes
unavailable for election to the Board of Directors, an event
which is not anticipated, the persons named as proxies, or their
substitutes, shall have full discretion and authority to vote or
refrain from voting for any other candidate in accordance with
their judgment.

Information About the Nominees

Name Age Position
---- --- --------

James C. Witham............ 62 Chairman of the Board and
ChiefExecutive Officer

Glenn A. Bergenfield....... 50 Director

Mr. James C. Witham founded AquaCell in March, 1997 and
serves as its Chairman and Chief Executive Officer. Prior to
founding AquaCell, Mr. Witham founded JW Acquisition Co. in May,
1996 and served as its Chief Executive Officer until March, 1997.
From April, 1987 through May, 1996, Mr. Witham founded and served
as Chairman, Chief Executive Officer and President of U.S.
Alcohol Testing. Mr. Witham also served as Chairman and Chief
Executive Officer of U.S. Alcohol's two publicly held
subsidiaries, U.S. Drug Testing, Inc. and Good Ideas Enterprises,
Inc. Mr. Witham is the husband of Karen B. Laustsen, President
of AquaCell.

Mr. Glenn A. Bergenfield has been a director of AquaCell
since July 1997. For the past fifteen years, Mr. Bergenfield has
been self-employed as a sole practitioner of law in the State of
New Jersey. Mr. Bergenfield served as a director of U.S.
Alcohol, and as a director of U.S. Drug Testing, Inc. and Good
Ideas Enterprises, Inc.

Information About the Other Directors and Executive Officers

The Company's other directors and executive officers are as
follows:

Name Age Position
---- --- --------

Dr. William DiTuro......... 48 Director

Karen B. Laustsen.......... 43 President, Chief Operating Officer,
Secretary and Director

Gary S. Wolff.............. 65 Chief Financial Officer, Treasurer
and Director

Dr. William DiTuro has been a director of AquaCell since
July 1997. Dr. DiTuro has been self-employed as a sole
practitioner of general pediatrics since 1986 and has served as a
clinical instructor of pediatrics at the Robert Wood Johnson
Medical School. Dr. DiTuro served as a director of U.S. Alcohol,
U.S. Drug Testing, Inc. and Good Ideas Enterprises, Inc.

Ms. Karen B. Laustsen is a founder of AquaCell and has
served as its President, Chief Operating Officer, Secretary, and
as a Director since March, 1997. Prior to founding AquaCell, Ms.
Laustsen served as President of JW Acquisition Co. from May, 1996
through March, 1997. From April, 1987 through May, 1996, Ms.
Laustsen served as Executive Vice President and a director of
U.S. Alcohol Testing of America, Inc. Ms. Laustsen also served
on the board of directors of U.S. Drug Testing, Inc. and Good
Ideas Enterprises, Inc. Ms. Laustsen is the wife of James C.
Witham, Chairman of AquaCell.

Mr. Gary S. Wolff is a founder of AquaCell and has served as
its Treasurer, Chief Financial Officer and as a Director since
March, 1997. Prior to founding AquaCell, Mr. Wolff served as
Chief Financial Officer and a director of U.S. Alcohol, a
publicly held company from April, 1987 through July, 1996. Mr.
Wolff also served as Chief Financial Officer and as a director of
U.S. Drug Testing, Inc. and as Treasurer and a director of Good
Ideas Enterprises, Inc. He is licensed as a Certified Public
Accountant in the States of New York and New Jersey and during
the period from July, 1996 through March, 1997 he was self-
employed as a sole practitioner of accounting.

The executive officers of the Company are elected annually
by the Board of Directors and serve at the discretion of the
Board.

During the fiscal year ended June 30, 2003, the Company's
Board of Directors held 7 meetings.

The Board of Directors maintains an Executive Committee
currently consisting of directors Witham, Laustsen and Wolff,
which has all of the authority of the Board of Directors except
as limited by applicable law. In addition we have an Audit
Committee and a Compensation Committee which are required to
consist of a majority of outside directors. The Audit Committee,
currently consisting of directors Bergenfield and DiTuro,
oversees actions taken by our independent auditors and reviews
our internal audit controls. The Compensation Committee,
currently consisting of directors Witham, Bergenfield and DiTuro,
reviews the compensation levels of our employees and makes
recommendations to the Board regarding compensation.

Audit Committee Information and Report

The Company's audit committee was established in June 2000
and is currently comprised of Glenn Bergenfield and William
DiTuro. The audit committee met 2 times in the fiscal year ended
June 30, 2003.

Audit Fees

For the fiscal year ended June 30, 2003, the aggregate fees
billed for professional services rendered for the audit of the
Company's annual financial statements and the reviews of its
financial statements included in the Company's quarterly reports
totaled approximately $51,000.

Financial Information Systems Design and Implementation Fees

For the fiscal year ended June 30, 2003, there were no fees
billed for professional services by the Company's independent
auditors rendered in connection with, directly or indirectly,
operating or supervising the operation of its information system
or managing its local area network.

All Other Fees

For the fiscal year ended June 30, 2003, there were no other
fees billed by the Company's independent auditors.

Audit Committee Report

Each member of the audit committee is an "independent
director" and is "financially literate" as defined under the Amex
listing standards. The Amex listing standards define an
"independent director" generally as a person, other than an
officer of the company, who does not have a relationship with the
company that would interfere with the director's exercise of
independent judgment. The Amex's listing standards define
"financially literate" as being able to read and understand
fundamental financial statements (including a company's balance
sheet, income statement and cash flow statement).

Pursuant to the audit committee's written charter, which was
adopted on June 1, 2000, the audit committee's responsibilities
include, among other things:

. annually reviewing and reassessing the adequacy of the
committee's formal charter;

. reviewing the annual audited financial statements with
the Company's management and its independent auditors
and the adequacy of its internal accounting controls;

. reviewing analyses prepared by the Company's management
and independent auditors concerning significant
financial reporting issues and judgments made in
connection with the preparation of its financial
statements;

. making recommendations concerning the engagement of the
independent auditor;

. reviewing the independence of the independent auditors;

. reviewing the Company's auditing and accounting
principles and practices with the independent auditors
and reviewing major changes to its auditing and
accounting principles and practices as suggested by the
independent auditor or its management; and

. reviewing all related party transactions on an ongoing
basis for potential conflict of interest situations.

The Company's audit committee has met and held discussions
with management and its independent auditors. Management
represented to the committee that the Company's consolidated
financial statements were prepared in accordance with generally
accepted accounting principles, and the committee has reviewed
and discussed the consolidated financial statements with
management and the independent auditors. The committee discussed
with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent
auditors also provided the audit committee with the written
disclosures required by Independence Standards Board Standard No.
1(Independence Discussions with Audit Committees) and the
committee discussed with the independent auditors and management
the auditors' independence, including with regard to fees for
services rendered during the fiscal year and for all other
professional services rendered by the Company's independent
auditors. Based upon the committee's discussion with management
and the independent auditors and the committee's review of the
representations of management and the report of the independent
auditors to the audit committee, the committee recommended that
the Board of Directors include the audited consolidated financial
statements in its annual report on Form 10-KSB for the fiscal
year ended June 30, 2003.

Glenn Bergenfield
William DiTuro

Executive Compensation

The following table sets forth information concerning
compensation for the fiscal years indicated for services in all
capacities awarded to, earned by or paid to the Company's Chief
Executive Officer and the other executive officers whose
compensation was in excess of $100,000 during the fiscal year
ended June 30, 2003.

Long-Term
Name and Principal Position Annual Compensation Compensation
------------------------------------------------------------ ----------------------------- -------------------------
Options All Other
Year Salary($)(1)(2) Bonus($) Granted(3) Compensation
---- --------------- -------- ----------- ------------

James C. Witham............................................. 2003 316,000 -- -- --
Chairman of the Board and Chief Executive Officer 2002 265,000 -- -- --
2001 196,000 -- -- --

Karen B. Laustsen........................................... 2003 190,000 -- -- --
President, Chief Operating Officer, Secretary and Director 2002 160,000 -- -- --
2001 99,000 -- -- --

Gary S. Wolff............................................... 2003 170,000 -- -- --
Treasurer, Chief Financial Officer and Director 2002 142,000 -- -- --
2001 103,000 -- -- --

(1) Aggregate salaries actually paid in fiscal year 2003 were
$109,000. $567,000 of accrued and unpaid salaries were
utilized to pay principal on certain notes receivable from
third parties that were personally guaranteed by the Company's
executive officers.

(2) All of the salaries actually paid to the officers during
fiscal 2003 represented vacation pay.

(3) No options were granted to the executive officers in the
last fiscal year. The executive officers do not hold any
options.

Employment Agreements

On February 12, 2001, we entered into five-year employment
agreements with each of Mr. Witham and Ms. Laustsen, and a two-
year employment agreement with Mr. Wolff that was extended
through June 30, 2005. These agreements provide for base
salaries of $265,000, $160,000, and $142,000, respectively, and
also provide for bonuses to be paid based upon established
financial performance targets. Each of these employment
agreements contains standard noncompete, confidentiality and
benefit provisions, including provisions for severance
compensation in the event of a termination without cause or
transactions that result in a change in control of AquaCell.
Each of these contracts provide that after the first year, the
base salary amounts will be subject to increase by 50% of the
amount of any bonus, with such bonus to be based on net sales and
net income earned during the prior year. The terms of the
employment agreements, including bonus criteria were reviewed and
approved by the Compensation Committee.

The following table sets forth certain information at June
30, 2003 with respect to the Company's equity compensation plans
that provide for the issuance of options, warrants or rights to
purchase the Company's securities.

Plan Category Number of Weighted- Number of
Securities to Average Securities
be Issued upon Exercise Price Remaining
Exercise of of Outstanding Available for
Outstanding Options, Future Issuance
Options, Warrants and under Equity
Warrants and Rights Compensation
Rights Plans (excluding
securities
reflected in the
first column)
-------------- --------------- --------------- ----------------
Equity
Compensation
Plans
Approved by 476,000 $ 0.92 524,000
Security
Holders

Equity
Compensation
Plans
Approved by 30,000 $ 0.65 470,000
Security
Holders

Report of the Compensation Committee Concerning Compensation of
Executive Officers

The Compensation Committee of the Board of Directors met
once during the 2003 fiscal year. The Committee has not
developed a formal compensation policy for the Company's
executive officers.

During 2003, Mr. Witham served as the Company's Chairman of
the Board and Chief Executive Officer. The compensation package
provided to Mr. Witham and the other executive officers are based
upon five (5) year and two (2) year employment agreements.

Bonus compensation, if any, to executive officers is based
generally upon the Company's fiscal performance and the
availability of resources as well as the executive officer's
individual performance and level of responsibility.

Stock option awards under the Company's stock option plans
are intended to attract and retain the best available talent and
encourage the highest level of performance by affording key
employees an opportunity to acquire proprietary interests in the
Company. The executive officers are also each entitled to
receive options although none have been granted to date.

James C. Witham
Glenn Bergenfield
William DiTuro

Summary of 1998 Incentive Stock Plan

Our 1998 Incentive Stock Plan, covering 1,000,000 shares of
our Common Stock, is administered by the Compensation Committee
of our Board of Directors. Among the Compensation Committee's
powers will be the authority to:

. interpret the plan;

. establish rules and regulations for its operation;

. select officers, other key employees, consultants and
advisors to receive awards; and

. determine the form, amount and other terms and
conditions of awards.

Directors, officers, key employees and independent
contractors will be eligible to participate in the plan. The
selection of participants is within the discretion of the
Compensation Committee.

The plan provides for the grant of any or all of the
following types of awards:

. stock options, including nonqualified stock options and
incentive stock options;

. stock awards;

. stock appreciation rights;

. performance shares; and

. performance units.

Awards may be granted by themselves, in combination or in
tandem with other awards as determined by the Compensation
Committee.

. Under the plan, the Compensation Committee may grant awards
in the form of nonqualified stock options or incentive stock
options, shares of our Common Stock, stock appreciation rights,
performance shares or performance units. The Compensation
Committee, with regard to each stock option, will determine the
number of shares subject to the option, the manner and time of
the option's exercise and vesting, and the exercise price per
share of stock subject to the option. The following limitations
are applicable under the plan: no incentive stock options may be
exercisable later than ten years after the date they are granted
and no nonqualified stock options may be exercisable later than
fifteen years after the date they are granted;

. the aggregate fair market value at the time of grant of
shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by a participant
during any calendar year cannot be more than $100,000;

. the exercise price of a stock option will not be less than
100% of the fair market value of the shares of Common Stock on
the date the option is granted for incentive stock options or
less than 85% of the market value for non qualified stock options
(or, in either case, not less than 110% of fair market value if
the optionee is an officer, director or a 10% stockholder);

. the option price must be paid by a participant by check or,
in the discretion of the Compensation Committee, by delivery of
our Common Stock; and

. awards may be subject to such terms, conditions,
restrictions or limitations, as the Compensation Committee deems
appropriate, including restrictions on transferability and
continued employment.

Under the plan, each stock appreciation right will entitle
the holder to elect to receive the appreciation in the fair
market value of the shares subject to the stock appreciation
right up to the date the right is exercised. Stock appreciation
rights may be granted independent of, or in connection with,
stock options. In the case of stock appreciation rights issued
independent of stock options, the appreciation shall not be
measured from a value less than 85% of the fair market value of
the shares on the date of grant. If the stock appreciation
rights are issued in connection with stock options, the
appreciation shall be measured from not less than the option
price. No stock appreciation right may be exercised earlier than
six months after the date of grant or later than the earlier of
the term of the related option or fifteen years after the date it
was granted.

Performance shares and units may be awarded either
alone or in addition to other awards and will consist of:

. in the case of performance shares, the right to receive
shares of Common Stock or cash of equal value at the end
of a specified performance period; or

. in the case of performance units, the right to receive a
fixed dollar amount, payable in cash or shares of Common
Stock or a combination of both at the end of a specified
performance period.

The Compensation Committee may condition the performance
shares or units on the attainment of specified performance goals
or such other facts or criteria as the committee shall determine.

The plan provides that awards shall not be transferable
otherwise than by law or by will or the laws of descent and
distribution. However, the Compensation Committee may permit the
transferability of an award to members of the participant's
immediate family or trusts or family partnerships for the benefit
of such family members.

The Board of Directors has the right to amend, suspend or
terminate the plan at any time, subject to the rights of
participants under any outstanding awards. However, no amendment
to the plan may be made without the approval of our stockholders
if such approval is required by law or regulatory authority.

Proposal No. 4 hereinafter seeks stockholder approval of an
amendment to the 1998 Plan increasing the number of shares
thereunder from 1,000,000 to 2,000,000. (See Proposal No. 4.)
No Plan securities were issued to any of the Company's executive
officers or directors during the last fiscal year.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934
requires AquaCell's directors and executive officers to file with
the SEC initial reports of ownership and changes in ownership of
AquaCell's Common Stock during the fiscal year ended June 30,
2003. AquaCell believes that its officers and directors complied
with all these filing requirements during the fiscal year. The
Company has relied upon the representations of its directors and
executive officers. The Company does not believe any other
stockholders are subject to Section 16(a) filing requirements.

Stock Performance Graph

The graph depicted below shows a comparison of cumulative
stockholder returns for the Company, the American Stock Exchange
Index and the Company's peer group.

Comparison of Cumulative Return for
The Period February 12, 2001 to June 30, 2003

[GRAPH]

Total Return to Shareholders
(Includes reinvestment of dividends)

ANNUAL RETURN PERCENTAGE
Years Ending

Company Name / Index Jun 01 Jun 02 Jun 03
-------------------------- ------ ------ ------
AQUACELL TECHNOLOGIES -10.00 -81.56 261.45
AMERICAN STOCK EXCHANGE -2.12 -2.70 8.53
PEER GROUP 19.95 28.22 -26.38

INDEXED RETURNS
Base Years Ending
Period
Company Name / Index 12Feb01 Jun 01 Jun 02 Jun 03
-------------------------- ------- ------ ------ ------
AQUACELL TECHNOLOGIES INC 100 90.00 16.60 60.00
AMERICAN STOCK EXCHANGE 100 97.88 95.23 103.36
PEER GROUP 100 119.95 153.80 113.23

Peer Group Companies
------------------------------------------------------------
IONICS INC
PENTAIR INC
VEOLIA ENVIRONNEMENT-ADR
(Name change from Vivendi Environmental 5/2003)

PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS

On September 14, 2003, the Board of Directors selected
Wolinetz, Lafazan & Company, PC as the Company's independent
public accountants for the fiscal year ending June 30, 2004.

Although neither federal nor state law requires the approval
of the auditors by stockholders, the Board believes that, in view
of the importance of financial statements to the stockholders,
the selection of independent public accountants should be passed
on by stockholders. Accordingly, approval of the following
resolution will be requested at the Meeting:

"RESOLVED, that the Board of Directors appointment of
Wolinetz, Lafazan & Company, PC to serve as the Company's
independent public accountants for fiscal year ending June
30, 2004 be, and the same hereby is ratified and approved."

The Board of Directors recommends a vote FOR the foregoing
resolution. In the event that stockholders disapprove of the
selection, the Board of Directors will consider the selection of
other auditors.

A representative of Wolinetz, Lafazan & Company, PC will be
present at the Annual Meeting or available by telephone. The
Company has been informed that the representative does not intend
to make any statement to the stockholders at the Annual Meeting,
but will be available to respond to appropriate questions from
stockholders.

Description of Capital Stock

General

Our authorized capital stock consists of 50 million shares
of capital stock, par value $0.001 per share. Currently
40 million of such shares of capital stock are classified as
Common Stock and 10 million are classified as Preferred Stock.
On October 3, 2003, 10,429,255 shares of our common stock were
outstanding and held by 123 stockholders of record and the
Company believes approximately 700 holders in the float. Our
Restated Certificate of Incorporation authorizes the Board to
classify any of the unissued shares of authorized Preferred Stock
into one or more different classes or series of Preferred Stock
which may be issued from time to time with such distinctive
designations, rights and preferences as may be determined by the
Board. We may issue Preferred Stock for possible future
financings of acquisitions or for general corporate purposes
without any legal requirement that further stockholder
authorization for such issuance be obtained. The issuance of
Preferred Stock could have the effect of making an attempt to
gain control of us more difficult by means of a merger, tender
offer, proxy contest or otherwise. Preferred Stock, if issued,
could have a preference on dividend payments which could affect
our ability to make dividend distributions to the holders of our
Common Stock.

Common Stock

Dividends. Holders of our Common Stock will be entitled to
dividends declared and payable at such times and in such amounts
as the Board will from time to time determine out of funds
legally available therefore. The rights of holders of our Common
Stock to receive dividends will be subject and subordinate to the
rights of any future holders of Preferred Stock as may be
authorized by us.

Liquidation. Upon our liquidation, dissolution or winding
up (either voluntary or involuntary), after payment of
liabilities, any future holders of classes of our Preferred Stock
or other senior stock, as may be authorized by us, will be
entitled to receive the payment of all liquidation and other
preference amounts; the holders of our Common Stock will be
entitled to receive our remaining assets available for
distribution to our stockholders pro rata according to the number
of shares held. The following shall not constitute a
liquidation, dissolution or winding up for the foregoing
purposes:

. our consolidation or merger with or into another
corporation;

. a merger of any other corporation with or into us or

. the sale of all or substantially all of our property or
business (other than in connection with a winding up of
our business).

Voting. Each holder of our Common Stock is entitled to one
vote for each share held of record on each matter submitted to
vote of holders of our Common Stock.

Other Rights. There are no preemptive or other subscription
conversion, redemption or sinking fund rights or provisions with
respect to shares of our Common Stock. We hold annual
stockholder meetings, and special meetings may be called by the
President or Secretary or holders of at least 20% of the total
voting power of all outstanding share of our capital stock then
entitled to vote or a majority of the Board. Our Restated
Certificate of Incorporation may be amended in accordance with
the Delaware General Corporation Law, subject to certain
limitations set forth therein.

Outstanding Options and Warrants

As of record date, up to 6,339,638 shares of Common Stock
are issuable pursuant to outstanding options and warrants as
follows:

. 506,000 shares of Common Stock are issuable, in
connection with outstanding options, at a weighted
average exercise price of $0.90; and

. 5,833,638 shares of Common Stock are issuable, in
connection with outstanding warrants, at a weighted
average exercise price of $2.55.

Series A Preferred Stock

Our Board has designated 1,870,000 shares of our preferred
stock as Series A Preferred Stock, 1,185,000 shares of which were
issued to private placement investors in April and May, 2003.

Dividends. The series A preferred stock will pay a cash
dividend, payable quarterly, at the rate of 8% per annum.
Dividends will cumulate if not paid.

Liquidation Preference. The series A preferred stock will
have priority over common stock in the event of liquidation equal
to its stated value, plus accrued and unpaid dividends.

Voluntary Conversion. Each share of the series A preferred
stock will be convertible, at the option of the holder, into one
share of common stock (subject to standard adjustments for stock
splits and dividends).

Mandatory Conversion. Each share of the series A preferred
stock automatically converts into common stock if (i) the closing
price of the common stock is at least $1.89 per share (subject to
standard adjustments for stocks, splits and dividends) for 20
consecutive trading days and (ii) either (a) at least one year
has passed since the issuance of the preferred stock or (b) a
registration statement registering the resale of the common stock
issuable upon conversion has been declared effective by the SEC
and the related prospectus remains current.

Voting. Holders of the series A preferred stock will not
have voting rights until their shares are converted into common
stock, except as required by Delaware Law.

Seniority. We may establish other series of preferred stock
senior to or parri passu with the series A preferred stock.

PROPOSAL NO. 3
TO RATIFY THE ISSUANCE OF 1,703,031 SHARES OF COMMON STOCK
IN CONNECTION WITH A PRIVATE PLACEMENT COMPLETED IN SEPTEMBER,
2003 TO COMPLY WITH AMEX RULE 713

In November 2002 we began exploring ways in which we could
raise additional capital to execute our business strategy and
concluded that raising capital privately was the most effective
way to raise the minimum amount of proceeds we foreseeably needed
in the shortest time frame. In April 2003 we completed a private
placement of 685,000 Series A Convertible Preferred shares at
$0.63 per share together with a matching number of warrants
exercisable at $1.16 per share. In May 2003 we completed a
second private placement of 500,000 Series A Convertible
Preferred shares at $0.75 per share with a matching number of
warrants exercisable at $1.60 per share. In both cases the
warrant exercise price exceeded the closing price of the
Company's common stock on AMEX on the day prior to the closing of
the private placement. The sale of 1,185,000 Preferred A shares,
convertible into common shares on a one-to-one basis represented
less than 20% of the Company's common stock, and therefore did
not require stockholders' approval pursuant to AMEX Rule 713.

In September 2003, the Company completed an additional
private placement of 1,703,031 shares of its common stock at
$1.50 per share, each share accompanied by a warrant exercisable
at $4.00 per share. All sales of convertible preferred and common
stock were made at a discount to market at the time of each
transaction, as this provided the Company with the fastest access
to funds necessary to execute our business plan. The Company
believed that due to distinction between the securities sold and
the lapse in time between the placements, that Rule 713 was
inapplicable. The shares underlying both the convertible
preferred shares and the warrants as well as the common shares
issued in the private placements are being registered with the
Securities and Exchange Commission. In connection with this
registration, we are seeking to list the additional shares
on AMEX. We were informed by the listing qualifications
personnel at AMEX that the issuance of the preferred and
common shares should be considered together. Under those
circumstances the issuances exceed the 20% limitation of Rule
713. After additional discussions with the AMEX, we agreed that
we would seek stockholders' approval of the September issuance.

The AMEX has the authority to delist the securities of any
issuer that fails to comply with its listing criteria, including
the stockholder voting provisions of Rule 713. Therefore, if we
do not obtain stockholders' approval to issue the 1,703,031
shares of common stock in excess of the limits of Rule 713, and
we nonetheless issue such shares, the Company's common stock
could be delisted from the AMEX. In the event of the delisting
of the Company's securities from the AMEX, trading, if any, in
the Company's securities would thereafter be conducted in the non-
Nasdaq over-the-counter market. As a result of such delisting,
the market price of the Company's common stock could be adversely
affected and an investor could find it more difficult to dispose,
or to obtain accurate quotations as to the market value, of the
common stock.

The Board of Directors recommends a vote FOR Proposal No. 3.

PROPOSAL NO. 4:
AMENDMENT OF THE COMPANY'S 1998 INCENTIVE STOCK PLAN

In order to provide the Company the ability to issue
options, the Board adopted the 1998 Incentive Stock Plan (the
"1998 Plan") on August 28, 1998. The 1998 Plan is intended to
encourage stock ownership by officers, employees, independent
contractors and advisors of the Company and thereby enhance their
proprietary interest in the Company.

On September 14, 2003, the Board of Directors adopted a
resolution, subject to shareholder approval, to amend the 1998
Plan to increase the number of shares issuable thereunder from
1,000,000 to 2,000,000. The Board of Directors believes that
stock options are valuable tools for the recruitment, retention
and motivation of qualified employees, including officers and
other persons who can contribute materially to the Company's
success. As of June 30, 2003, options to purchase 476,000 shares
were outstanding under the 1998 Plan. The Board of Directors
believes that equity ownership by management and other employees
has contributed to the Company's growth over the past five years.
The Board believes that it is important to have additional shares

available under the 1998 Plan to provide adequate incentives to
the Company's growing workforce and to continue aligning the
interests of management with those of the Company's stockholders.
A summary of the significant provisions of the 1998 Plan, as
amended from 1,000,000 shares to 2,000,000 shares is set forth
below.

Administration of the 1998 Plan

The 1998 Plan is administered by the compensation committee
(the "Committee") consisting of two or more persons who are
appointed by, and serve at the pleasure of, the Board and each
of whom is a "disinterested person" as that term is defined in
Rule 16b of the General Rules and Regulations under the
Securities Exchange Act of 1934. Subject to the express
provisions of the 1998 Plan, the Committee has the sole
discretion to determine to whom among those eligible, and the
time or times at which, options will be granted, the number of
shares to be subject to each option and the manner in and price
at which options may be exercised. In making such determinations,
the Committee may take into account the nature and period of
service of eligible employees, their level of compensation, their
past, present and potential contributions to the Company and such
other factors as the Committee in its discretion deems relevant.
Options are designated at the time of grant as either "Incentive
Stock Options" intended to qualify under Section 422 of the
Internal Revenue Code (the "Code") or "non-qualified options"
which do not so qualify.

The Committee may amend, suspend or terminate the 1998 Plan
at any time, except that no amendment may be adopted without the
approval of shareholders which would (i) increase the maximum
number of shares which may be issued pursuant to the exercise of
options granted under the Plan; (ii) change the eligibility
requirements for participation in the 1998 Plan; (iii) permit the
grant of any incentive stock option under the 1998 Plan with an
option price of less than 10% of the fair market value of the
shares at the time such incentive stock option is granted; or
(iv) extend the term of any incentive stock options or the period
during which any incentive stock options may be granted under the
1998 Plan.

Unless the 1998 Plan is terminated earlier by the Board,
the 1998 Plan will terminate on December 31, 2008.

Shares Subject to the Plan

No more than 2,000,000 shares of Common Stock may be issued
pursuant to the exercise of options granted under the 1998 Plan.
If any option expires or terminates for any reason, without
having been exercised in full, the unpurchased shares subject to
such option will be available again for purposes of the 1998
Plan.

Under certain circumstances involving a change in the number
of shares of Common Stock without the receipt by the Company of
any consideration therefore, such as a stock split, stock
consolidation or payment of a stock dividend, the class and
aggregate number of shares of Common Stock in respect of which
options may be granted under the 1998 Plan, the class and number
of shares subject to each outstanding option and the option price
per share will be proportionately adjusted. In addition, if the
Company is involved in a merger, consolidation, dissolution or
liquidation, the options granted under the 1998 Plan will be
adjusted or, under certain conditions, will terminate, subject to
the right of the option holder to exercise his option or a
comparable option substituted at the discretion of the Company
prior to such event. An option may not be transferred other than
by, will or by the laws of descent and distribution, and during
the lifetime of the option holder may be exercised only by such
holder.

Participation

The Committee is authorized to grant incentive stock options
from time to time to such employees of the Company as the
Committee, in its sole discretion, may determine. Employees of
the Company, advisors and independent contractors providing
services to the Company are eligible to receive non-qualified
options under the 1998 Plan. There are approximately 25 people
who may participate in the 1998 Plan at the present time.

Option Price

The exercise price of each option is determined by the
Committee, but may not, in the case of incentive stock options,
be less than 100% of the fair market value of the shares of
Common Stock covered by the option on the date the option is
granted. In the case of non-qualified options, the option price
per share may be less than, equal to or greater than the fair

market value of the shares of Common Stock covered by the option
on the date the option is granted but not less than 85% of the
Fair Market Value of the Common Stock shares on the grant date.
If an incentive stock option is to be granted to an employee who
owns over 10% of the total combined voting power of all classes
of the Company's stock, then the exercise price may not be less
than 110% of the fair market value of the Common Stock covered by
the incentive stock option on the date the option is granted.

Terms of Options

The Committee has the discretion to fix the term of each
option granted under the 1998 Plan, except past the maximum
length of term of each option is 10 years, subject to earlier
termination as provided in the Plan.

Required Vote

The affirmative vote of holders of a majority of the shares
of Common Stock present, in person or by proxy, at the Annual
Meeting is required to approve the 1998 Plan pursuant to the
following resolution:

"RESOLVED, that the Company's 1998 Stock Option Plan be
amended to provide for the issuance of up to 2,000,000
shares in the aggregate."

The Board of Directors recommends that you vote FOR the
amendment of the 1998 Plan.

2004 STOCKHOLDER PROPOSALS

In order for stockholder proposals for the 2004 Annual
Meeting of Stockholders to be eligible for inclusion in the
Company's Proxy Statement, they must be received by the Company
at its principal office in Rancho Cucamonga, California not later
than June 30, 2004. Stockholders are advised that the Company's
management shall be permitted to exercise discretionary voting
authority under proxies it solicits and obtains for the Company's
2004 Annual Meeting of Stockholders with respect to any proposal
presented by a stockholder at such meeting, without any
discussion of the proposal in the Company's proxy statement for
such meeting, unless the Company receives notice of such proposal
at its principal office in Rancho Cucamonga, California, not
later than August 25, 2004.

WHERE YOU CAN FIND MORE INFORMATION

We are a public company and file annual, quarterly and
special reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of
these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference room. Our
SEC filings are also available to the public at the SEC's web
site at http://www.sec.gov. In addition, you can read and copy
our SEC filings at the office of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, D.C.
20006.

You should rely only on the information contained or
incorporated by reference in this Proxy Statement. We have not
authorized anyone else to provide you with information that is
different from what is contained or incorporated in this Proxy
Statement. This document is dated October 23, 2003. You should
not assume that the information in this Proxy Statement is
accurate as of any later date, and the mailing of this Proxy
Statement to stockholders shall not create any implication to the
contrary.

INCORPORATION OF CERTIN DOCUMENTS BY REFERENCE

The Securities and Exchange Commission allows us to
"incorporate by reference" the information we file with them,
which means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is an important part of this Proxy Statement, and
information that we file later with the Securities and Exchange
Commission will automatically update and supersede this

information. We incorporate by reference the documents listed
below and any future filings made with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until the date of the special
meeting or any adjournment or postponement of the special
meeting:

. Our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2003; and

. Our Registration Statement on Form S-3 filed on October
22, 2003.

Any statement contained in a document incorporated or
deemed to be incorporated by reference in this Proxy Statement
shall be deemed to be modified or superseded for purposes of this
Proxy Statement to the extent that a statement contained in this
Proxy Statement or in any other document subsequently filed with
the Securities and Exchange Commission which also is deemed to be
incorporated by reference in this Proxy Statement modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement. We
will provide without charge to each person to whom a copy of this
Proxy Statement is delivered, upon request, a copy of any and all
documents incorporated by reference in this Proxy Statement.
Requests for such copies should be made to Gary S. Wolff, Chief
Financial Officer of the Company, 10410 Trademark Street, Rancho
Cucamonga, California 91730 or by calling (800) 326-5222.

SOLICITATION OF PROXIES

The solicitation of proxies in the enclosed form is made on
behalf of the company and the cost of this solicitation is being
paid by the Company. In addition to the use of the mails, proxies
may be solicited personally or by telephone or telephone using
the services of directors, officers and regular employees of the
Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the
Company for expenses incurred in sending proxy material to
beneficial owners of the Company's stock.

OTHER MATTERS

The Board of Directors knows of no matter which will be
presented for consideration at the Annual Meeting other than the
matters referred to in this Proxy Statement. Should any other
matter properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote
such proxy in accordance with their best judgment.

Karen B. Laustsen, Secretary

Rancho Cucamonga, California
October 10, 2003

PROXY CARD

AQUACELL TECHNOLOGIES, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 25, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned Stockholder(s) of AQUACELL TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), hereby appoints James C. Witham, Proxy, with full
power of substitution in the name, place and stead of the undersigned, to vote
the Annual Meeting of Stockholders of the Company to be held on November 25,
2003 and at all adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters.

(Continued and to be signed below)

Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope

================================================================================

1. Election of Directors:
James C. Witham, Glenn A. Bergenfield

[ ] FOR all nominees listed at left (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed at left.
[ ] *EXCEPTIONS

(INSTRUCTIONS: To withhold authority to vote for any individual nominee mark the
"Exceptions" box and write that nominee's name on the space provided below.)
EXCEPTIONS ____________________________________________________________________

2. Proposal to ratify the appointment of Wolinetz, Lafazan & Company, PC as
Independent Public Accountants for the Company for the Fiscal Year ending
June 30, 2004.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To ratify the issuance of 1,703,031 shares of common stock in connection
with a private placement completed in September, 2003 to comply with AMEX
Rule 713.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. Proposal to ratify amendment of the Company's 1998 Incentive Stock Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEE AND PROPOSALS
LISTED ABOVE.

Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partner-ship, please sign in partnership name by authorized person.

Date ______________________________________________, 2003

_______________________________________________________
Signature
_______________________________________________________
Signature, if held jointly