U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

     [ X ]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1997

     [   ]     TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                                  EXCHANGE ACT
               For the transition period from ________ to ________

                         Commission file number: 0-20102

                            CELERITY SOLUTIONS, INC.
        (Exact name of small business issuer as specified in its charter)


             Delaware                                   52-1283993
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
          incorporation)


                           200 Baker Avenue, Suite 300
                                Concord, MA 01742
                     (Address of principal executive office)


                                 (978) 287-5888
                            Issuer's telephone number


     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X__   No _____

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date:

                                                   Number Outstanding Shares
              Title of Class                        as of November 11, 1997
              --------------                        -----------------------
      Common Stock, $.10 Par Value                         6,032,065

     Transitional Small Business Disclosure Format:   Yes _____   No __X__

                                  Page 1 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.
                               SEPTEMBER 30, 1997
                                   FORM 10-QSB
                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----
PART I.  FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements
           Condensed Consolidated Balance Sheets as of 
           September 30, 1997 and March 31,1997                              3
           Condensed Consolidated Statement of Operations for the
             three and six months ended September 30, 1997 and 1996          4
           Condensed Consolidated Statements of Cash Flows for the
             six months ended September 30, 1997 and 1996                    5
           Notes to Condensed Consolidated Financial Statements              6

ITEM 2.  Management's Discussion and Analysis or Plan of
           Operation                                                         8


PART II  OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                  14

ITEM 2.  Changes in Securities                                              14

ITEM 3.  Defaults Upon Senior Securities                                    14

ITEM 4.  Submission of Matters to a Vote of Security Holders                14

ITEM 5.  Other Information                                                  15

ITEM 6.  Exhibits and Reports on Form 8-K                                   16

         Signatures                                                         16

                                  Page 2 of 16

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                            Celerity Solutions, Inc.
                      Condensed Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                 September 30        March 31
                                                                     1997              1997
                                                                 ------------------------------
                                                                 (Unaudited)
<S>                                                              <C>               <C>         
Assets
Current assets:
   Cash and cash equivalents                                     $  3,344,576      $    760,065
   Short-term investments                                             249,140           997,036
   Accounts receivable, net of allowance for doubtful accts           982,325         1,027,307
   Notes and guaranteed royalties receivable                          250,000           250,000
   Prepaid expenses and other current assets                          136,935            76,602
                                                                 ------------------------------
Total current assets                                                4,962,976         3,111,010

Property and equipment:                                               955,207         1,629,249
   Less: accumulated depreciation and amortization                   (581,908)         (970,874)
                                                                 ------------------------------
                                                                      373,299           658,375

Notes and guaranteed royalties receivable                           1,111,112         1,073,600
Goodwill net of accumulated amortization                              785,823           827,182
Other long-term assets                                                195,942           240,872
                                                                 ------------------------------
Total assets                                                     $  7,429,152      $  5,911,039
                                                                 ==============================

Liabilities and shareholders' equity 
Current liabilities:
   Accounts payable and accrued liabilities                      $    442,838      $    430,768
   Unearned revenue and other current liabilities                     402,785           395,382
                                                                 ------------------------------
Total current liabilities                                             845,623           826,150

Notes payable to related parties                                    1,552,069         1,552,069
Deferred rent                                                          77,582            83,328
                                                                 ------------------------------
Total liabilities                                                   2,475,274         2,461,547

Shareholders' equity:
   Common stock, $.10 par value                                       685,715           685,715
   Additional paid-in capital                                      16,747,202        16,747,202
   Accumulated deficit                                            (10,428,695)      (11,933,081)
                                                                 ------------------------------
                                                                    7,004,222         5,499,836

Less treasury stock, at cost                                       (2,050,344)       (2,050,344)
                                                                 ------------------------------
Total shareholders' equity                                          4,953,878         3,449,492
                                                                 ------------------------------
Total liabilities and shareholders' equity                       $  7,429,152      $  5,911,039
                                                                 ==============================
</TABLE>

     See accompanying notes.

                                  Page 3 of 16

<PAGE>

                            Celerity Solutions, Inc.
                 Condensed Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                              Three Months Ended                Six Months Ended
                                                 September 30                     September 30
                                            1997             1996             1997            1996
                                        ----------------------------      ----------------------------
                                              --(Unaudited)--                   --(Unaudited)--        
<S>                                     <C>              <C>              <C>              <C>        
Revenue:
  Services                              $ 1,000,672      $   280,409      $ 1,796,920      $   903,909
  Software licenses                         138,327           46,752          261,048          435,801
                                        ----------------------------      ----------------------------
Total revenue                             1,138,999          327,161        2,057,968        1,339,710

Cost of services                            578,185                         1,103,082
                                        ----------------------------      ----------------------------
Gross Margin                                560,814          327,161          954,886        1,339,710

Operating expenses:
  Research and development                  181,579          665,287          404,376        1,214,439
  General and administrative                331,177          301,746          654,965          729,006
  Sales and Marketing                       205,480                           329,824
  Consolidation charges                                      462,566                           462,566
  Amortization of goodwill and
   developed Software                        30,680                            61,360
                                        ----------------------------      ----------------------------
Total operating expenses                    748,916        1,429,599        1,450,525        2,406,011

Operating income (loss)                    (188,102)      (1,102,438)        (495,639)      (1,066,301)

Other income (expense):
  Interest and other income, net             67,241           75,666          136,038          135,669
  Interest expense                          (47,652)                          (95,304)
  Gain on sale of assets                         --                         2,037,104               --
                                        ----------------------------      ----------------------------
Income (loss) before income taxes          (168,513)      (1,026,772)       1,582,199         (930,632)
  Provision for income taxes                    813               --           77,813           14,400
                                        ----------------------------      ----------------------------

Net income (loss)                       $  (169,326)     $(1,026,772)     $ 1,504,386      $  (945,032)
                                        ============================      ============================

Net income (loss) per share                    (.03)            (.21)             .24             (.20)
                                        ============================      ============================

Weighted average shares outstanding       6,032,065        4,832,065        6,959,393        4,832,065
                                        ============================      ============================
</TABLE>

     See accompanying notes.

                                  Page 4 of 16

<PAGE>

                            Celerity Solutions, Inc.
                 Condensed Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                  Six Months Ended
                                                                    September 30
                                                                1997            1996
                                                            ----------------------------
                                                                   --(Unaudited)--       
<S>                                                         <C>              <C>         
Operating Activities
Net (loss) income                                           $ 1,504,386      $  (945,032)
Adjustments to reconcile net income to net cash used in
  operating activities:
  Depreciation of property and equipment                        106,788           92,015
  Amortization of Goodwill and developed software                61,360               --
  Gain on sale of assets                                     (2,037,104)              --
  Changes in assets and liabilities (net of effect from
    disposition):
    Accounts receivable                                        (122,520)         (67,607)
    Prepaid expenses and other current assets                   (69,271)         113,715
    Long-term notes, royalties, and other assets                (20,223)         (39,012)
    Accounts payable and accrued liabilities                    (71,479)         483,504
    Unearned revenue and deferred rent                           85,208          (51,711)
                                                            ---------------------------- 
Net cash used in operating activities                          (562,855)        (414,128)

Investing Activities
Purchases of short-term investments                                  --         (404,165)
Proceeds from sales of short-term investments                   747,896          326,210
Proceeds from sale of assets                                  2,509,757               --
Capital expenditures                                           (110,287)        (128,094)
                                                            ---------------------------- 
Net cash (used in) provided by investing activities           3,147,366         (206,049)

Financing Activities
Proceeds from sale of common stock                                   --               --
                                                            ---------------------------- 
Net cash provided by financing activities                            --               --
                                                            ---------------------------- 

Net (decrease) increase in cash and cash equivalents          2,584,511         (620,177)
Cash and cash equivalents at beginning of period                760,065        1,961,393
                                                            ---------------------------- 
Cash and cash equivalents at end of period                  $ 3,344,576        1,341,216
                                                            ============================ 
</TABLE>

     See accompanying notes.

                                  Page 5 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Statement of Information Provided

The accompanying unaudited condensed  consolidated  financial statements,  which
are for  interim  periods,  have been  prepared in  accordance  with Form 10-QSB
instructions  and  do  not  include  all  disclosures  provided  in  the  annual
consolidated  financial  statements.   These  unaudited  condensed  consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the year ended March 31, 1997 of Capitol  Multimedia,  Inc. (the
"Company"), as filed with the Securities and Exchange Commission.  These results
have been determined on the basis of generally  accepted  accounting  principles
and practices  applied  consistently  with those used in the  preparation of the
Company's  March 31,  1997  Annual  Report on Form  10-KSB.  The March 31,  1997
balance sheet was derived from audited consolidated  financial  statements,  but
does not  include all  disclosures  required by  generally  accepted  accounting
principles.


2.   Reclassifications

Certain  amounts in the September 30, 1996 Statement of Operations and Statement
of Cash  Flows have been  reclassified  to conform  to the  September  30,  1997
presentation.


3.   Sale  of  select   multimedia  assets  and  acquisition  of  Client  Server
     Technologies, Inc. (CSTI)

On April 16, 1997,  the Company sold  selected  multimedia  assets to Davidson &
Associates  (Davidson) for $2,509,759 in cash. The assets that were sold include
machinery and capital equipment  utilized in art, animation and audio production
in St.  Petersburg,  Russia,  and Concord,  Mass.  The net asset value of assets
transferred was $472,655.  As part of the  transaction,  the Company amended its
software development contract with Blizzard  Entertainment (the Company was paid
all  related  receivables  from  the  contract),  entered  into a  work-for-hire
agreement with Davidson related to software engineering  services,  and assigned
and transferred its present Concord, Massachusetts office lease to Davidson. The
Gain on Sale resulting from this transaction was $2,037,104.

On March 31, 1997, the Company  acquired all of the outstanding  stock of Client
Server  Technologies,Inc.(CSTI)  for $3,853,060. The purchase price was composed
of 1,200,000  unregistered  shares of the Company's common stock discounted to a
value of $1,050,000,  issuance of  non-interest  bearing  convertible  long-term
notes  totaling  $1,945,000 to sellers and  discounted to a value of $1,552,069,
and cash payments  totaling  $1,250,991.  Debt holders have the right to convert
$945,000 out of the  $1,945,000 in interest and  principal  under the notes into
shares of common stock at a $3.00 per share  conversion  price in December 1998.
The  transaction  was  accounted  for under  the  purchase  method  of  business
combinations. As a result of the acquisition,  $827,182 of goodwill was recorded
which will be amortized on a straight line basis over 10 years,  and  $2,200,000
of "In-Process Technology" which was written off at March 31, 1997.

                                  Page 6 of 16

<PAGE>


                           CELERITY SOLUTIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Supplemental  pro forma results of operations for the three and six months ended
September  30,  1997 and 1996,  assuming  the above  sale and  acquisition  were
consummated prior to April 1, 1996, are presented below.

<TABLE>
<CAPTION>
                                              Three Months Ended                Six Months Ended
                                                 September 30                     September 30
                                            1997             1996             1997             1996
                                        ----------------------------      ----------------------------
                                              --(Unaudited)--                   --(Unaudited)--        

<S>                                     <C>              <C>              <C>              <C>        
Total revenue                           $ 1,138,999      $ 1,223,764      $ 2,057,968      $ 2,527,406
Cost of services                            578,185          503,222        1,020,534          901,851
                                        ----------------------------      ----------------------------
Gross margin                                560,814          720,542        1,037,434        1,625,555
Operating expenses:
  Research and development                  181,579          180,804          404,376          401,021
  General and administrative                331,177          375,973          654,965          813,240
  Sales and marketing                       205,480          109,132          329,824          215,699
  Consolidation charges                                      462,566                           462,566
  Amortization of goodwill and
   developed software                        30,680           30,680           61,360           61,360
                                        ----------------------------      ----------------------------
Total operating expenses                    748,916        1,159,155        1,450,525        1,952,886

Operating income (loss)                    (188,102)        (438,613)        (413,091)        (327,331)

Other income:
  Interest and other income, net             67,241          116,309          136,038          201,823
  Interest expense                          (47,652)         (45,000)         (95,304)         (90,000)
  Gain on sale of assets
                                        ----------------------------      ----------------------------
Income (loss) before income taxes          (168,513)        (367,304)        (372,357)        (216,508)
  Provision for income taxes                                                                    14,628
                                        ----------------------------      ----------------------------
Net income (loss)                       $  (168,513)     $  (367,304)     $  (372,357)     $  (231,136)
                                        ============================      ============================

Net income (loss) per share                    (.03)            (.06)            (.06)            (.04)
                                        ============================      ============================

Weighted average shares outstanding       6,032,065        6,032,065        6,032,065        6,032,065
                                        ============================      ============================
</TABLE>


4.   Subsequent Event

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings  per Share,  which is required  to be adopted for periods  ending
after December 17, 1997  including  interim  periods.  At that time, the Company
will be required to change the method  currently  used to compute  earnings  per
share  and to  restate  all  prior  periods.  Under  the  new  requirements  for
calculating  primary  earnings per share,  the dilutive  effect of stock options
will be excluded.  The impact of this new  pronouncement  has not been presented
since the Company has not computed the effect at this time.

                                  Page 7 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


Business Developments

     During the  quarter  ended  June  1997,  the  Company  sold  certain of its
multimedia assets to Davidson, a division of CUC International, Inc. The Company
retained all rights to its fourteen (14) multimedia CD-ROM products currently on
the market,  three (3) new CD-ROM titles , all software  tools and engines,  and
software development capabilities in the United States and Russia. The Company's
current CD-ROM products are targeted  primarily at children ranging from 3 to 14
years of age and are  distributed  by  Davidson  and  Broderbund  Software  Inc.
(Broderbund).

     The  quarter  ended June 30, 1997 is the first  quarter to include  results
from CSTI which the Company acquired on March 31,1997. This acquisition provided
the Company an entry into the supply  chain  management  sector of the  business
software market, encompassing the planning and control of material and resources
from order entry through warehousing and logistics to customer delivery.  During
the  quarter,  CSTI  signed  license  and  service  arrangements  with  Teleport
Communications  Group Inc. (TCG) and Nortel  Communications  (Nortel)  valued in
excess  of  nine  hundred  thousand  dollars  ($900,000).   Revenue  from  these
agreements  should be  recognized  over the balance of fiscal  1998.  During the
quarter ended September 30, 1997 the Company signed several  additional  license
and service  arrangements  valued at approximately five hundred thousand dollars
($500,000) which should also be recognized during the remainder of fiscal 1998.


Presentation

     Since the  Company's  April 1997 sale of select  multimedia  assets and the
March 1997  acquisition  of CSTI,  the Company  has focused on the supply  chain
management  segment of the  business  software  market,  but  continues  to sell
existing   multimedia   software  titles  through  its  distribution   channels.
Accordingly,  the discussion and analysis of the Company's results of operations
compares pro forma results for the three and six month  periods ended  September
30,  1997 to pro  forma  results  for the  three  and six  month  periods  ended
September 30, 1996. This pro forma presentation,  which is included in the notes
to  condensed  consolidated  financial  statements,  assumes  that  the sale and
acquisition had occurred on March 31, 1996. The Company believes such comparison
provides a more meaningful analysis of current and prior fiscal year results.


Net Sales

     The  composition  of pro forma net sales for the three and six months ended
September 30, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended                       Six Months Ended
                                                   September 30                            September 30

                                         1997           1996        % Change      1997          1996      % Change
                                         ----           ----        --------      ----          ----      --------
<S>                                   <C>            <C>             <C>       <C>            <C>           <C>
Business software                     $1,051,555     $  997,012        6%      $1,938,174     $1,911,605      1%

Multimedia consumer software sales
  and royalties                           87,444        226,752      (61%)        119,794        615,801    (81%)
                                      ----------------------------------------------------------------------------
 Total net sales                      $1,138,999     $1,223,764       (7%)     $2,057,968     $2,527,406    (19%)
                                      ============================================================================
</TABLE>

                                  Page 8 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


Net Sales, continued

     Revenues from business  software  increased $54,543 or 6% and $26,569 or 1%
on a pro forma  basis for the three and six  months  ended  September  30,  1997
versus  the  comparable  periods  in 1996.  This  increase  is  attributable  to
increases  in  consulting  revenue  partially  offset by  decreases  in software
license and support maintenance revenues. License revenue recognition fluctuates
with customer  acceptance of the delivered  product and product sales to new and
existing  customers.  The decrease in license revenue from the corresponding six
months in 1996 is a timing difference related to the acceptance of licenses. The
Company  continues  to expand  all  phases of sales  and  marketing  in order to
generate  long-term  business  software sales growth.  The Company  expects that
business  software  revenue will increase above fiscal 1997 levels during fiscal
1998.

     Consumer  software  sales  and  royalties  decreased  $139,308  or 61%  and
$496,007  or 81% on a pro  forma  basis  for  the  three  and six  months  ended
September 30, 1997 versus the  comparable  periods in 1996  primarily due to the
continued competitive conditions of the edutainment CD-ROM market, oversupply of
juvenile edutainment CD-ROM products, intensified competition and limited retail
shelf  space.  During  the six  months  ended  September  30,  1996 the  Company
recognized  five  hundred  and twenty  thousand  dollars  ($520,000)  in prepaid
royalty  revenue  from the  release  of three  foreign  title  releases  and one
domestic title release.  The Company will not develop new multimedia products in
the foreseeable  future,  but has three (3) completed action adventure titles to
sell or license.  The Company  entered into a  distribution  agreement in April,
1997 with Davidson to  distribute  its Magic Tales series under the Fisher Price
label.  The  Company's  outlook  on revenue  from  consumer  software  sales and
royalties for the current fiscal year is dependent on the sale or license of the
three  new  multimedia  products.  With  the  Company's  decision  to  sell  its
multimedia  assets and to discontinue all development of multimedia  titles,  it
expects that royalty revenue will continue to decline in future periods.

     The  level  of  net  sales  realized  by the  Company  in  any  quarter  is
principally  dependent on the portion of projects  completed,  the number of new
software  licenses sold and the number of titles shipped for published  consumer
software titles.  The purchase of supply chain management  solutions  requires a
significant commitment of capital and resources on the part of the customer, the
sales cycles are long and average from six to nine months. As a result,  revenue
recognition  is subject to many risks such as budgetary  cycles,  changes in the
business of a customer and overall  economic trends that are not controllable by
the Company.  Quarterly  results have varied  significantly  in the past and are
likely to  fluctuate  in the  future as a result  of the  timing of new  orders,
product  development  expenditures,   the  number  and  timing  of  new  product
completions, and multimedia product shipments and returns. A significant portion
of the Company's  operating  expenses are fixed and planned  expenditures in any
given  quarter are based on sales and  revenue  forecasts.  Accordingly,  if net
sales do not meet the Company's  expectations  in any given  quarter,  operating
results  and  financial  condition  could be  adversely  and  disproportionately
affected.  As a result of these and other  factors,  the  Company's  results  of
operations and financial  condition for any period are  inherently  difficult to
predict.  Any significant change from levels expected by securities  analysts or
shareholders could result in substantial  volatility in the trading price of the
Company's common stock.


Cost of Services

     Cost of services are incurred in  connection  with the sale of supply chain
management  software.  It  consists  of costs  associated  with  consulting  and
implementation services that are sold as part of a total supply chain management
solution, and costs associated with providing support to customers.  These costs
increased  $74,963 or 15% and $118,683 or 13% during the three and six pro forma
months ended September 30, 1997 versus 1996. Cost of services as a percentage of
revenue from services  increased only 5% for the six months ended September 1997
versus 1996. The

                                  Page 9 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


Cost of Services, continued

Company has increased its consulting staff in anticipation of growing consulting
revenue. To the extent that the Company's consulting revenues do not increase at
anticipated  rates, the hiring of additional  consultants could adversely affect
the Company's  gross  margins.  The Company  expects this expense to increase in
absolute dollars, but not as a percentage of sales during fiscal 1998.


Research and Development

     Research and development  expense increased $775 or less than 1% and $3,355
or 1% during the three and six pro forma months ended  September 30, 1997 versus
the comparable  periods in 1996.  Research and development costs as a percentage
of total business software sales was 21% for both six month periods. The Company
expects research and development to increase during fiscal year 1998 as a result
of an expansion of product development for its supply chain management software.
There can be no assurance that the Company will be able to anticipate, evaluate,
and adapt to changes in platforms  and evolving  technologies,  or to do so in a
timely or cost effective manner.


Depreciation and Amortization

     Depreciation  and  amortization  only slightly changed on a pro form basis.
The Company  expects  depreciation  during fiscal year 1998 to  approximate  the
fiscal 1997 level.  The  acquisition of CSTI will increase the  amortization  of
goodwill and developed  software.  The total  amortization costs for fiscal 1998
are expected to be approximately $120,000.


General and Administrative

     General and  administrative  expenses decreased $44,796 or 12% and $158,275
or 20% during the three and six pro forma months ended September 30, 1997 versus
the comparable periods in 1996 as a result of the consolidation of the Company's
headquarters   in  Bethesda,   Maryland   into  its  new  facility  in  Concord,
Massachusetts and a decrease in administrative  staff. A significant  portion of
the Company's  operating  expenses are fixed,  and planned  expenditures  in any
given quarter are based on sales and revenue forecasts. Accordingly, if products
are not  completed  and/or  shipped  on  schedule  and net sales do not meet the
Company's  expectations  in any given quarter,  operating  results and financial
condition could be adversely  affected.  Given the Company's recent  acquisition
and sale of certain  assets,  as well as, the  consolidation  of  operations  in
November of 1996, the Company expects general and  administrative  expenses on a
pro forma basis to decrease in absolute  dollars and as a percentage of sales in
fiscal 1998 versus 1997.


Sales and Marketing

     Sales and marketing expense increased $96,348 or 88% and $114,125 or 53% on
a pro forma  basis  during the three and six months  ended  September  30,  1997
versus the  comparable  periods in 1996.  This item includes  personnel  related
costs,  as well as,  those costs  related to  facilities,  travel,  trade shows,
advertising and promotions.  Past CSTI  expenditures on sales and marketing were
substantially  below  industry  averages  and the  Company  is  committed  to an
investment  in sales and marketing  efforts and  alliances.  This  investment is
expected to generate an increase in future  revenue.  However,  the  benefits of
such expenditures are not expected to be realized during fiscal

                                  Page 10 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


Sales and Marketing, continued

1998.  There can be no  assurance  that the Company  will be able to realize the
benefits from this investment.  The Company expects sales and marketing expenses
to increase in absolute dollars and as a percentage of sales during fiscal 1998.


Consolidation Charges

     There are no  consolidation  charges in 1997, the $462,566 of consolidation
charges in the second  quarter of 1996 relate to the closing and  relocation  of
the Company's offices in Bethesda MD into its offices at Concord MA.


Gain on Sale of Assets

     The gain of $2,037,104  resulted from the sale of select  multimedia assets
to Davidson  for  $2,509,759  in cash.  The assets sold  include  machinery  and
capital  equipment  utilized  in art,  animation  and  audio  production  in St.
Petersburg,  Russia, and Concord, Mass. This gain is excluded from the pro forma
income statement.


Provision for Income Taxes

     The  provision  for  income  taxes  represents   alternative   minimum  tax
liabilities  and state income  taxes on income  earned.  The Company  expects an
effective tax rate of  approximately  4% for fiscal year 1998. This rate differs
from the statutory rate due to anticipated  partial recognition of $4,888,000 in
deferred tax assets which were fully reserved at March 1996.


Liquidity and Capital Resources

     The Company's primary sources of liquidity are cash, cash equivalents,  and
short-term  investments.  During the six months ended September 1997, cash, cash
equivalents,  and investments  increased $1,836,615 or 105% to $3,593,716.  This
increase  relates to $2,510,000  in proceeds from the sale of select  multimedia
assets,  less $  110,000  in  capital  expenditures  and  $563,000  used to fund
operating  activities.  The  Company  will use its  working  capital  to finance
ongoing  operations and fund the continued  expansion of its sales and marketing
resources.  Management expects its existing cash and short-term investments, and
cash generated from operations will be sufficient to meet the Company's expected
liquidity and capital needs for fiscal 1998.

     At September  30, 1997,  the Company had  outstanding  Series A Warrants to
purchase  492,700  shares of Common  Stock at $4.37 per  share.  These  warrants
expire  March 31, 1998,  subject to  extension  by the Company.  Pursuant to the
redemption  provision  in the Warrant  Agreement,  the Company has the option of
redeeming the warrants on an "all or nothing basis," and, given favorable market
conditions,  may do so. Exercise of these warrants would generate  approximately
$2,153,000 in cash.

     The  Company  continues  to  consider  investments  in or  acquisitions  of
compatible businesses.  However, there can be no assurance that the Company will
make investments in or enter into business  combinations with other entities. In
the  event  that  the  Company  engages  in such  transactions,  it may  require
additional financial resources.

                                  Page 11 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


Forward Looking Information

     Except for the historical  information  contained in this Form 10-QSB,  the
information  set forth  herein  includes  forward  looking  statements  that are
dependent on certain risks and uncertainties. Important factors that could cause
the actual results to differ  materially from the anticipated  results  include,
but are not limited to, the anticipated  growth of certain market segments;  the
positioning,   release  dates,   and  acceptance  of  Company  products  in  the
marketplace;  quarterly  fluctuations  and  seasonality;  political,  social and
economic  stability in Russia;  the competitive  environment  and  technological
change in the software industry; and dependence on distribution channels and key
personnel,  all of which are  difficult  to predict and many of which are beyond
the control of the Company.  Additional  information  on these and other factors
which  could  affect  the  Company's   financial  condition  and/or  results  of
operations  are included in the Company's  March 31, 1997 Form 10-KSB filed with
the Securities and Exchange Commission.

     The following is a  description  of certain risk factors that have not been
quantified by the Company in the past as they represent  risks  associated  with
the change in focus of the Company towards the supply chain  management  segment
of the business  software  market.  This list is not all inclusive and should be
considered  in  addition  to  factors  included  above  and  throughout  Item 2(
Management Discussion and Analysis ).

     Lack of  Profitability:  With the exception of the fiscal years ended March
31,1996 and 1997, the Company has not had a profitable  year since its inception
in 1982. With the acquisition of CSTI on March 31, 1997, management repositioned
the  Company  for  growth in an  expanding  industry.  However,  there can be no
assurance that the Company will be able to maintain any level of profitability.

     Dependence on New Products and Rapid  Technological  Change:  The Company's
success is largely  dependent  on its  ability to develop  new  products  and to
lengthen the life cycle of current products  through upgrades and  enhancements.
It must  continually  evaluate  and  adapt its  products  to  emerging  hardware
platforms and  technologies.  There can be no assurance that the Company will be
able to develop and market new products or product  enhancements that respond to
technological  change or evolving industry standards,  that new products will be
released on  schedule,  or that  released  products  will  achieve any degree of
market acceptance.

     Risk of Software Errors or Failures:  The Company's  software  products may
contain  undetected  errors  when  first  introduced  or when new  versions  are
released.  There can be no  assurance  that,  despite  testing of the  Company's
products,  errors  will be  detected in new  products  or  subsequent  releases,
resulting  in the loss of or a delay in market  acceptance  which  could  have a
material adverse effect on the Company's  business and its operating results and
financial condition.
                                  Page 12 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


     Competition:  The consumer and supply chain management  software industries
are  intensely   competitive.   Many  competitors  have  substantially   greater
financial,  technical,  marketing and  distribution  resources than the Company.
Competitors  in the supply  chain  management  software  industry  include  Baan
Company N.V., Logility, Inc., I2, Inc., and the Manugistics Group, Inc. Existing
competitors   may  continue  to  broaden   their  product  lines  and  potential
competitors,  including larger computer or software manufacturers, may enter the
market or increase their focus and resources on products and product lines which
compete  with the  company's  products.  An  increasing  number  of  competitive
products may result in an inability to  distribute or sell  products,  increased
development, marketing and distribution costs, and additional pricing pressures,
any of which could have a material  adverse  effect on the  Company's  operating
results.

     Lack of Product  Diversification:  The Company's  future  results depend on
continued market  acceptance of supply chain management  software as well as the
Company's  ability to adapt and modify such software to meet the evolving  needs
of its customers.  Any reduction in demand or increase in competition could have
a material adverse affect on the Company's operating results.

     Dependence on Certain Distribution  Channels:  The Company's future success
in the supply chain  management  software  industry  depends upon the successful
expansion of the Company's marketing,  sales, support and service organizations,
as well as its ability to establish alternative distribution channels, including
resellers, systems integrators and application software vendors. The Company has
formal and  informal  relationships  with a number of  third-party  software and
hardware vendors and consulting and system integration firms. Such firms include
Hewlett Packard,  Microsoft,  Digital Equipment Corp., COGNOS, Business Forecast
Systems, and The Orion Group Software Engineers,  Inc. There can be no assurance
that the  Company  will be able to expand  its  marketing,  sales,  support  and
service  organizations or develop additional  distribution  channels on a timely
basis.

     Proprietary  Intellectual Property Rights: The Company regards the software
it owns as  proprietary  and relies  primarily on a combination  of  copyrights,
trademarks, trade secret laws, employee and third party nondisclosure agreements
and other methods to protect its proprietary  intellectual  property rights. The
Company  has  registered  trademarks  in the United  States  for  certain of its
product  names and has pending  trademark  applications  for certain  additional
product names.  Most of the Company's  products do not include any mechanisms to
prevent  or  inhibit  unauthorized   copying,  nor  does  the  Company  rely  on
shrink-wrap licenses which restrict copying and use of the products. The Company
is aware that unauthorized  copying occurs within the software industry and that
if a significant  amount of unauthorized  copying of the Company's products were
to occur,  the  Company's  business  and  operating  results  could be adversely
affected.  As the number of software  products increase and the functionality of
these products further  overlaps,  software  developers may become  increasingly
subject to  infringement  claims.  Although there are currently no  infringement
claims  against the Company,  there can be no assurance  that third parties will
not assert  infringement  claims  against the Company with respect to current or
future  products,  or that any such  assertion  will not  require the Company to
enter into royalty arrangements or incur significant litigation costs.

                                  Page 13 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Not Applicable.


ITEM 2.  CHANGES IN SECURITIES

Not Applicable.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

                                  Page 14 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's  Annual Meeting of  Shareholders  was held on August 21, 1997. The
following voting matters were approved at the meeting:

<TABLE>
<CAPTION>
                                                                                 Against/                     Broker
                                                                   For           Withheld      Abstain      Non-Votes
                                                                   ---           --------      -------      ---------
<S>                                                             <C>               <C>          <C>          <C>      
1.   Election   of  seven   persons  to  the  Board  of
     Directors  to hold  office  until the next  Annual
     Meeting  or  until  their   successors  have  been
     elected and qualified or their earlier resignation
     or removal:
          Robert Donaldson                                      4,605,851          35,687         --             --
          Luda Kopeikina                                        4,606,613          34,925         --             --
          Nico B.M. Letschert                                   4,606,613          34,925         --             --
          Igor R. Razboff                                       4,606,613          34,925         --             --
          Philip R. Redmond                                     4,606,613          34,925         --             --
          Richard Santagati                                     4,606,613          34,925         --             --
          Alan White                                            4,606,613          34,925         --             --

2.   Ratification  and  approval of an Amendment to the
     Company's Amended and Restated 1992  Non-Qualified
     Stock  Option Plan for  Non-Employee  Directors to
     increase  the number of  authorized  shares of the
     Company's common stock issuable under the Director
     plan from 300,000 to 600,000.                              2,520,854         209,781       54,765      1,856,138

3.   Ratification  and  approval of an Amendment to the
     Company's Amended and Restated 1991  Non-Qualified
     Employee  Stock Option Plan  increasing the number
     of shares  issuable  under the Employee  Plan from
     1,500,000 to 3,000,000.                                    2,379,114         209.681      106,487      1,946,256

4.   Ratification  and  approval  of  an  Amendment  to
     Article  1  of  the   Company's   Certificate   of
     Incorporation  to  change  the  Company's  name to
     "Celerity Solutions, Inc.".                                4,598,059          23,985       19,494       -
</TABLE>


ITEM 5.  OTHER INFORMATION

Not Applicable.

                                  Page 15 of 16

<PAGE>

                            CELERITY SOLUTIONS, INC.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     3.1  Certificate of  Incorporation,  as amended  (incorporated by reference
          herein to the exhibit  filed with the  Company's  Form 8K dated August
          21, 1997 filed on September 5,1997).

     4.5  Amended and  Restated  1991  Non-Qualified  Celerity  Solutions,  Inc.
          Employee Stock Option Plan  (incorporated  by reference  herein to the
          exhibit filed with the  Company's  Form 8K dated August 21, 1997 filed
          on September 5,1997).

     4.6  Amended  and  Restated  1992  Non-Qualified   Stock  Option  Plan  for
          Non-Employee  Directors  (incorporated  by  reference  herein  to  the
          exhibit filed with the  Company's  Form 8K dated August 21, 1997 filed
          on September 5,1997).

     11.1 Computation of Earnings Per Share

     27.1 Financial Data Schedule


(b)  Reports on Form 8-K:

     On September 5, 1997,  the Company filed a Form 8-K  disclosing the results
of votes brought  before  shareholders  at its annual  meeting which was held on
August  21,1997.  Pursuant  to that vote the  Company  also filed  Exhibit 3.1 a
Certificate of Incorporation,  as amended on August 21, 1997 to reflect the name
change of the Company from "Capitol  Multimedia,  Inc." to "Celerity  Solutions,
Inc." ,as well as,  Exhibit 4.5 the  "Amended and  Restated  1991  Non-Qualified
Celerity  Solutions,  Inc.  Employee  Stock  Option  Plan" and  Exhibit  4.6 the
"Amended and Restated 1992 Non-Qualified  Celerity Solutions,  Inc. Stock Option
Plan for Non-Employee Directors".



                                    SIGNATURE

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                         CELERITY SOLUTIONS, INC.
                                         -----------------------------------
                                                (Registrant)


Date:  November 13, 1997                 /s/ James P. Dore
                                         -----------------------------------
                                         James P. Dore
                                         Controller (Principal Accounting
                                         Officer)

Date:  November 13, 1997                 /s/ Edward Terino
                                         -----------------------------------
                                         Edward Terino
                                         Chief Financial Officer &
                                         Secretary/Treasurer

                                  Page 16 of 16