**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**




**WASHINGTON,
      DC 20549**






**AMENDMENT
      NO. 1 TO**




**FORM
      10-Q**




( mark
      one )




x
      Quarterly Report
      Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934




For
      the
      quarterly period ended **September
      30, 2005**




o
      Transition report under
      Section 13 or 15(d) of the Securities Exchange Act of 1934




For
      the
      transition period from _______ to _______.




Commission
      File No. 814-00631




**CELERITY
      SYSTEMS, INC.**


(Exact
      name of registrant as specified in Its charter)




Delaware
            52-2050585(State
                or Other Jurisdiction of Incorporation
              or
                Organization)
            (I.R.S.
                Employer Identification No.)4100
                North Fairfax Drive, Suite 1150, Arlington, Virginia
            22203-1664(Address
                of Principal Executive Offices)
            (Zip
                Code)(865)
                539-5300(Issuer’s
                Telephone Number, Including Area
                Code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the past 12 months,
      and
      (2) has been subject to such filing requirements for the past 90 days. Yes o No o




Indicate
      by check mark whether the registrant is an accelerated filed (as defined in
      Rule
      12b-2 of the Exchange Act).




Yes o No þ




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o No þ




There
      were 4,390,579,206 shares of common stock outstanding as of October 24, 2005.





















**PART
      I**






**FINANCIAL
      INFORMATION**




**Item
      1.**  **Financial
      Statements**










2




**CELERITY
      SYSTEMS, INC.**






**Notes
      to Unaudited Condensed Financial Statements**






**Overview**




Celerity
      Systems, Inc., a Delaware corporation (the “ Company ”)
      has
      operated as a business development company (“ BDC ”)
      regulated pursuant to Section 54 of the Investment Company Act of 1940, as
      amended (the “ 1940
      Act ”).
      On
      August 29, 2005, the Board of Directors (the “ Board ”)
      moved
      to discontinue as a business development company subject to approval by the
      stockholders at their next special meeting to be held in December 2005. We
      intend to seek opportunities to invest in companies that offer attractive
      investment opportunities.






**1.**  **Financial
      Highlights**




**Nine
                Months**
            
            **Year
                Ended****September
                30**
            
            **December
                31****2005**
            
            **2004****Net
                asset value at beginning of period**
            
            $
            0.00030
            
            $
            0.00000**Net
                investment income**
            
            
            0.00001
            
            
            0.00026**Net
                realized gains and change in unrealized appreciation and other
                charges**
            
            
            (0.00021
            )
            
            (0.00019
            )**Total
                from investment operations**
            
            
            (0.00020
            )
            
            0.00008**Less
                distributions**
            
            
            NONE
            
            
            NONE**Net
                asset value at end of period**
            
            $
            0.00010
            
            $
            0.00008$
            0.00381
            
            $
            0.00188**Total
                return based on market price**
            
            
            -5.2018
            %
            
            4.0032
            %**Net
                assets at end of period**
            
            $
            17,494
            
            $
            1,319,183**Ratio
                of expenses to net assets**
            
            
            5816.76
            %
            
            99.86
            %**Ratio
                of net investment income to net assets**
            
            
            0
            
            
            0**Number
                of shares outstanding at end of period**
            
            
            4,390,579,206
            
            
            4,796,102,805









3




**2.**  **Presentation
      of Unaudited Interim Financial Statements**




The
      accompanying interim condensed financial statements and notes to the financial
      statements for the interim period as of September 30, 2005 and for the nine
      months ended September 30, 2005 and 2004, are unaudited. The accompanying
      interim unaudited financial statements have been prepared by the Company in
      accordance with accounting principles generally accepted in the United States
      for interim financial statements and pursuant to the requirements for reporting
      on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
      all the information and footnotes required by generally accepted accounting
      principles for complete financial statements. In the opinion of management,
      all
      adjustments (consisting of normal recurring adjustments) considered necessary
      for a fair presentation have been included. Operating results for the nine
      month
      period ended September 30, 2005, are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2005. The condensed
      financial statements should be read in conjunction with the financial statements
      and notes thereto included in the Form 10-K of the Company as of and
      for
      the year ended December 31, 2004. Certain September 30, 2004 balances have
      been
      reclassified to conform with the September 30, 2005 financial statement
      presentation.




On
      May
      20, 2003, the Company formed a subsidiary, Celerity Systems, Inc. (a Nevada
      corporation), (“ Celerity
      NV ”).
      The
      assets and liabilities related to the existing interactive video business were
      transferred to Celerity NV for 100% of the common stock of Celerity NV. As
      this
      subsidiary is not an investment company, after June 2, 2003, it is not
      consolidated with the parent company. The Company’s investment in Celerity NV is
      recorded at fair value, represented as cost, plus or minus unrealized
      appreciation or depreciation, respectively.




On
      August
      19, 2005, the Company formed a subsidiary, Homeland Security Advisory Services
      Corp., a Delaware corporation (“ HSASC ”).
      The
      only assets of HSASC as of the date of this Report are two Strategic Advisor
      Services Agreements that were transferred to HSASC on August 31, 2005 by C.
      Thomas McMillen in connection with Mr. McMillen being hired to serve as a
      Director, President and Chief Executive Officer of the Company. This transfer
      and the terms of the two Agreements are discussed below under Note 11,
“Subsequent Events”.





On
      October 6, 2005, the Company formed a subsidiary, Homeland Security Advisory
      Services, LLC, a Delaware limited liability company (“ HSASL ”).
      HSASL
      has no assets at this time.





On
      November 3, 2005, the Company formed a subsidiary, IntelliSecure Corp., a
      Delaware corporation (“ IntelliSecure ”).
      IntelliSecure has no assets at this time.





In
      accordance with Article 6 of Regulation S-X under the Securities Act of 1933,
      as
      amended, and Securities Exchange Act of 1934, as amended, the Company does
      not
      consolidate portfolio company investments in which the Company has a controlling
      interest.




The
      Company’s financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. The Company has had recurring
      losses and continues to suffer cash flow and working capital shortages. Since
      inception in January 1993 through September 30, 2005, the losses total
      $44,436,338. These factors, taken together with the lack of revenues and the
      absence of significant financial commitments, raise substantial doubt about
      the
      Company’s ability to continue as a going concern.




On
      June
      3, 2003, the Company elected to become a business development company regulated
      under Section 54 of the Investment Company Act of 1940, as amended. On June
      4,
      2003 the Company filed an Offering Circular Under Regulation E to sell up to
      $4,500,000 of its common stock at a minimum price of $0.001 to a maximum price
      of $0.02 in the succeeding 12-month period. Between June 4, 2003 and January
      13,
      2004, the last date of sale of securities under this offering, the Company
      sold
      1,289,833,333 shares resulting in net proceeds of $1,360,000.




There
      can
      be no assurances that the Company will be successful in its attempts to raise
      sufficient capital essential to its survival. To the extent that the Company
      is
      unable to raise the necessary operating capital it will become necessary to
      further curtail operations. Additionally, even if the Company does raise
      operating capital, there can be no assurances that the net proceeds will be
      sufficient enough to enable it to develop its business to a level where it
      will
      generate profits and positive cash flows. The financial statements do not
      include any adjustments relating to the recovery of the recorded assets or
      the
      classification of the liabilities that might be necessary should the Company
      be
      unable to continue as a going concern.




4


**Stock-Based
      Compensation**




The
      Company has granted options for 580,000,000 shares of the Company’s common stock
      to C. Thomas McMillen, all of which are subject to the terms and conditions
      of
      the Company’s option plan, as such plan may be amended from time-to-time. Since
      adoption of the option plan is subject to the stockholders’ approval at the
      upcoming Special Meeting to be held in December 2005 and is therefore not
      currently in force, and since the Company has not granted any stock options
      in
      2004, there was no stock-based compensation to be determined under the fair
      value method during the nine months ended September 30, 2005 and 2004 and there
      is no difference between net loss as reported and pro forma net
      loss.




**3.**  **Investment
      in Celerity Systems, Inc. (A Nevada corporation)**




Celerity
      NV had no operations for the nine months ended September 30, 2005. The following
      table represents Celerity NV’s operating results for the nine months ended
      September 30, 2004.




Sales
            
            $
            -0-Cost
                of Sales
            
            
            -0-Gross
                loss
            
            
            -0-General
                and administrative expenses
            
            
            214,221Net
                loss
            
            
            (214,221
            )







The
      following table represents Celerity NV’s balance sheet as of September 30,
      2004.




Accounts
                receivable, net
            
            $
            -0-Inventories,
                net
            
            
            -0-Total
                current assets
            
            
            -0-Fixed
                assets, net
            
            
            -0-Other
            
            
            -0-Total
                assets
            
            $
            -0-Accounts
                payable
            
            $
            72,763Advances
                from Celerity Systems, Inc.
            
            
            575,223Other
                current liabilities
            
            
            6,000Total
                liabilities
            
            
            653,986Stockholder
                DeficitCommon
                stock
            
            
            250Additional
                paid-in capital
            
            
            499,750Accumulated
                deficit
            
            
            (1,153,986
            )Total
                stockholder deficit
            
            
            (653,986
            )Total
                liabilities and deficit
            
            $
            -0-





Celerity
      NV developed and manufactured, at third party plants, digital set top boxes
      and
      digital video servers for the interactive television and high speed Internet
      markets. Celerity NV also provided a comprehensive content package for education
      users with over 1,300 titles available.




Prior
      to
      September 2004, the Company charged Celerity NV for salaries and benefits and
      a
      portion of overhead costs as a facility charge. During the first nine months
      of
      2004, the Company advanced $233,103 to Celerity NV to fund Celerity NV’s
      operations. This amount resulted in an unrealized depreciation on the investment
      in Celerity NV of $233,103 as reflected in the statement of operations of the
      Company.




In
      September 2004, the Company decided to cease operations within Celerity NV
      and
      exchanged all of the operating assets, customer lists and a cash payment of
      $15,000 for a 25% equity interest in Escent Systems, Inc. The Company has no
      managerial involvement and has not guaranteed or otherwise committed any future
      financing to the venture. Because of the start up nature of the new company,
      Celerity NV has valued its investment in Escent at nil. Also, in 2004, the
      Company recognized a loss of its cost and the unrealized depreciation of its
      cost and advances in Celerity NV.







5




**4.
      Investment in Sagamore Holdings, Inc.**




In
      September 2004, the Company entered into a business development agreement with
      Sagamore Holdings, Inc. (“ Sagamore ”)
      with
      an effective date of October 4, 2004. The Company received 7,500,000 shares
      of
      Sagamore common stock as consideration for its agreement to provide future
      services regarding capital formation and management advise. The Company has
      reviewed the valuation of the Sagamore stock using fair value, and, based on
      the
      liquidation preference of the preferred stockholder, management has considered
      the value of the stock as nil. Also, the Company has rendered no specific
      services in 2005 or 2004. There have been no events or circumstances occurring
      in the nine months ended September 30, 2005 that would change the valuation.
      Accordingly, the Board has continued to include the value of the Sagamore stock
      in its financial statements as nil and has not recognized any revenue from
      the
      transaction




**5.**  **Investment
      in Yorkville Advisors Management, LLC**




On
      December 1, 2003, the Company purchased a minority interest in Yorkville
      Advisors Management, LLC (“ Yorkville ”).
      Yorkville is the investment manager of a private equity fund that is a principal
      holder of equity securities of the Company. The purchase price amounted to
      $5,240,000. The acquisition was funded through the sale of 2,000,000,000 shares
      of common stock to the aforementioned private equity fund, resulting in net
      proceeds of $4,000,000 and the balance paid using the proceeds received from
      the
      issuance of convertible notes payable. During the year ended December 31, 2004
      and 2003, the Company received proceeds of $1,255,000 and $65,000, respectively,
      from this investment, which amounts have been recorded as dividend income in
      the
      statements of operations. In 2005, the Company was informed that Yorkville
      was
      in the process of an orderly liquidation of its business. Under the terms of
      a
      Preferential Rights Agreement, the Company’s membership interest in Yorkville
      was converted into a new class with certain preferential rights entitling the
      Company to receive consideration equal to the original purchase price of the
      investment less certain debt of approximately $1,500,000 due to Cornell Capital
      Partners, LP (“ Cornell ”),
      an
      affiliate of Yorkville and, also, a stockholder and related party of the
      Company. In the nine months ended September 30, 2005, the Company received
      $5,240,000 net of the $1,500,000 settlement price due to Cornell for debt that
      was contractually entered into and consisted of short term notes and debentures
      due to Cornell of $1,255,000 with related accrued interest of $105,302 and
      registration penalty of $311,428. Additionally, the transaction included a
      $10,000 short term payable to Edward Kidston, a former director for sales
      commissions which were written off as an offset against a disputed receivable.
      The Company had originally recorded the difference between the book value of
      the
      debt ($1,681,901) and the cash settlement of $1,500,000 as a gain on the
      liquidation of debt. However upon further consideration, the Company feels
      that
      the correct recording should be as an addition to additional paid in capital
      and
      has recorded the transaction as such in the balance sheet as of September 30,
      2005. The origination of the debt balances arose in the ordinary course of
      business as arm’s-length transactions that did not involve overreaching by
      either party, and did not rise as a result of a joint transaction under Section
      57 of the Investment Company Act of 1940, as amended (the “ ICA ”).






**6.**  **Loss
      Per Share**




Basic
      and
      diluted loss per share were computed by dividing net loss attributable to common
      stock by the weighted average number of common shares outstanding during each
      period. Potential common equivalent shares are not included in the computation
      of per share amounts in the periods because the Company reported a net loss
      and
      their effect would be anti-dilutive.






**7.**  **Convertible
      Debentures**




The
      long-term debt of the Company includes convertible debentures, issued for cash
      in the normal course of business, and is represented by the following
      items:




September
                30, 2005
            
            December
                31, 20044%
                convertible debentures
            
            $
            -0-
            
            $
            12,5005%
                convertible debentures
            
            
            232,500
            
            
            1,812,50010%
                secured convertible debenture
            
            
            -0-
            
            
            705,000232,500
            
            
            2,530,000Less:Unamortized
                debt discount
            
            
            (-0-
            )
            
            (242,988
            )Long-term
                debt
            
            $
            232,500
            
            $
            2,287,012




6




The
        $2,287,012 of long-term debt noted in the table above arose from the issuance
        of
        convertible debentures for cash in the normal course of the Company’s business.
        The debentures were issued at market rates of 4% to 10% from 2002 to June
        2004
        and were issued to (i) Cornell in an aggregate amount of $755,000, (ii)
        unrelated customers of the Company, Misiak and Benesch, in the aggregate
        amount
        of $1,250,000, and (iii) 14 unrelated individuals in the aggregate amount
        of
        $525,000. Certain of the debentures were issued before the date on which
        the
        Company elected to be treated as a BDC under the ICA, June 3, 2003 (the
“ BDC
        Election Date ”).
  All
          such
          debentures complied with Section 61(b) of the ICA as of their date of issuance,
          except that the convertibility feature of these debentures did not comply
          with
          Section 61(a)(3)(A)(iii) (Determination of Conversion Price) and Section
          61(a)(3)(A)(iv) (Shareholder Approval).
  In
        four
        instances, the conversion of debt resulted in issuance of common stock of
        the
        Company at a price less than NAV, which is contrary to the requirements of
        the
        ICA. The individuals that exercised their conversion rights were neither
        affiliates nor insiders of the Company. The issuance of these shares had
        a
        dilutive effect on the Company's stockholders because they were issued at
        a
        price below NAV. The conversions had an aggregate dilutive effect of 0.68%
        and
        resulted in an aggregate reduction of the Company's net assets of $59,319.86.
        The Company deems the dilutive effect and the reduction in net assets caused
        by
        these conversions to be not material.
   No
          convertible debentures that remain outstanding as of the date hereof will
          be
          converted into shares of common stock of the Company unless and until either
          (i)
          prior stockholder approval is obtained for such debentures, or (ii) the
          Company
          withdraws its election to be treated as a BDC under the ICA. If said election
          is
          not withdrawn then the Company will not permit conversion of any convertible
          debentures without obtaining prior stockholder approval for such debentures.
 
 The
          Company received $2,530,000 in cash in connection with the incurring of
          this
          debt, the balance, $242,988, was unamortized debt discount.


During
      the nine months ended September 30, 2005, no convertible debentures were
      presented for conversion, accordingly, no shares of its common stock were
      issued.




**8.**  **Stock
      Buyback Program**




In
      September 2004, the Board authorized the Company to establish a stock buyback
      program whereby the Company would acquire up to 500,000,000 shares of its common
      stock over a twelve month period from the open market at favorable prices.
      There
      was no obligation to acquire any specific number of shares or purchase at any
      specific price. At December 31, 2004, the Company had acquired 226,843,599
      shares at a cost of $561,334 and from January through September 2005, the
      Company acquired 178,680,000 shares at a cost of $417,967. The acquisitions
      have
      been accounted for as treasury stock until the cancellation of 405,523,599
      shares on June 2, 2005. The funding was provided primarily through a short
      term
      note of $500,000 from a related party through December 2004. In the nine month
      period through September 2005, the purchases were funded from proceeds from
      the
      liquidation of its Yorkville investment.






**9.**  **Judgments
      and Defaults Payable**




In
      January 2002, the Company terminated the Equity Line of Credit with Cornell
      because of delays in getting the related shares registered and, also, in order
      to pursue other types of financing arrangements. As a result, the Company does
      not have an effective registration statement including common shares to be
      issued in connection with certain debentures issued in 2001 and the first
      quarter of 2002 under the Line of Credit Agreement. The Company is required
      to
      pay liquidated damages in the form of increased interest on the convertible
      debentures as a result of not filing an effective registration statement for
      these debentures at a rate of 2% of the principle plus interest per month.
      The
      liability for liquidated damages has been accrued at its maximum amount. The
      Company has remaining accrued liquidated damages of $36,000 at September 30,
      2005.




In
      December 2001, Veja Electronics, Inc. d/b/a Stack Electronics sued the Company
      for breach of contract and is seeking damages in excess of $106,000. This action
      relates to amounts alleged to be owed from the cancellation of a purchase order.
      During 2003 a judgment was rendered against the Company in the amount of
      $71,000, which has been accrued at September 30, 2005.




In
      2003,
      Del Rio Enterprises sued the Company for non-payment of services rendered.
      During 2003 a judgment was rendered against the Company in the amount of $8,000.
      This amount has been accrued at September 30, 2005.




In
      addition, the United States Internal Revenue Service and the Knox County,
      Tennessee Trustee, creditors for which we have fully accrued liabilities, have
      threatened litigation if not paid. The Company is seeking to make arrangements
      with these creditors. There can be no assurance that any claims, if made, will
      not have an adverse effect on the Company. These amounts are included in the
      Company’s accounts payable and are accruing applicable late fees and
      interest.




**10.**  **Common
      Stock**




During
      the nine months ended September 30, 2005, the Company did not issue any shares
      of its common stock.




**11.**  **Reorganization**




At
      Special Meetings held on August 17, 2005 and August 29, 2005, the Board decided
      to pursue a new strategic direction to focus on owing and operating small and
      mid-sized businesses that provide homeland security solutions through innovative
      technologies to both the public and private sector and to drive growth through
      management, strategic guidance, capital and financial support, and government
      marketing expertise. To attain this end, the Board moved to approve and
      recommend several provisions to the Company’s stockholders at the upcoming
      Special Meeting to be held in December 2005.




First,
      the name of the Company will be changed to “Homeland Security Capital Company”
      to more closely describe the nature of the business, provided, however, that
      such name change will not be effective unless and until the stockholders approve
      of the Company withdrawing its election to be treated as a BDC under the 1940
      Act. Second, the Board moved to increase the number of authorized shares of
      common stock to twenty billion (20,000,000,000) with a par value of $0.001
      per
      share, and the number of shares of authorized preferred stock to three million
      (3,000,000) with a par value of $0.01 per share. Third, the Board adopted for
      recommendation to the stockholders a stock option plan and reservation of seven
      hundred and twenty million (720,000,000) shares of common stock for issuance
      thereunder. Fourth, the Board approved for recommendation to the stockholders
      that the Company withdraw its election as a BDC under the ICA and called for
      a
      Special Meeting of Stockholders to occur in December 2005 and established
      October 7, 2005 as the Record Date to determine the stockholders entitled to
      vote at such Meeting. Fifth, the Board approved a term sheet regarding the
      purchase by Cornell of $1 million of convertible preferred stock from the
      Company. Further, the Board also approved a term sheet regarding a financing
      agreement whereby Cornell would purchase up to $50 million of the Company’s
      common stock. Both of these term sheets are subject to definitive agreements.
      Sixth, the Board moved to accept the resignation of Robert Legnosky as a
      Director, Chief Executive Officer and President of the Company and to approve
      the appointment to serve in an unfilled position as a Director, and the
      employment of C. Thomas McMillen as the Company’s new Chief Executive Officer
      and President. Mr. Legnosky remained a Director and President of the Company’s
      subsidiary, Celerity NV. Finally, the Board moved that the Company was directed
      to prepare and file proxy materials with the United States Securities and
      Exchange Commission (the “ Commission ”)
      to
      solicit proxies for the December 2005 Special Meeting, and authorized the
      Company to do all things necessary to effect these changes and transactions.




7


**12.**  **Subsequent
      Events**




The
      Company entered into two business development agreements in 2004 in which the
      Company was to receive shares of common stock for providing capital formation
      and management services in the future. However, no consideration has been
      received and no services performed as of September 30, 2005 and to the date
      of
      this Report. The Company and the respective parties are currently negotiating
      a
      termination agreement.




On
      August
      31, 2005, C. Thomas McMillen transferred two Strategic Advisor Services
      Agreement, one with Hexa-One, Inc. (“ Hexa-One ”)
      and
      the other with Techalt, Inc. (“ Tech-Alt ”),
      to
      HSASC, a wholly-owned subsidiary of the Company, in connection with Mr. McMillen
      being hired to serve as a Director, President and Chief Executive Officer of
      the
      Company. As a result of the assignment of the Hexa-One Agreement, HSASC will
      receive 250,000 shares of common stock of Hexa-One in exchange for the provision
      of consulting services. As a result of the assignment of the Tech-Alt Agreement,
      HSASC will receive:
      (i) one hundred percent (100%) of the cash proceeds resulting from the sale
      non-qualified options to purchase three hundred thousand (300,000) shares of
      common stock of Techalt, less (ii) an amount equal to the taxes assessed against
      Mr. McMillen as the legal owner of said options in connection with such sale,
      and (iii) further reduced by any consulting payments to Mr. McMillen for his
      personal consulting services rendered to Techalt after such date.





On
      October 6, 2005, the Company closed a Securities Purchase Agreement with Cornell
      for the purchase of $1,000,000 of Series F Convertible Preferred stock, par
      value of $0.01 per share (the “ Series
      F Stock ”).
      Upon
      the termination of the Company’s status as a BDC under the ICA, the Series F
      Preferred Stock will become convertible at the option of the holder thereof,
      into such number of fully paid and non-assessable shares of the common stock
      of
      the Company, par value $0.001 per share, as is determined by dividing (a) the
      sum of (i) $1,000,000 (the original purchase price for the Series F Preferred
      Stock, plus (ii) all accrued but unpaid dividends thereon by (b) the conversion
      price then in effect. As set forth in the Certificate of Designation of the
      Series F Preferred Stock, the conversion price is $0.001, as adjusted from
      time-to-time as provided in such Certificate of Designation.





In
      connection with the above transaction, the Company issued Cornell one million
      shares of Series F Stock.





The
      Company will have the right to redeem upon three calendar days prior written
      notice to Cornell, all or any part of the Series F Preferred Stock at a
      redemption price equal to 125% of the amount redeemed. The redemption price,
      in
      immediately available funds, will accompany the written notice.





While
      the
      Company has elected to be treated as a BDC under Section 54 of the ICA, the
      holders of the Series F Preferred Stock will not be paid any dividends by the
      Company. Upon termination of the Company’s election to be treated as a BDC, the
      Series F Preferred Stock will not accrue dividends unless the aggregate number
      of shares of the Company’s common stock outstanding at any time and prior to
      conversion is less than 3,200,000,000 shares. Any such dividends will accrue
      at
      12% per annum and will be paid on a pro rata basis when and if declared by
      the
      Board. Dividends will be paid in cash, and dividends will be cumulative and
      will
      accrue from the date of issuance whether or not earned or declared and whether
      or not there exists profits, surplus or other funds legally available for the
      payment of dividends, provided, however, that no cash dividends or distributions
      will be declared or paid or set apart for payment on the common stock in any
      calendar year unless cash dividends or distributions on the Series F Preferred
      Stock for such calendar year are likewise declared and paid.





The
      Company intends to use the proceeds that it received in connection with the
      sale
      of the Series F Stock to Cornell for general working capital purposes, including
      funding the Company’s business plans and operations.





8


**Item
      2.**  **Management’s
      Plan of Operation and Discussion and Analysis**






**Introductory
      Statements**




*Forward-Looking
      Statements and Associated Risks.* ****** *This
      Report contains forward-looking statements. Such forward-looking statements
      include statements regarding, among other things, (a) our projected sales and
      profitability, (b) our growth strategies, (c) anticipated trends in
      our
      industry, (d) our future financing plans, (e) our anticipated needs for working
      capital, (f) our lack of operational experience, and (g) the benefits
      related to ownership of our common stock. Forward-looking statements, which
      involve assumptions and describe our future plans, strategies, and expectations,
      are generally identifiable by use of the words
“may,”“will,”“should,”“expect,”“anticipate,”“estimate,”“believe,”“intend,” or
“project” or the negative of these words or other variations on these words or
      comparable terminology. These forward-looking statements are based largely
      on
      our company’s expectations and are subject to a number of risks and
      uncertainties, including those described in “Business Risk Factors” of our Form
      10-K for the year ended December 31, 2004. Actual results could differ
      materially from these forward-looking statements as a result of changes in
      trends in the economy and our company’s industry, demand for our products,
      competition, reductions in the availability of financing and availability of
      raw
      materials, and other factors. In light of these risks and uncertainties, there
      can be no assurance that the forward-looking statements contained in this Report
      will in fact occur as projected.*




**Critical
      Accounting Policies**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires our management to make
      assumptions, estimates and judgments that affect the amounts reported in the
      financial statements, including the notes thereto, and related disclosures
      of
      commitments and contingencies, if any. We consider our critical accounting
      policies to be those that are complex and those that require significant
      judgments and estimates in the preparation of our financial statements,
      including valuation of our investments. Management relies on historical
      experience and on other assumptions believed to be reasonable under the
      circumstances in making its judgment and estimates. Actual results could differ
      materially from those estimates.




*Estimates.* The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.




*Fair
      Value of Financial Instruments.* The
      carrying amount of items included in working capital approximates fair value
      because of the short maturity of those instruments. The carrying value of the
      Company’s debt approximates fair value because it bears interest at rates that
      are similar to current borrowing rates for loans of comparable terms, maturity
      and credit risk that are available to the Company.




*Debt
      Offering Costs.* Debt
      offering costs are related to private placements and are being amortized on
      a
      straight line basis over the term of the related debt, most of which is in
      the
      form of convertible debentures. Should conversion occur prior to the stated
      maturity date the remaining unamortized cost is expensed.




*Investment
      Valuation.* Investments in equity securities are recorded at fair value, represented as
      cost, plus or minus unrealized appreciation or depreciation, respectively.
      The
      fair value of investments that have no ready market, are determined in good
      faith by management, and approved by the Board, based upon assets and revenues
      of the underlying investee companies as well as general market trends for
      businesses in the same industry. Because of the inherent uncertainty of
      valuations, management’s estimates of the values of the investments may differ
      significantly from the values that would have been used had a ready market
      for
      the investments existed and the differences could be material.




*Income
      Taxes.* The
      Company accounts for income taxes using the asset and liability method, whereby
      deferred tax assets and liabilities are determined based upon the differences
      between financial reporting and tax bases of assets and liabilities and are
      measured using the enacted tax rates and laws that will be in effect when the
      differences are expected to reverse. A valuation allowance related to the
      deferred tax assets is also recorded when it is more likely than not that some
      or all of the deferred tax asset will not be realized.




*Going
      Concern.* The
      Company’s financial statements have been prepared on a going concern basis,
      which contemplates the realization of asset and the settlement of liabilities
      and commitments in the normal course of business. The Company has had recurring
      losses and continues to suffer cash flow and working capital shortages. Since
      inception in January 1993 through September 30, 2005, the losses total
      $44,446,338. These factors taken together with the lack of revenues and the
      absence of significant financial commitments raise substantial doubt about
      the
      Company’s ability to continue as a going concern. The Company’s source of income
      during 2004 has been dividends from its minority investment in Yorkville. The
      Company’s investment in the minority interest of Yorkville was made on December
      1, 2003 and the Company has received $1,310,000 in dividend proceeds since
      that
      date. As of September 30, 2005, the Company has liquidated all of its interest
      in Yorkville and will not receive any further dividend income in the
      future.






9


**Results
      of Operations**






**Three
      Months Ended September 30, 2005 Compared to Three Months Ended September 30,
      2004**




**Realized
      loss on investments**




Since
      the
      election to operate as a BDC under the ICA, the Company has recorded a realized
      loss on its investment in Celerity NV. This loss is comprised of two
      elements:




Effect
                of recording advances at fair value
            
            $
            633,008Effect
                of recording equity investments at fair value
            
            
            500,000$
            1,133,008





The
      Company calculates realized loss on investments by totaling the aggregate amount
      of its initial investment, plus any additional advances made since the beginning
      of the investment. Unrealized losses on investments are calculated in the same
      manner, except they are then booked as an allowance for loss/reserve until
      realized.




The
      write-down of the Company’s advances to and investment in Celerity NV recognized
      that without additional sales, there was a substantial risk that Celerity NV
      would not be able to continue operations. On November 4, 2004, Celerity NV
      entered into an Asset Purchase Agreement with Escent Systems, Inc.
      (“ Escent ”)
      whereby Celerity NV sold its assets and interactive video business to Escent
      in
      return for 25% of Escent’s equity. Celerity NV also provided $15,000 in cash
      toward the working capital of the new venture. Because Escent has limited sales
      history and lack of necessary product and content development capacity, Celerity
      NV has determined that the fair value of the investment to be nil.




During
      the three month period ended September 30, 2004, Celerity NV recorded no sales
      or gross profit and incurred other general and administrative expenses that
      resulted in a net loss of $79,448 for the period. During such period Celerity
      NV
      received parent company advances of $8,141 to fund its working capital
      requirements. Management recorded a write-down of the Company’s advances since
      without additional sales, there is a substantial risk that Celerity NV will
      not
      be able to continue operations.




The
      Company has had no transactions with Celerity NV in the nine months ended
      September 30, 2005.






**Dividend
      income**




Since
      its
      investment in Yorkville on December 1, 2003, the Company has received $1,255,000
      in 2004 and $65,000 in 2003 in proceeds, which have been recorded as dividend
      income in the statements of operations. On January 31, 2005, the members of
      Yorkville decided to wind-up its operations and amended its Operating Agreement
      to establish a new class of membership with preferential rights. The Company’s
      investment interest was converted to this new class of ownership. The
      preferential rights allowed the Company to receive its investment purchase
      price
      returned in cash by December 31, 2005, but receive no other dividend income
      distributions. During the three month period ended September 30, 2005, the
      Company has received no proceeds that would be considered as dividend income.
      However, the Company did receive the remaining $3,000,000 of its original
      investment capital and the Company has no further interest in Yorkville as
      of
      September 30, 2005.




10


During
      the three month period ended September 30, 2004, the Company received $260,000
      in proceeds from its investment in Yorkville and recorded these receipts as
      dividend income in the statement of operations.






**Operating
      Expenses**




Operating
      expenses for the third quarter of 2005 were $271,477 compared to $181,684 for
      the third quarter of 2004, an increase of $89,793 or 49.4%. Increased operating
      expenses in 2005 can be attributed to higher payroll due to the signing bonus
      ($125,000) for C. Thomas McMillen, who serves as a Director, Chief Executive
      Officer and President of the Company and higher operating costs totaling
      approximately $135,000. Expenses were reduced by lower facility charges of
      $27,700 and lower professional fees of $17,400.






**Amortization
      of debt offering costs**




Amortization
      of debt offering costs for the third quarter of 2005 was nil compared to $16,154
      in same period of 2004. The debt associated with the debt offering costs was
      paid-off in the first quarter of 2005.






**Beneficial
      conversion feature - convertible notes**




Non-cash
      interest expense relating to amortization of a beneficial conversion feature
      for
      the various convertible debentures issues amounted to nil and $35,688 for the
      three months ended September 30, 2005 and 2004, respectively. This decrease
      results primarily from the payment of the debt prior to the third quarter of
      2005 which caused full recognition of the related beneficial conversion feature
      in that period.






**Interest
      Expense**




Interest
      expense for the three months ended September 30, 2005 was $2,930 compared to
      $88,183 for the same period in 2004, a decrease of $85,253 or 96.7%. The
      decrease is attributable to the repayment of debt primarily from the funds
      from
      the liquidation of the Yorkville investment in 2005.




**Settlement
      of Debt**




For
      the
      three months ended September 30, 2005, the Company settled certain trade
      payables that resulted in net gains of $61,236, compared to the three months
      ended September 30, 2004 when debt settlements resulted in net gains of
      $1,218.






**Net
      Loss Attributable to Common Stockholders**




As
      a
      result of the foregoing, the Company had a net loss of $211,155 or $0.00 per
      share for the three months ended September 30, 2005, compared to a net gain
      of
      $68,632 or $0.00 per share for the three months ended September 30, 2004, an
      increase of $142,523 or 207.7%.






**Nine
      Months Ended September 30, 2005 Compared to Nine Months Ended September 30,
      2004**




**Realized
      loss on investments**




Since
      the
      election to operate as a BDC, the Company has recorded a realized loss on its
      investment in Celerity NV. This loss is comprised of two elements:




Effect
                of recording advances at fair value
            
            $
            633,008Effect
                of recording equity investments at fair value
            
            
            500,000$
            1,133,008





11


The
      Company calculates the amount of the realized loss on investments by totaling
      the aggregate amount of its initial investment, plus any additional advances
      made since the beginning of the investment. Because of the nature of the
      operations and the large risk of loss due to the lack of profitable operations,
      the fair value of this investment has been considered as nil. The amount of
      the
      unrealized losses on this investment are calculated in the same manner, except
      they are then booked as an allowance for loss/reserve until realized.




The
      write-down of the Company’s advances to and investment in Celerity NV recognized
      that without additional sales, there was a substantial risk that Celerity NV
      would not be able to continue operations. On November 4, 2004, Celerity NV
      entered into an Asset Purchase Agreement with Escent whereby Celerity NV sold
      its assets and interactive video business to Escent in return for 25% of
      Escent’s equity. Celerity NV also provided $15,000 in cash toward the working
      capital of the new venture. Because Escent has limited sales history and lack
      of
      necessary product and content development capacity, Celerity NV has determined
      that the fair value of the investment to be nil.




During
      the nine month period ended September 30, 2004, Celerity NV recorded no sales
      or
      gross profit and incurred other general and administrative expenses that
      resulted in a net loss of $214,223 for the period. During such period, Celerity
      NV received parent company advances of $233,103 (net of cash recoveries from
      liquidation of inventories of $61,015) to fund its working capital requirements.
      Management recorded a write-down of the Company’s advances.






**Dividend
      income**




Since
      its
      investment in Yorkville on December 1, 2003, the Company has received $1,255,000
      in 2004 and $65,000 in 2003 in proceeds, which have been recorded as dividend
      income in the statements of operations. On January 31, 2005, the members of
      Yorkville decided to wind-up its operations and amended its Operating Agreement
      to establish a new class of membership with preferential rights. The Company’s
      investment interest was converted to this new class of ownership. The
      preferential rights allowed the Company to receive its investment purchase
      price
      returned in cash by December 31, 2005, but receive no other dividend income
      distributions. During the nine month period ended September 30, 2005, the
      Company has received its entire investment cost of $5,240,000 and the Company
      has no further interest in Yorkville.




During
      the nine month period ended September 30, 2004, the Company received $955,000
      in
      proceeds from its investment in Yorkville and recorded these receipts as
      dividend income in the statement of operations.






**Operating
      Expenses**




Operating
      expenses for the first nine months of 2005 were $664,397 compared to $514,212
      for the first nine months of 2004, an increase of $150,185 or 29.2%. Increased
      operating expenses in 2005 can be attributed to higher payroll ($113,185),
      professional service expenses (approximately $51,300), and higher operating
      and
      administrative costs (approximately $33,700). Expenses were reduced by lower
      facility charges ($48,000).






**Amortization
      of debt offering costs**




Amortization
      of debt offering costs for the first nine months of 2005 was $40,529, compared
      to $65,141 for the same period in 2004, a decrease of $24,612 or 37.8%. The
      debt
      associated with the debt offering costs was paid-off in the first quarter of
      2005.






**Beneficial
      conversion feature - convertible notes**




Non-cash
      interest expense relating to amortization of a beneficial conversion feature
      for
      the various convertible debentures issues amounted to $242,988 and $259,266
      for
      the nine months ended September 30, 2005 and 2004, respectively. This decrease
      results primarily from the payment of certain debt in 2005 which caused full
      recognition of the related beneficial conversion feature in this period compared
      to the longer amortization period for debt not converted.




12




**Interest
      Expense**




Interest
      expense for the nine months ended September 30, 2005 was $71,042 compared to
      $180,208 for the same period in 2004, a decrease of $109,166 or 60.6%. The
      decrease is attributable to the repayment of debt primarily from the funds
      from
      the liquidation of the Yorkville investment in 2005.




**Settlement
      of Debt**




For
      the
      nine months ended September 30, 2005, the Company settled certain convertible
      notes and trade payables that resulted in net gains of $1,372 **.** For the
      nine months ended September 30, 2004, debt settlements resulted in net gains
      of
      $41,196.




**Net
      Loss Attributable to Common Stockholders**




As
      a
      result of the foregoing, the Company had a net loss of $975,624, or $0.00 per
      share, for the nine months ended September 30, 2005, compared to a net loss
      of
      $254,620, or $0.00 per share, for the nine months ended September 30, 2004
      an
      increase of $721,004 or 279.2%.




**Liquidity
      and Capital Resources**




The
      primary source of financing for the Company since its inception has been through
      the issuance of common and preferred stock and debt. We had cash balances on
      hand of $630,033 as of September 30, 2005 and $1,863 as of December 31, 2004.
      Our cash position continues to be uncertain. Our primary need for cash is to
      fund our ongoing operations until such time that income from our investments
      generate enough proceeds to fund operations. In addition, our need for cash
      includes satisfying current liabilities of $562,909, consisting primarily of
      accounts payable of $314,568, accrued interest and other liabilities of
      $133,341, and judgments and defaults payable of $115,000, including a judgment
      of $71,000 obtained by Veja Electronics, Inc. for breach of contract, a judgment
      of $8,000 obtained by Del Rio Enterprises for non-payment of services, and
      liquidated damages resulting from the lack of filing a registration statement
      relating to certain convertible debentures of $36,000. We will need significant
      new funding from the sale of securities or from proceeds from our investments
      to
      fund our ongoing operations and to satisfy the above obligations. We anticipate
      that preferential distribution proceeds from the liquidation of our investment
      in Yorkville will provide sufficient funds in 2005 to operate the Company after
      satisfying certain related party debt of $1,500,000.




We
      currently do not have any commitments for funding except as follows: (i) on
      October 6, 2005, Cornell purchased $1 million of Series F Stock from the Company
      for net proceeds to the Company of $880,000 before the payment of legal expenses
      in connection therewith (please refer to page 7 hereof for a description of
      the
      Series F Stock and this transaction); and (ii) on August 29, 2005, the Board
      approved a term sheet regarding a financing agreement whereby Cornell would
      purchase up to $50 million of the Company’s common stock in connection with the
      establishment by Cornell of an equity line arrangement for the benefit of the
      Company. While the term sheet is subject to a definitive agreement being
      executed by Cornell and the Company and there can be no assurances that such
      agreement will, in fact, be executed, management believes that there is a
      substantial likelihood that such an agreement will be executed during the first
      quarter of 2006, provided that the stockholders of the Company approve of the
      withdrawal of the Company’s election to be treated as a BDC under Section 54 of
      the ICA, which will be voted on at the upcoming Special Meeting of Stockholders
      in December 2005. If such withdrawal is approved and such definite agreement
      is
      executed, the Company would then be able to draw on the equity line of credit
      with Cornell to fund the Company’s business plans. The Company intends to use
      the proceeds that it receives in connection with the sale of the Series F Stock
      to Cornell and any funds that it may receive under the equity line with Cornell
      for general working capital purposes, including funding the Company’s business
      plans and operations.




As
      discussed in the overview section, on September 3, 2003, the Company elected
      to
      become regulated under Section 54 of the ICA. As a BDC, the Company may sell
      up
      to $5,000,000 of its common stock in a 12-month period. Shares sold are exempt
      from registration under Regulation E of the Securities Act of 1933, as amended.
      To that end, at our Annual Meeting of Stockholders held on January 14, 2003,
      the
      stockholders approved an increase in our authorized capital stock to
      5,000,000,000 shares of common stock. On September 4, 2003, the Company filed
      an
      Offering Circular Under Regulation E to sell up to $4,500,000 of its common
      stock at a minimum price of $0.001 to a maximum price of $0.02. Between
      September 4, 2003 and January 13, 2004, the last date of sales of securities
      under this offering, the Company sold 1,289,833,333 shares resulting in net
      proceeds of $1,360,000.




13


We
      are
      also looking at several other options in terms of improving our cash shortage.
      We are continuing to seek to arrange financing, including possible strategic
      investment opportunities or opportunities to sell some or all of our assets
      and
      business, while continuing to pursue sales opportunities. The lack of sales
      or a
      significant financial commitment raises substantial doubt about our ability
      to
      continue as a going concern or to resume a full-scale level of
      operations.




During
      the nine months ended September 30, 2005, we had a net increase in cash of
      $628,170. Our sources and uses of funds were as follows:




***Cash
      Flows From Operating Activities.*** **** We
      used
      net cash of $1,396,363 in our operating activities in the nine months ended
      September 30, 2005. Our net cash used in operating activities resulted primarily
      from the Company’s net loss of $975,624, non-cash income of $180,001 related to
      the settlement of debt, the acquisition of miscellaneous assets of $150,215
      and
      the payment of accounts payable, judgments and defaults and accrued interest
      of
      $489,931. Cash was provided by non-cash expenses of depreciation of fixed assets
      of $8,400, beneficial conversion feature of $242,988, and debt offering costs
      of
      $40,529. In addition, cash was provided by increases in other current
      liabilities of $107,491.




***Cash
      Flows From Investing Activities*** *.* We
      provided cash of $5,240,000 in investing activities in the nine months ended
      September 30, 2005 from the proceeds from preferential distributions from
      Yorkville. As of September 30, 2005, we had no further interest in Yorkville.
      These funds were used to fund the operating activities of the Company, liquidate
      certain convertible notes and purchase shares under the Company’s stock buyback
      program.




***Cash
      Flows From Financing Activities*** *.* We used
      $3,215,467 in net cash for financing activities, consisting primarily of
      principal payments on debt to a related party of $1,255,000, principal payments
      on certain convertible debentures of $1,542,500, and the purchase of treasury
      stock under the Company’s stock buyback program of $417,967.




As
      of
      September 30, 2005 we had net working capital of approximately $220,000. We
      have
      reduced overhead expenses, which will have a favorable impact on cash required
      to fund the business. We had no significant capital spending or purchase
      commitments at September 30, 2005 other than a certain lease of corporate office
      space




We
      have
      no existing bank lines of credit.




There
      can
      be no assurances that we will be successful in our attempts to raise sufficient
      capital essential to our survival. To the extent that we are unable to raise
      the
      necessary operating capital it will become necessary to further curtail
      operations. Additionally, even if we raise operating capital, there can be
      no
      assurances that the net proceeds will be sufficient enough to enable us to
      develop our business to a level where we will generate profits and positive
      cash
      flows. These matters raise substantial doubt about our ability to continue
      as a
      going concern.




**Item
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




**Interest
      Rate Sensitivity**




The
      Company does not have any exposure to market risk as it relates to changes
      in
      interest rates as all of the borrowings of the Company are at a fixed rate
      of
      interest.




The
      Company has no cash equivalents or short-term investments that are subject
      to
      market risk.




**Foreign
      Currency Risk**




The
      Company does not do any business that has any risk of foreign exchange rate
      fluctuations.




**Equity
      Security Price Risk**




We
      do not
      have any investment in marketable equity securities; therefore, we do not have
      any direct equity price risk.




**Commodity
      Price Risk**




We
      no not
      do any business involving commodities; therefore, we do not have any commodity
      price risk.




14




**Item
      4.**  **Controls
      and procedures**







(A)
            Evaluation
                Of Disclosure Controls And
                Procedures





As
      of the
      end of the period covered by this Report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company’s Principal
      Executive Officer/Interim Principal Financial Officer (one person), of the
      effectiveness of the design and operation of the Company’s disclosure controls
      and procedures. The Company’s disclosure controls and procedures are designed to
      produce a reasonable level of assurance of achieving the Company’s disclosure
      control objectives. The Company’s Principal Executive Officer/Interim Principal
      Financial Officer has concluded that the Company’s disclosure controls and
      procedures were, in fact, adequate and effective to ensure that material
      information relating to the Company that is required to be disclosed by the
      Company in reports that it files or submits under the Securities Exchange Act
      of
      1934, as amended, is recorded, processed, summarized and reported within the
      time periods specified in Commission rules and accumulated and communicated
      to
      the Company’s management, including its Principal Executive Officer/Interim
      Principal Financial Officer (one person), to allow timely decisions regarding
      required disclosure.




(B)
            Changes
                In Internal Controls Over Financial
                Reporting





In
      connection with the evaluation of the Company’s internal controls during the
      Company’s last fiscal quarter, the Company‘s Principal Executive
      Officer/Principal Financial Officer (one person) has determined that there
      are
      no changes to the Company’s internal controls over financial reporting that has
      materially affected, or is reasonably likely to materially effect, the Company’s
      internal controls over financial reporting.


15




**PART
      II**






**OTHER
      INFORMATION**






**Item
      1.**  **Legal
      Proceedings**




There
      is
      no pending or threatened litigation against us that occurs outside the ordinary
      course of our business, except as otherwise noted below:




·
            In
                December 2001, Veja Electronics, Inc. d/b/a Stack Electronics sued
                us for
                breach of contract and is seeking damages in excess of $106,000 for
                products not received by us. During 2003, a judgment was rendered
                against
                the Company in the amount of $71,000.




·
            In
                2003, Del Rio Enterprises sued the Company for non-payment of services
                rendered. During 2003 a judgment was rendered against the Company
                in the
                amount of $8,000.




·
            On
                September 20, 2004, Joseph Banta, et al. filed an action in the United
                States District Court for the Eastern District of Tennessee at Knoxville,
                Tennessee in the amount of approximately $60,000 for non-payment
                of
                salaries and benefits during a two-month period in 2002. The Company
                settled this case in full in January
                2005.




In
      addition, the United States Internal Revenue Service in its assessment of
      payroll taxes and the Knox County, Tennessee Trustee with its assessment of
      tangible personal property taxes, creditors for which we have fully accrued
      liabilities and other claims, have threatened litigation if they are not paid.
      We are seeking to make arrangements with these creditors. There can be no
      assurance that any claims, if made, will not have an adverse effect on
      us.




All
      liabilities in connection with the foregoing legal proceedings as well as any
      known liabilities have been accrued on the Company’s financial statements to the
      extent material or could have a material impact on the Company.






**Item
      2.**  **Changes
      in Securities and Use of Proceeds**




None.






**Item
      3.**  **Defaults
      Upon Senior Securities**




None.




**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**




None.




**Item
      5.**  **Other
      Information**




Not
      applicable.







16







**Item
      6.**  **Exhibits
      and Reports on Form 8-K**




**(a)**  **Exhibits.**




**Exhibit
                No.**
            
            **Description**
            
            **Location**31.1
            
            Section
                302 Certification
            
            Provided
                herewith32.1
            
            Section
                906 Certification
            
            Provided
                herewith





**(b)**
            **Reports
                on Form****8-K****.**




Current
      Report on Form 8-K filed by the Company on August 3, 2005 pursuant to Item
      8.01
      (Other Events) whereby the Company reported that, effective July 26, 2005,
      it
      had engaged the services of Worldwide Stock Transfer, LLC as its new stock
      transfer agent.




Current
      Report on Form 8-K filed by the Company on August 30, 2005 pursuant to Item
      1.01
      (Entry into a Material Definitive Agreement) whereby the Company reported that
      it had entered into two term sheets for a $51 million financial commitment
      from
      Cornell Capital Partners, LP. In the same Form 8-K, pursuant to Item 5.02
      (Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers), the Company reported that Robert Legnosky
      resigned, effective August 30, 2005, as a Director, President and Chief
      Executive Officer of the Company and the Board of Directors appointed C. Thomas
      McMillen to be a Director, President and Chief Executive Officer of the Company
      effective on said date. In the same Form 8-K, pursuant to Item 8.01 (Other
      Events), the Company reported that the Company intends to pursue a new strategic
      direction to focus on owning and operating small and mid-sized growth businesses
      that provide homeland security solutions through innovative technologies to
      both
      the public and private sector. The Company also announced on said date in the
      same Form 8-K its intention to seek stockholder approval to change its name
      to
“Homeland Security Capital Corporation”, its intention to seek stockholder
      approval to withdraw the Company’s election as a BDC under the ICA, and its
      intention to move its corporate headquarters to the Washington, D.C.
      area.




Current
      Report on Form 8-K filed by the Company on August 31, 2005 pursuant to Item
      8.01
      (Other Events) whereby the Company reported that effective September 12, 2005,
      the principal offices of the Company will be located at 4100 North Fairfax
      Drive, Suite 1150, Arlington, Virginia 22203-1664.









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**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, as
      amended, the Registrant caused this Report to be signed on its behalf by the
      undersigned, thereunto duly authorized.




Date:December 14, 2005
            **CELERITY
                SYSTEMS, INC.**By:/s/
                C. Thomas McMillenC.
                Thomas McMillenPresident,
                Chief Executive Officer, and Interim Chief
              Financial
                Officer








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