U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB



        (MARK ONE)

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

                  For the quarterly period ended JUNE 30, 2001

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

               For the transition period from _______ to _______.

                          Commission File No. 000-28321

                             CELERITY SYSTEMS, INC.
                 (Name of Small Business Issuer in Its Charter)

DELAWARE                                                 52-2050585
--------                                                 ----------
(State or Other Jurisdiction of                          (I.R.S. Employer
Incorporation or Organization)                           Identification No.)

122 PERIMETER PARK DRIVE, KNOXVILLE, TENNESSEE           37922
----------------------------------------------           -----
(Address of Principal Executive Offices)                 (Zip Code)

                                 (865) 539-5300
                (Issuer's Telephone Number, Including Area Code)


        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,  and (2) has
been subject to such filing requirements for the past 90 days.  Yes |X| No |_|



        There were 49,521,100 shares of Common Stock outstanding as of August 7,
2001.



<PAGE>


PART I
ITEM 1. FINANCIAL STATEMENTS.

CELERITY SYSTEMS, INC.
 Balance Sheets
<TABLE>
<CAPTION>
                                                                         June 30, 2001     December 31,
                                                                          (unaudited)          2000
                                                                       ------------------------------------
<S>                                                                        <C>              <C>
Assets
   Cash                                                                      $    54,453    $     10,366
   Accounts receivable                                                             1,000               -
   Inventory, net                                                              1,746,685         400,157
                                                                     ------------------------------------
        Total current assets                                                   1,802,138         410,523

Property and equipment, net                                                      560,687         100,375
Debt offering costs, net of accumulated amortization of $67,914
  and $257,263, respectively                                                     160,240          41,215

Other assets                                                                      36,435          56,930
                                                                     ------------------------------------
     Total assets                                                         $    2,559,500   $     609,043
                                                                     ====================================

Liabilities, Redeemable Preferred Stock and Stockholders' Deficit
Accounts payable                                                          $    1,496,430   $     684,103

Accrued wages and related taxes                                                   77,022         187,642

Accrued interest                                                                 182,954         151,499

Other accrued liabilities                                                        216,618         176,925

Notes payable                                                                    107,766          92,943

Equity warrant liability (Notes 8 and 9)                                       1,137,874               -

Current maturities of long-term debt and capital lease obligations               482,500         570,000
                                                                      ------------------------------------
      Total current liabilities
                                                                               3,701,164       1,863,112
Long-term debt and capital lease obligations, less current
maturities                                                                     1,027,835         530,425
                                                                      ------------------------------------
      Total liabilities                                                        4,728,999       2,393,537


Commitments and contingencies (Notes 7 and 8)
Series A convertible preferred stock, $.01 par value; authorized
     50 shares; 0 and 13.715 shares issued and outstanding at
     June 30, 2001 and December 31, 2000, respectively                                 -         168,357
Series B convertible preferred stock, $.01 par value; authorized
     100 shares; 100 and 0 shares issued and outstanding at
     June 30, 2001 and December 31, 2000, respectively                           144,334               -
Common stock, $.001 par value, 50,000,000 shares authorized,
    49,858,464 issued and 49,521,100 outstanding, and 24,640,649
     issued and 24,303,285 outstanding at June 30, 2001
     and December 31, 2000, respectively                                          49,858          24,641

Additional paid-in capital                                                    29,991,258      30,407,547

Equity placement fee                                                          (1,363,975)              -
Treasury stock, at cost, 337,364 shares at June 30, 2001 and
December 31, 2000                                                               (227,500)       (227,500)

Accumulated deficit                                                          (30,766,474)    (32,157,539)
                                                                      ------------------------------------
      Total stockholders' deficit                                             (2,316,833)     (1,952,851)
                                                                      ------------------------------------
      Total liabilities, redeemable preferred stock and stockholders'
deficit                                                                    $   2,559,500   $     609,043
                                                                      ====================================
</TABLE>
The  accompanying  notes  are an  integral  part of  these  unaudited  condensed
financial statements.

                                       2
<PAGE>



 CELERITY SYSTEMS, INC.
 Condensed Statements of Operations
 Unaudited
<TABLE>
<CAPTION>
                                                             Three Months Ended                          Six Months Ended
                                                                  June 30,                                   June 30,
                                                 --------------------------------------------------------------------------------
                                                        2001                    2000                 2001                2000
                                                        -----                   -----                -----               -----
<S>                                                   <C>                  <C>                 <C>                  <C>
   Revenues                                           $       --           $          -            $   2,400            $      -

   Cost of revenues                                           --                685,313                3,240             685,313
                                                 ---------------          -------------       --------------       --------------
           Gross margin                                       --               (685,313)                (840)           (685,313)

   Operating expenses                                    688,354                945,119            1,343,310           1,896,895
                                                 ---------------          -------------       --------------       --------------
           Loss from operations                         (688,354)            (1,630,432)          (1,344,150)         (2,582,208)

      Interest expense                                  (160,197)              (572,010)            (228,691)           (746,053)

      Income on equity warrant liability (Note 8)        491,048                      -              491,048                   -

      Other income                                        16,955                  7,895               18,380               9,549
                                                 ---------------          -------------       --------------       --------------
           Loss from continuing operations              (340,550)            (2,194,547)          (1,063,415)         (3,318,712)

   Discontinued operations:

      Income on disposal of discontinued
      CD-ROM Segment                                           -                 (1,437)                   -              36,311

      Cumulative effect of change in
      accounting method (Note 9)                       2,598,813                      -            2,598,813                   -
                                                 ---------------          -------------       --------------       --------------
           Net income (loss)                           2,258,263             (2,195,983)           1,535,400          (3,282,401)

Amortization of beneficial conversion feature
and accretion of redeemable convertible preferred
stock (Note 4)                                          (113,706)                     -             (144,335)                  -

                                                 ---------------          -------------       --------------       --------------

Net income (loss) applicable to common             $   2,144,557          $  (2,195,983)       $   1,391,065        $ (3,282,401)
shareholders                                     ===============          ==============       ==============       =============

   Basic and diluted income (loss) per common
      shares Note 2:

      Loss from continuing operations              $       (0.01)         $       (0.22)       $       (0.02)        $     (0.39)

      Discontinued operations                                  -                   0.00                    -                0.00

      Cumulative effect of change in
       accounting method                                    0.05                   0.00                 0.05                0.00
                                                 ---------------          -------------       --------------       --------------
      Net income (loss) per share
       to common shareholders                      $        0.04          $       (0.22)       $        0.03         $     (0.39)
                                                 ===============          =============       ==============       ==============

</TABLE>

The  accompanying  notes  are  an  integral part of  these  unaudited  condensed
financial statements.



                                       3
<PAGE>




 CELERITY SYSTEMS, INC.
 Condensed Statements of Cash Flows
 Unaudited
<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                         2001               2000
                                                                         ----               ----
<S>                                                               <C>                 <C>
 Cash flows from operating activities:
    Net income (loss)                                             $    1,535,400      $    (3,282,401)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
             Depreciation and amortization                               160,682              398,894

Provision for inventory obsolescence                                          --              683,750
    Noncash interest expense related to beneficial
         conversion feature of debt                                       89,934              658,339
    Noncash interest expense related to notes payable                     36,860                    -
    Noncash operating expense related to consulting fees                   3,721              468,750
    Noncash operating expense related to payroll
       and directors' fees
                                                                          19,396              309,222
    Noncash income related to settlement of capital lease
      obligation                                                         (97,500)                   -
      Noncash income related to equity warrant liability                (491,048)                   -
      Noncash income related to change in accounting principle        (2,598,813)                   -
      Changes in current assets and liabilities:
          Accounts receivable                                             (1,000)              27,200
          Prepaid expenses                                                     -               16,400
          Inventory                                                   (1,346,528)            (152,204)
          Accounts payable                                               837,952             (420,670)
          Other current liabilities                                      (15,098)            (526,322)
                                                                    ----------------------------------
                     Net cash used in operating activities            (1,866,044)          (1,819,042)
 Cash flows from investing activities:
    Purchase of fixed assets                                            (491,370)             (45,915)
                                                                    ----------------------------------
                     Net cash used in investing activities              (491,370)             (45,915)

 Cash flows from financing activities:
    Proceeds from short-term borrowings                                   15,000              130,000
    Payments on short-term borrowings                                    (15,000)             (30,000)
    Proceeds from long-term debt                                       1,800,000            1,179,980
    Principal payments on long-term debt and capital lease obligations   (60,000)             (30,000)
    Proceeds from issuance of common stock                                30,000            1,060,000
    Proceeds from exercise of common stock warrants
                                                                               -              136,100
    Proceeds from exercise of common stock options
                                                                               -                2,775
    Proceeds from Series B preferred stock and warrant offering, net
      of offering costs                                                  859,654                    -
    Financing and debt issue costs                                      (228,153)            (134,980)
                                                                    ----------------------------------
                     Net cash provided by financing activities         2,401,501            2,313,875

Net increase in cash and cash equivalents                                44,087              448,918
 Cash and cash equivalents, beginning of period                           10,366                  383
                                                                    ----------------------------------
 Cash and cash equivalents, end of period                           $     54,453          $   449,301
                                                                    ==================================
</TABLE>

The accompanying notes are an integral part of these unaudited
condensed financial statements.



                                       4
<PAGE>

                             CELERITY SYSTEMS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.      PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS

        The accompanying interim condensed financial statements and notes to the
financial  statements  for the  interim  periods as of June 30, 2001 and for the
three  and six  months  ended  June  30,  2001  and  2000,  are  unaudited.  The
accompanying  interim unaudited  financial  statements have been prepared by the
Company in accordance with generally accepted accounting  principles for interim
financial statements and Item 310(b) of Regulation S-B. 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 items)  considered
necessary for a fair presentation have been included.  Operating results for the
six month period  ended June 30, 2001,  are not  necessarily  indicative  of the
results  that may be  expected  for the  year  ending  December  31,  2001.  The
condensed financial  statements should be read in conjunction with the financial
statements and notes thereto included in the Annual Report on Form 10-KSB of the
Company as of and for the year ended December 31, 2000.

        In June  1998,  the FASB  issued  SFAS 133,  Accounting  for  Derivative
Instruments  and  Hedging  Activities,  and in July 1999  issued  SFAS 137 which
deferred  the  effective  date of SFAS 133, as it pertains  to the  Company,  to
fiscal year 2001. This statement has not had a material impact on the Company.

        In July 2001, the FASB issued SFAS 141, Business Combinations,  and SFAS
142, Goodwill and Other Intangible  Assets.  SFAS 141 requires that the purchase
method be used for business combinations initiated after June 30, 2001. SFAS 142
requires  that  goodwill  no longer be  amortized  to  earnings,  but instead be
reviewed for  impairment.  The  amortization of goodwill ceases upon adoption of
the Statement  which will be January 1, 2002.  Adoption of these  statements has
not had a material impact on the Company.

        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. Additionally, the lack of sales or a significant financial commitment
raises  substantial  doubt  about the  Company's  ability to continue as a going
concern.

        The Company has focused on attempting to obtain the necessary capital to
maintain  its  operations.  Additionally,  the  Company has  narrowed  its sales
efforts to those which, it believes, have the best chance of closing in the near
term.  In the first half of 2001,  the  Company  received  gross  proceeds  from
private  placements  of  convertible  debt  totaling  $1,800,000  and  Series  B
Convertible  Preferred Stock totaling  $1,000,000 and received  $30,000 from the
issuance of common stock.  These funds enabled the Company to produce  inventory
for its orders and to operate for the last few months.  Management believes that
additional  funds  required for future  operations  will be  available  from the
$10,000,000 Equity Line of Credit Agreement established in June 2001. (Note 8)

2.      INCOME (LOSS) PER SHARE

        Basic and diluted  income (loss) per share were computed by dividing net
loss  applicable to common stock by the weighted  average  fully diluted  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 loss from  continuing  operations  and their effect would be
anti-dilutive.

        Following is a reconciliation  of the numerators and denominators of the
basic and diluted loss per share:


                                       5
<PAGE>
<TABLE>
<CAPTION>

                                                    Three Months Ended            Six Months Ended
                                                         June 30,                     June 30,
                                                 -------------------------   -----------------------------
                                                    2001         2000            2001          2000
                                                    ----         ----            ----          ----
----------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>            <C>           <C>
Income (Loss)
        Basic and diluted:
               Income (Loss) applicable to
               common stockholders                $2,144,557  $(2,195,983)    $ 1,391,065   $(3,282,401)

Shares
        Basic and diluted:
               Weighted-average common shares
               outstanding                        49,858,464    10,126,337     46,154,644     8,437,406


----------------------------------------------------------------------------------------------------------
</TABLE>

3.      ISSUANCE OF CONVERTIBLE DEBENTURES

        The  Company  issued  $1,800,000   aggregate   principal  amount  of  4%
convertible  debentures  in the  first  half of 2001  under its  Equity  Line of
Credit,  resulting in net proceeds of approximately  $1,642,000.  The debentures
have a term of five years and are convertible into the Company's common stock at
a price,  at the option of the holder,  equal to 75% of the average  closing bid
price of the  common  stock  for the five  trading  days  immediately  preceding
conversion.  The Company  recognized  a  beneficial  conversion  feature for the
convertible  debentures  as a  discount  on the  convertible  debentures  and as
additional  paid-in  capital.  This  discount of $729,524 will be amortized as a
non-cash interest expense over the five year period from the date of issuance to
the stated redemption date of the debentures.

4.      ISSUANCE OF SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK

        In the  first  quarter  of  2001,  the  Company  consummated  a  private
placement  of 23 shares  of  Series B  Redeemable  Convertible  Preferred  Stock
resulting in gross proceeds of $230,000.  These shares provide for  preferential
dividends  at an annual  rate of 8%. The  preferred  stock is  convertible  into
shares of common stock at a conversion price equal to $0.025 per share,  subject
to  availability,  at any time during the two years  following  execution of the
subscription  agreements.  Should there be an  insufficient  number of shares of
common  stock  available  at  the  time  the  preferred  stock  is  offered  for
conversion,  the  conversion  period  shall be  extended  by the  number of days
between the  conversion  date and the date common shares become  available.  Two
years from the original  issuance  date,  the Company shall offer to redeem such
preferred  shares then  outstanding  at a price equal to the  original  issuance
price plus  accrued  dividends.  The  Company  will record  accretion  up to the
redemption  value until the redemption  date.  Accretion  totaled $16,500 in the
second  quarter  of 2001 and  $22,000  in the first  half of 2001.  Warrants  to
purchase  one share of common  stock for each two shares of common  stock issued
upon conversion of this tranche of Series B Preferred Stock were included. These
warrants are exercisable for a two year period  following the date that the last
share of the Series B Redeemable  Convertible  Preferred Stock is converted into
common  stock  and have an  exercise  price  of $0.10  per  share.  The  Company
allocated  $132,000 of the proceeds to the warrants based on their relative fair
value.  The resulting  $98,000  beneficial  conversion  feature of the preferred
stock will be reflected as a dividend  over the two year period until the stated
redemption date of the stock. Amortization of this beneficial conversion feature
totaled  $12,250 in the second  quarter of 2001 and $16,333 in the first half of
2001.

        The Company  also  consummated  an  additional  private  placement of 72
shares of Series B Redeemable  Convertible  Preferred  Stock  resulting in gross
proceeds  of  $720,000,  and  issued an  additional  5 shares  having a value of
$50,000 as payment for certain accounts payable and accrued wages.  These shares
provide for preferential  dividends at an annual rate of 8%. The preferred stock
is convertible into shares of common stock at a conversion price equal to $0.025
per share,  subject to availability,  at any time during the two years following
execution of the subscription  agreements.  The beneficial conversion feature of
$679,654  will be  reflected  as a dividend  over the two year period  until the
stated  redemption  date.  Amortization  of this beneficial  conversion  feature
totaled  $84,957 in the second quarter of 2001 and $106,002 in the first half of
2001. Should there be an insufficient number of shares of common stock available
at the time the preferred stock is offered for conversion, the conversion period
shall be extended by the number of days between the conversion date and the date
common shares become  available.  Two years from the original  issuance date the
Company shall offer to redeem such preferred  shares then outstanding at a price
equal to the original  issuance price plus accrued  dividends.  The Company will
record accretion up to the redemption value until the redemption date.


                                       6
<PAGE>


5.      ISSUANCE OF COMMON STOCK

        In the first quarter of 2001,  the Company  issued  1,000,000  shares of
common stock in a private placement for a value of $30,000.

6.      SUPPLEMENTAL CASH FLOW INFORMATION

        During the first half of 2001,  the  Company  issued  427,946  shares of
common  stock  with a value of $23,116 as payment  for  certain  consulting  and
directors' fees and certain payroll expenses.

        The Company also issued 5 shares of Series B convertible preferred stock
with a value of $50,000 as payment  for  certain  accounts  payable  and accrued
wages.

        Also  during  the  first  half  of  2001,  $617,023  of the  convertible
debentures were converted into 19,656,665 shares of common stock.

        Additionally,  during the first half of 2001,  $140,912  of the Series A
convertible preferred stock was converted into 4,360,203 shares of common stock.

        Also during the first half of 2001, $38,860 of non-cash interest expense
was incurred relating to notes payable.

        During the first half of 2000,  the  Company  issued  624,275  shares of
common stock with a value of $766,038 as payment for certain consulting fees.

        In the first half of 2000,  $30,000 of the  convertible  debentures were
converted into 52,665 shares of common stock.

7.      COMMITMENTS AND CONTINGENCIES

        At June 30,  2001,  the Company had issued  49,858,464  shares of common
stock with  $3,275,122  aggregate  principal and interest  amount of convertible
debentures and Series B Preferred  Stock  outstanding.  The Company has received
exercise  notices  for  $363,650  of  convertible  debentures  under which it is
obligated  to  issue  an   additional   12,364,281   shares  of  common   stock.
Additionally, the Company would be obligated to issue an aggregate of 48,695,652
shares of common stock if all  remaining  holders  converted  or  exercised  all
outstanding  securities  convertible or exercisable into shares of common stock,
based upon the five day average  closing  price of $0.2760 as of June 30,  2001,
discounted to 75% of market price, or $0.2070. Sufficient shares of common stock
are not available for issuance upon conversion of the convertible  securities or
upon  exercise  of  outstanding  options  and  warrants.  While the  Company has
scheduled a stockholders  meeting for August 23, 2001 to obtain  approval for an
increase in the number of authorized shares of common stock, it cannot currently
satisfy  its  obligations  in respect to the  issuance of  additional  shares of
common  stock.  To the extent the Company is unable to issue shares as required,
it will be in breach  of its  obligations  under  the  terms of the  outstanding
convertible  securities  agreements,  and will incur  liability  for  liquidated
damages of approximately $6,000 per month.

        The Company is a defendant in a lawsuit  brought by a financial  printer
for  non-payment of expenses.  The action was brought on January 30, 2001 and is
pending  before the Supreme Court of the State of New York,  County of New York.
In this action,  the plaintiff,  Merrill/New York Company,  has sued the Company
for the  non-payment  of financial  printing  fees and is seeking  approximately
$118,000 in damages,  plus interest and certain  costs.  The Company  intends to
defend the action vigorously.

        In addition,  certain creditors 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.



                                       7
<PAGE>

8.      EQUITY LINE OF CREDIT

        In April 2001, the Securities and Exchange  Commission ("SEC") issued an
interpretation  regarding Equity Line Financings.  This Interpretation  modified
the  criteria  required  to  register  the shares of common  stock  issued  upon
conversion of the related debentures.  The Company entered into a Line of Credit
Agreement  that  expires on October 31,  2001,  under which a maximum  amount of
$10,000,000  of debentures  may be issued.  As of June 30, 2001, the Company had
drawn  $2,795,000   under  the  Line  of  Credit.   As  a  result  of  this  SEC
Interpretation,  the  terms of this  Line of  Credit  Agreement  do not meet the
criteria  for  registration  of the  common  stock  which  would be issued  upon
conversion of these debentures.

        On June 14,  2001,  the  Company  entered  into an Equity Line of Credit
pursuant to which the Company may, at its discretion,  periodically  sell to the
Investor  shares  of  common  stock  for a total  purchase  price of up to $10.0
million.  For each share of common  stock  purchased  under the  Equity  Line of
Credit,  the  Investor  will pay 82% of the average of the 5 lowest  closing bid
prices on which our common stock is traded for the 10 days immediately following
the  notice  date.  The amount of each  advance is subject to a maximum  advance
amount  based on an  average  daily  volume of the  Company's  common  stock.  A
consulting  fee of 10% of each  advance  will be paid to the agent upon  closing
each of the sales under this  agreement.  The  consultant  received  warrants to
purchase  3,500,000  shares of common stock at an exercise  price of $0.10.  The
$1,530,000  fair  value  of  these  warrants  was  recorded  as a  cost  of  the
transaction.  These warrants expire in June 2006. In accordance with EITH 00-19,
the Company has recorded an Equity Warrant Liability of $1,363,975 in connection
with  these   warrants.   As  these  warrants  cannot  be  exercised  until  the
shareholders  approve an increase in the number of authorized  capital stock the
Company has recorded a  mark-to-market  adjustment  of $491,048,  which has been
reflected as Income on equity warrant liability.

9.      CHANGE IN ACCOUNTING PRINCIPLE

        Effective  June 30, 2001,  the Company  adopted the  provisions  of EITF
00-19,   "Accounting  for  Derivative  Financial  Instruments  Indexed  to,  and
Potentially  Settled  in, a  Company's  Own  Stock".  This issue  provides  that
warrants to  purchase  common  shares  which are  outstanding  and for which the
number of authorized but unissued  shares is insufficient to satisfy the maximum
number of shares that could be required upon the exercise of such warrants, then
the contract is reclassified from equity to an asset or liability. The effect of
the  application  of  this   pronouncement  that  requires  asset  or  liability
classification  for those contracts that existed as of September 20, 2000, would
be calculated  as of June 30, 2001,  and presented on that  date as a cumulative
effect of a change in accounting  principle.  At June 30, 2001,  $2,863,760  was
reclassified  from  equity  to a  liability  and  mark-to-market  adjustment  of
$2,598,813  was  recorded  as the  cumulative  effect of a change in  accounting
principle.

                                       8
<PAGE>


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

INTRODUCTORY STATEMENTS

        FORWARD-LOOKING  STATEMENTS AND ASSOCIATED  RISKS.  THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS,  INCLUDING 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 AND (E) OUR
ANTICIPATED  NEEDS FOR WORKING CAPITAL.  IN ADDITION,  WHEN USED IN THIS FILING,
THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "IN ANTICIPATION OF," "EXPECTS,"
AND SIMILAR  WORDS ARE INTENDED TO IDENTIFY  FORWARD-LOOKING  STATEMENTS.  THESE
FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON OUR EXPECTATIONS AND ARE SUBJECT
TO A  NUMBER  OF RISKS  AND  UNCERTAINTIES,  INCLUDING  THOSE  DESCRIBED  IN THE
"BUSINESS  RISK FACTOR"  SECTION.  ACTUAL RESULTS COULD DIFFER  MATERIALLY  FROM
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CHANGES IN TRENDS IN THE ECONOMY
AND OUR  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 FILING WILL IN FACT OCCUR.

OVERVIEW

        Prior to 1998, our major  activity was selling  digital video servers in
the interactive video services market. All sales were in Korea,  Israel,  Taiwan
and China.  However,  beginning in 1998,  we focused our sales  efforts in North
America,  and developed and sold the first production units of a new digital set
top box, the T 6000.

        In  February  1998,  we decided  to scale  back our CD-ROM  segment to a
maintenance  mode of  operations.  We  developed a formal plan of disposal  that
became effective in May 1998. The segment had revenues of $0 and $67,950 for the
three months ended June 30, 2001 and 2000,  respectively.  In February  2001, we
sold the  assets of our CD-ROM  segment  for 20  preferred  shares of the buyer,
which are  convertible  into common shares on a scheduled  basis over a two-year
period.  As we had written the assets of this segment down to zero, and the fair
value of the shares of the buyer was not currently determinable, no gain or loss
on this sale was recorded.

        We have  continued  to  focus  most of our  development  and  production
efforts during 2000 and into 2001 on the T 6000. In addition, we are seeking new
projects  using our digital  video  servers,  which could be deployed with the T
6000 or other  compatible set top boxes.  In 1999, we produced our initial trial
run of the T 6000 set top boxes,  which were manufactured by Taylor-White,  LLC,
of  Greeneville,  Tennessee.  In December 1999, we entered into a  manufacturing
agreement  with  Global PMX  Company,  Limited,  which was  terminated  by us in
November  2000.  We have since  entered into  agreements  with  Nextek,  Inc. in
Madison,  Alabama and IES in Gray,  Tennessee to  manufacture  all of our T 6000
digital set top boxes.

        Management  has also  focused  on  attempting  to obtain  the  necessary
capital  to  maintain  our  operations.  We are  continuing  to seek  financing,
including possible strategic  investment  opportunities or opportunities to sell
some or all of our  assets  and  business,  while  continuing  to  pursue  sales
opportunities.  We have narrowed our sales  efforts to those which,  we believe,
have the best chance of closing in the near term.  We  continue  to  encounter a
longer and more complex sales cycle than  originally  contemplated.  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.

        We had no revenues in 2000. We had one  interactive  video customer that
represented all of our revenues in the first half of 2001.




                                       9
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

REVENUES

        We had no revenues  for the quarters  ended June 30, 2001 and 2000.  The
lack of  interactive  video  sales  is a result  of the  constrained  sales  and
marketing  activities caused by our cash shortage and delays associated with the
production of the T 6000 set top box.

COSTS OF REVENUES

        Costs of revenues  were $-0- in the second  quarter of 2001, as compared
to  $685,313 in 2000.  Costs of revenues in 2000 were  related to an increase in
inventory  obsolescence.  During the second  quarter of 2000,  the we reached an
agreement  with  nCUBE  Corporation  under  which  nCUBE  will  manufacture  the
Company's  updated  version of our digital  video server.  This updated  version
rendered obsolete  portions of the raw material  inventory related to the former
versions of the digital video servers.

OPERATING EXPENSES

        Operating  expenses  for the  three  months  ending  June 30,  2001 were
$785,855 as compared to $945,119  for the same period in 2000,  or a decrease of
$159,264.  This decrease  includes a reduction in legal and professional fees of
approximately  $306,000 in the second quarter of 2001 from the second quarter of
2000 primarily from lower consulting  expenses  incurred to assist with investor
relations and investment  banking.  Compensation  expense was down approximately
$104,000 in the  current  quarter  compared  to the same  period in 2000.  These
decreases were partially  offset by increases in consulting  expense incurred in
the development of an updated version of the T 6000 set top box and by increased
contract  labor costs  incurred for the  software to be used in our  interactive
digital video system.

INTEREST EXPENSE

        Interest  expense in the second quarter of 2001 was $160,197 as compared
to $572,010 the first quarter of 2000. Of these amounts, $43,933 and $530,033 in
2001 and 2000,  respectively,  are non-cash  expenses  related to the beneficial
conversion  features of certain debentures and account for a significant portion
of the reduction between the two periods.  In November 2000, the Emerging Issues
Task Force of the Financial  Accounting Standards Board reached a consensus that
the discount  resulting  from  recording a beneficial  conversion  feature is to
amortized  from  the  date of  issuance  to the  stated  redemption  date of the
convertible instrument,  regardless of when the earliest conversion date occurs.
As a result,  the beneficial  conversion  feature of the convertible  debentures
issued after November 2000 are being  amortized over the life of the debentures,
in most cases 60 months,  versus an  approximately 3 month period generally used
prior to the issuance of this pronouncement.

NET LOSS FROM CONTINUING OPERATIONS

        As a result of the above factors,  net loss from  continuing  operations
for the quarter ended June 30, 2001,  was $340,550 as compared to $2,194,547 for
the same period in 2000.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

REVENUES

        There were  revenues of $2,400 for the six months ended June 30, 2001 as
compared to $-0- for the same period in 2000. The low level of interactive video
sales is a result of the constrained  sales and marketing  activities  caused by
our cash shortage and delays  associated  with the  production of the T 6000 set
top box.



                                       10
<PAGE>

COSTS OF REVENUES

        Costs of revenues  for the six months ended June 30, 2001 were $3,240 as
compared to $685,313 for the same period in 2000. Costs of revenues in 2000 were
related to an increase in inventory  obsolescence.  During the second quarter of
2000, the Company reached an agreement with nCUBE  Corporation under which nCUBE
will  manufacture  the Company's  updated  version of it's digital video server.
This updated version rendered  obsolete  portions of the raw material  inventory
related to the former versions of the digital video servers.

OPERATING EXPENSES

        Operating  expenses  for  the six  months  ending  June  30,  2001  were
$1,440,810 as compared to $1,896,895  for the same period in 2000, or a decrease
of $456,085.  This decrease  includes a reduction in legal and professional fees
of approximately  $516,000 primarily from lower expenses incurred to assist with
investor  relations  and  investment  banking.  Compensation  expense  was  down
approximately  $130,000  in the  current  six-month  period  but was  offset  by
increased contract labor incurred in the development of our interactive  digital
video system.  These decreases were partially  offset by increases in consulting
expense  incurred in the development of an updated version of the T 6000 set top
box and by increases in  insurance,  employee  benefits and  telephone and other
utility expenses.

INTEREST EXPENSE

        Interest  expense  for the first  six  months  of 2001 was  $228,691  as
compared to $746,053 for the same period in 2000. Of these amounts,  $87,786 and
$670,080 in 2001 and 2000,  respectively,  are non-cash  expenses related to the
beneficial   conversion  features  of  certain  debentures  and  account  for  a
significant  portion of the reduction between the two periods. In November 2000,
the  Emerging  Issues Task Force of the  Financial  Accounting  Standards  Board
reached a consensus  that the  discount  resulting  from  recording a beneficial
conversion  feature  is to  amortized  from the date of  issuance  to the stated
redemption date of the convertible  instrument,  regardless of when the earliest
conversion date occurs. As a result,  the beneficial  conversion  feature of the
convertible  debentures  issued after November 2000 are being amortized over the
life of the debentures, in most cases 60 months, versus an approximately 3 month
period generally used prior to the issuance of this pronouncement.

NET LOSS FROM CONTINUING OPERATIONS

        As a result of the above factors,  net loss from  continuing  operations
for the six months ended June 30, 2001, was $1,063,413 as compared to $3,318,712
for the same period in 2000.

LIQUIDITY AND CAPITAL RESOURCES

        Our primary source of financing since our inception has been through the
issuance of common and preferred stock and debt.

        We had cash  balances on hand as of June 30,  2001 of $54,453.  Our cash
position continues to be uncertain.

        In the first half of 2001, we received  gross  proceeds from the Line of
Credit Agreement of $1,800,000,  $950,000 on the private  placement of 95 shares
of our Series B Convertible  Preferred Stock and warrants,  and $30,000 from the
issuance of common  stock.  We are looking at several  other options in terms of
relieving our cash shortage,  but no commitments are in place. We are continuing
to seek  to  arrange  financing,  including  possible  strategic  investment  or
opportunities  to sell some or all of our assets and business,  while continuing
to pursue  sales  opportunities.  We have  granted a  security  interest  in our
personal property to our former legal counsel. Such security interest may hinder
our efforts to obtain  financing.  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.

        As of June 30, 2001, we have  an accumulated  deficit of $1,899,000.  We
expect to incur operating  losses for the  foreseeable  future as we continue to
develop our technology and until we achieve some sales success. Since January 1,
2001, we have received new orders to install and operate end-to-end  interactive
video systems in 3 multi-family  developments with a total of 749 units in Texas

                                       11
<PAGE>

and Arizona and for the sale of our Digital  Education System to two Ohio school
systems.  There can be no  assurance,  however,  as to the  receipt or timing of
revenues  from  operations,  including,  in  particular,  revenues from products
currently under development.

        As  of  June  30,  2001,   we  had  negative  net  working   capital  of
approximately  $1,634,000.  We had no significant  capital  spending or purchase
commitments  at June 30, 2001 other than certain  facility  leases and inventory
component purchase commitments required in the ordinary course of our business.

        The Company  entered  into a Line of Credit  Agreement  that  expires on
October 31, 2001,  under which a maximum amount of $10,000,000 of debentures may
be issued.  As of June 30, 2001 the Company had drawn  $2,805,000 under the Line
of Credit. As a result of a recent SEC Interpretation, the terms of this Line of
Credit  Agreement do not meet the criteria for  registration of the common stock
which would be issued upon conversion of these debentures.

        On June 14,  2001,  the  Company  entered  into an Equity Line of Credit
Agreement  pursuant to which the Company  may, at its  discretion,  periodically
sell to the Investor, Cornell Capital Partners, L.P., shares of common stock for
a total purchase  price of up to $10.0  million.  For each share of common stock
purchased  under the Equity  Line of Credit,  the  Investor  will pay 82% of the
average of the 5 lowest  closing  bid prices on the  Over-the  Counter  Bulletin
Board or other  principal  market on which our common stock is traded for the 10
days  immediately  following  the notice date.  A consulting  fee of 10% of each
advance  will be paid to the agent  upon  closing  each of the sales  under this
agreement.  The consultant  received  warrants to purchase  3,500,000  shares of
common stock at an exercise price of $0.10.  The $1,530,000  fair value of these
warrants was recorded as a cost of the  transaction.  These  warrants  expire in
June 2006.

        We have no existing bank lines of credit.

BUSINESS RISK FACTORS

WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

        We have historically lost money. In the three months ended June 30, 2001
and year ended  December  31,  2000,  we  sustained  losses from  operations  of
$340,000 and $5.6 million, respectively.  Future losses are likely to occur. Due
to our recurring losses and working capital shortages,  our independent auditors
have noted in our financial statements for the year ended December 31, 2000 that
there is  substantial  doubt about our  ability to continue as a going  concern.
Accordingly,  we may experience  significant liquidity and cash flow problems if
we are not able to raise additional  capital as needed and on acceptable  terms.
No assurances can be given that we will be successful in reaching or maintaining
profitable operations.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

        We have relied on significant external financing to fund our operations.
Such financing has  historically  come from a combination of borrowings and sale
of common stock from third  parties and funds  provided by certain  officers and
directors.  We will need to raise  additional  capital  to fund our  anticipated
operating expenses and future expansion.  Among other things, external financing
may be  required  to cover  our  operating  costs.  We  cannot  assure  you that
financing  whether from external sources or related parties will be available if
needed or on favorable  terms. The sale of our common stock to raise capital may
cause dilution to our existing  shareholders.  Our inability to obtain  adequate
financing will result in the need to curtail business  operations.  Any of these
events  would be  materially  harmful to our  business and may result in a lower
stock price.

WE HAVE  BEEN THE  SUBJECT  OF A GOING  CONCERN  OPINION  FROM  OUR  INDEPENDENT
AUDITORS,  WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE  OPERATIONS UNLESS WE
OBTAIN ADDITIONAL FUNDING

        Our  independent  auditors have added an explanatory  paragraph to their
audit opinions  issued in connection  with the years ended December 31, 2000 and
1999 financial statements which states that there is substantial doubt about our
ability to  continue  as a going  concern  due to  recurring  losses and working
capital  shortages.  Our ability to obtain additional funding will determine our


                                       12
<PAGE>

ability to continue as a going concern.  Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

        Our  success  largely  depends  on  the  efforts  and  abilities  of key
executives and consultants,  including Kenneth D. Van Meter, our Chief Executive
Officer,  President  and Chairman of the Board.  The loss of the services of Mr.
Van  Meter  could  materially  harm our  business  because  of the cost and time
necessary  to replace  and train a  replacement.  Such a loss would also  divert
management  attention away from operational issues. We do not have an employment
agreement  with Mr.  Van Meter.  We do not  presently  maintain  a key-man  life
insurance policy on Mr. Van Meter.

WE MAY BE UNABLE TO MANAGE GROWTH

        Successful implementation of our business strategy requires us to manage
our  growth.  Growth  could place an  increasing  strain on our  management  and
financial resources. To manage growth effectively, we will need to:

        o     Implement changes in certain aspects of our business;

        o     Enhance  our  information  systems  and  operations  to respond to
              increased demand;

        o     Attract and retain qualified personnel; and

        o     Develop, train and manage an increasing number of management-level
              and other employees.

        If we fail to manage our growth  effectively,  our  business,  financial
condition or operating results could be materially  harmed,  and our stock price
may decline.

WE ARE IN DEFAULT OF CERTAIN CONVERTIBLE  DEBENTURES FOR FAILING TO REGISTER THE
UNDERLYING  SHARES IN A TIMELY  MANNER,  WHICH  DEFAULT  ENTITLES  THE HOLDER TO
LIQUIDATED DAMAGES AND POSSIBLY OTHER REMEDIES

        We are obligated to register the  underlying  common stock issuable upon
conversion  of our  convertible  debentures  under various  registration  rights
agreements. We did not timely fulfill our registration obligations in respect to
some of the convertible debentures. We are required to pay liquidated damages of
approximately  $26,000  in the form of  increased  interest  on the  convertible
debentures as a result of our failure to timely file such registration statement
and have it declared effective by the Securities and Exchange Commission.

OUR  PROJECTS  ARE  EXPECTED TO REQUIRE  SUBSTANTIAL  UP-FRONT  COSTS BEFORE ANY
REVENUES WILL BE REALIZED

        A  significant  portion of our  revenue is  expected  to  continue to be
derived from substantial  long-term projects which require significant  up-front
expense to us. There can be no assurance  that revenues  will be realized  until
the  projects  are  completed  or certain  significant  milestones  are met. Our
failure, or any failure by a third-party with which we may contract,  to perform
services or deliver interactive video products on a timely basis could result in
a substantial loss to us.

        We have had difficulty in meeting delivery schedules, which has resulted
in customer  dissatisfaction.  In addition,  difficulty  in completing a project
could have a material adverse effect on our reputation,  business and results of
operations.  In many instances, we are dependent on the efforts of third parties
to  adequately  complete our portion of a project and, even if our digital video
servers perform as required, a project may still fail due to other components of
the project supplied by third parties.

LACK OF PATENT AND COPYRIGHT PROTECTION

        Although we have filed a provisional  patent application with respect to
certain  technology,  we hold no patents  and have not  generally  filed  patent
applications. Our methods of protecting our proprietary knowledge may not afford
adequate  protection.  We cannot assure you that any patents applied for will be
issued,  or, if issued,  that such patents  would  provide them with  meaningful
protection from competition.



                                       13
<PAGE>

RISK OF THIRD PARTY CLAIMS OF INFRINGEMENT

        Technology-based  industries,  such as  ours,  are  characterized  by an
increasing  number of patents and frequent  litigation  based on  allegations of
patent  infringement.  From  time to time,  third  parties  may  assert  patent,
copyright  and  other  intellectual  property  rights to  technologies  that are
important to us. While there  currently are no outstanding  infringement  claims
pending by or against  us, we cannot  assure  you that  third  parties  will not
assert  infringement  claims against us in the future,  that  assertions by such
parties will not result in costly  litigation,  or that they will not prevail in
any such litigation.  In addition,  we cannot assure you that we will be able to
license  any valid and  infringed  patents  from third  parties on  commercially
reasonable  terms  or,  alternatively,   be  able  to  redesign  products  on  a
cost-effective  basis to avoid  infringement.  Any  infringement  claim or other
litigation against or by us could have a material adverse effect on us.

NO ASSURANCE OF TECHNOLOGICAL SUCCESS

        Our  ability  to   commercialize   our  products  is  dependent  on  the
advancement  of our  existing  technology.  In order to obtain  and  maintain  a
significant  market share we will  continually  be required to make  advances in
technology.  Due to cash shortages,  we did not expend any money in research and
development  in 2000.  We cannot  assure you that our research  and  development
efforts will result in the  development of such  technology on a timely basis or
at all. Any failures in such  research and  development  efforts could result in
significant delays in product  development and have a material adverse effect on
us. We cannot assure you that we will not encounter unanticipated  technological
obstacles  which either delay or prevent us from  completing the  development of
our products.

        We believe there are certain  technological  obstacles to be overcome in
order  to  develop  future  products.  These  obstacles  include  the lack of an
electronic data  interchange  server  interface (used for real-time  exchange of
data  between  servers)  and  enhancements  in the ability to access and utilize
information  stored on remote  servers.  In certain cases,  we will be dependent
upon  technological  advances  which  must be made by third  parties.  We cannot
assure  you that they or such third  parties  will not  encounter  technological
obstacles  which either delay or prevent us from  completing the  development of
our future products. Such obstacles could have a material adverse effect on us.

CERTAIN OF OUR PRODUCTS AND SERVICES ARE REGULATED BY THE FEDERAL COMMUNICATIONS
COMMISSION, WHICH MAY IMPOSE BURDENSOME REGULATIONS ON US

        The  Federal  Communications   Commission  and  certain  state  agencies
regulate  certain of our  products and services and certain of the users of such
products  and  services.  We are  also  subject  to  regulations  applicable  to
businesses  generally,  including  regulations  relating  to  manufacturing.  In
addition,  regulatory  authorities in foreign countries in which we may sell our
products may impose similar or more extensive governmental regulations.

        We rely upon,  and  contemplate  that we will continue to rely upon, our
corporate   partners  or  interactive  video  system  sponsors  to  comply  with
applicable regulatory  requirements.  We cannot assure you that such regulations
will not materially adversely affect us by jeopardizing the projects in which we
are  participating,  by  imposing  burdensome  regulations  on the  users of our
products,  by imposing sanctions that directly affect us, or otherwise.  Changes
in the  regulatory  environment  relating to the  industries in which we compete
could have a material  adverse  effect on us. We cannot  predict the effect that
future regulation or regulatory changes may have on our business.

WE DO NOT MAINTAIN ANY PRODUCT LIABILITY  INSURANCE,  WHICH MAY EXPOSE US TO THE
EXPENSE OF DEFENDING ANY LIABILITY CLAIMS

        The  manufacture  and sale of our  products  entails the risk of product
liability  claims.  In addition,  many of the  telephone,  cable and other large
companies with which we do or may do business may require  financial  assurances
of product reliability. At the present time we do not maintain product liability
insurance.



                                       14
<PAGE>



PART II

OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.
        ------------------

        There is no pending litigation against Celerity,  other than a claim for
non-payment of printing expenses. The action was brought on January 30, 2001 and
is pending before Supreme Court of the State of New York, County of New York. In
this action, the plaintiff,  Merrill/New York Company,  has sued the Company for
the non-payment of financial printing fees and is seeking approximately $118,000
in damages,  plus interest and certain costs.  The Company intends to defend the
action vigorously.

        In addition,  certain creditors have threatened  litigation if not paid.
Celerity 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 Celerity.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
        ------------------------------------------

        (a), (b) and (d)     None.

        (c)    SALES OF UNREGISTERED SECURITIES.

        In June 2001, we entered into an Equity Line of Credit pursuant to which
Cornell  Capital  Partners has agreed to purchase up to $10.0  million of common
stock. We have registered up to 55,555,556 shares in this registration statement
for issuance to the investor under the Equity Line of Credit. In connection with
the Equity Line of Credit,  our Company issued a warrant to Yorkville  Advisors,
the general partner of Cornell Capital Partners, to purchase 3,500,000 shares of
common stock at $0.10 per share.

        In April 2001, we sold 20.4667  shares of Series B Preferred  Stock from
which  we  received  gross  proceeds  of  $204,667.  We  also  sold  $10,000  of
convertible  debentures  pursuant to a Line of Credit  Agreement,  from which we
received gross proceeds of $10,000.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
        --------------------------------

        Not applicable.

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

        None.

ITEM 5. OTHER INFORMATION.
        ------------------

        Not applicable.





                                       15
<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
        ---------------------------------

        (a)    The  following  exhibits  are filed as part of this  registration
               statement:

<TABLE>
<CAPTION>
EXHIBIT NO.       DESCRIPTION                                LOCATION
----------------  ----------------------------------------  ----------------------------------------
<S>               <C>                                        <C>
3.1               Certificate of Incorporation of Celerity   Incorporated by reference to Exhibit
                  Systems, Inc.                              3.1 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

3.2               Bylaws of Celerity Systems, Inc.           Incorporated by reference to Exhibit
                                                             3.2 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

4.1               Form of Underwriter's Warrant              Incorporated by reference to Exhibit
                                                             4.1 to  Amendment No. 1 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 8, 1997

4.2               1995 Stock Option Plan                     Incorporated by reference to Exhibit
                                                             4.2 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

4.3               1997 Stock Option Plan                     Incorporated by reference to Exhibit
                                                             4.3 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

4.4               Form of Stock Certificate                  Incorporated by reference to Exhibit
                                                             4.4 to Amendment No. 2 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 28, 1997

4.5               Form of Bridge Warrant                     Incorporated by reference to Exhibit
                                                             4.5 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

4.6               Form of 1996 Warrant                       Incorporated by reference to Exhibit
                                                             4.6 to Amendment No. 2 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 28, 1997

4.7               Form of Hampshire Warrant                  Incorporated by reference to Exhibit
                                                             4.7 to Amendment No. 1 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 8, 1997

4.8               Form of 1995 Warrant                       Incorporated by reference to Exhibit
                                                             4.8 to the Registration Statement on
                                                             SB-2 filed with the SEC on August 13,
                                                             1997

4.9               Letter Agreement dated July 15, 1997,      Incorporated by reference to Exhibit
                  between the Company and Mahmoud            4.9 to the Registration Statement on
                  Youssefi, including exhibits               SB-2 filed with the SEC on August 13,
                                                             1997

4.10              Letter Agreement, dated July 11, 1997,     Incorporated by reference to Exhibit
                  between the Company and Dr. Fenton         4.10 to the Registration Statement on
                  Scruggs                                    SB-2 filed with the SEC on August 13,
                                                             1997

4.11              Form of 9% Convertible Debenture           Incorporated by reference to Exhibit
                                                             4.11 to Amendment No. 1 to Form 10-KSB
                                                             for the year ended December 31, 1998
                                                             filed with the SEC on April 30, 1999

                                       16
<PAGE>
EXHIBIT NO.       DESCRIPTION                                LOCATION
----------------  ----------------------------------------  ----------------------------------------

4.12              Form of 7% Promissory Note                 Incorporated by reference to Exhibit
                                                             4.12 to Amendment No. 1 to Form 10-KSB
                                                             for the year ended December 31, 1998
                                                             filed with the SEC on April 30, 1999

4.13              Form of Registration Rights Agreement,     Incorporated by reference to Exhibit
                  between the Company and each of RNI        4.13 to Amendment No. 1 to Form 10-KSB
                  Limited Partnership, First Empire          for the year ended December 31, 1998 as
                  Corporation, Greg A. Tucker and Michael    filed with the SEC on April 30, 1999
                  Kesselbrenner

4.14              Form of Warrant issued April 27, 1999      Incorporated by reference to Exhibit
                                                             4.2 to the Registration Statement on
                                                             S-3 filed with the SEC on June 18, 1999

4.15              Shareholders Agreement, dated August 10,   Incorporated by reference to Exhibit
                  1999, between Celerity Systems, Inc.,      99.2 to the Form 8-K filed with the SEC
                  FutureTrak Merger Corp. and certain        on September 14, 1999
                  parties listed therein

4.16              Registration Rights Agreement, dated       Incorporated by reference to Exhibit
                  September 30, 1999, between the Company    99.2 to the Form 8-K filed with the SEC
                  and GMF Holdings                           on October 8, 1999

4.17              Form of Debenture in connection with       Incorporated by reference to Exhibit
                  Line of Credit Agreement, dated            99.4 to the Form 8-K filed with the SEC
                  September 30, 1999                         on October 8, 1999

4.18              Form of Warrant issued September 30, 1999  Incorporated by reference to Exhibit
                                                             4.10 to the Registration Statement on
                                                             S-3 filed with the SEC on February 15,
                                                             2000

4.19              Form of 4% Convertible Debenture due       Incorporated by reference to Exhibit
                  2002 between the Company and each of       4.2 to the Registration Statement on
                  John Bridges, John Faure, Loni             S-3 filed with the SEC on February 15,
                  Spurkeland, Robert Dettle, Michael         2000
                  Genta, Lennart Dallgren

4.20              Form of 8% Convertible Debenture due       Incorporated by reference to Exhibit
                  2002 between the Company and each of       4.3 to the Registration Statement on
                  Richard T. Garrett, W. David McCoy,        S-3 filed with the SEC on February 15,
                  Dominick Chirarisi, Gilda R. Chirarisi,    2000
                  Joseph C. Cardella, Carl Hoehner

4.21              Form of 8% Convertible Debenture due       Incorporated by reference to Exhibit
                  2003 between the Company and John          4.4 to the Registration Statement on
                  Bolliger                                   S-3 filed with the SEC on February 15,
                                                             2000

4.22              Form of Registration Rights Agreement,     Incorporated by reference to Exhibit
                  between Celerity and each of John          4.6 to the Registration Statement on
                  Bridges, John Faure, Loni Spurkeland,      S-3 filed with the SEC on February 15,
                  Robert Dettle, Michael Genta, Lennart      2000
                  Dallgren

4.23              Form of Registration Rights Agreement,     Incorporated by reference to Exhibit
                  between Celerity and each of Richard T.    4.7 to the Registration Statement on
                  Garrett, W. David McCoy, Dominick          S-3 filed with the SEC on February 15,
                  Chirarisi, Gilda R. Chirarisi, Joseph C.   2000
                  Cardella, Carl Hoehner

4.24              Form of Registration Rights Agreement,     Incorporated by reference to Exhibit
                  between Celerity and John Bolliger         4.8 to the Registration Statement on
                                                             S-3 filed with the SEC on February 15,
                                                             2000

                                       17
<PAGE>
EXHIBIT NO.       DESCRIPTION                                LOCATION
----------------  ----------------------------------------  ----------------------------------------

4.25              Form of 8% Convertible Debenture due       Incorporated by reference to Exhibit
                  2003 between the Company and each of Sui   99.7 to the Form 8-K filed with the SEC
                  Wa Chau, Qinu Guan, Peter Chenan Chen,     on March 23, 2000
                  K&M Industry, Inc., Michael Dahlquist,
                  Denise and Vernon Koto and Rance Merkel

4.26              Form of Registration Rights Agreement,     Incorporated by reference to Exhibit
                  between Celerity and each of Sui Wa        99.8 to the Form 8-K filed with the SEC
                  Chau, Qinu Guan, Peter Chenan Chen, K&M    on March 23, 2000
                  Industry, Inc., Michael Dahlquist,
                  Denise and Vernon Koto and Rance Merkel

4.27              Securities Purchase Agreement, dated       Incorporated by reference to Exhibit
                  August 31, 2000, between Celerity and      99.1 to the Form 8-K filed with the SEC
                  the Investors specified therein            on September 5, 2000

4.28              Registration Rights Agreement, dated       Incorporated by reference to Exhibit
                  August 31, 2000, between Celerity and      99.2 to the Form 8-K filed with the SEC
                  the Investors specified therein            on September 5, 2000

4.29              Form of Warrant issued March 31, 2000      Incorporated by reference to Exhibit
                                                             99.3 to the Form 8-K filed with the SEC
                                                             on April 5, 2000

10.1              Employment Agreement, dated January 7,     Incorporated by reference to Exhibit
                  1997, as amended, between the Company      10.1 to Amendment No. 1 to Registration
                  and Kenneth D. Van Meter                   Statement on SB-2 filed with the SEC on
                                                             October 8, 1997

10.2              Employment, Non-Solicitation,              Incorporated by reference to Exhibit
                  Confidentiality and Non-Competition        10.2 to the Registration Statement on
                  Agreement, dated as of May 1, 1996,        SB-2 filed with the SEC on August 13,
                  between the Company and Glenn West         1997

10.3              Termination Agreement, dated as of         Incorporated by reference to Exhibit
                  April 5, 1997, between the Company and     10.3 to the Registration Statement on
                  Mahmoud Youssefi                           SB-2 filed with the SEC on August 13,
                                                             1997

10.4              [Reserved]

10.5              Letter Agreement, dated March 13, 1997,    Incorporated by reference to Exhibit
                  between the Company and William Chambers   10.5 to Amendment No. 1 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 8, 1997

10.6              Letter Agreement, dated July 24, 1997,     Incorporated by reference to Exhibit
                  between the Company and Mark. C. Cromwell  10.6 to Amendment No. 1 to Registration
                                                             Statement on SB-2 filed with the SEC on
                                                             October 8, 1997

10.7              Exclusive OEM/Distribution Agreement,      Incorporated by reference to Exhibit
                  dated March 10, 1995, between the          10.7 to the Registration Statement on
                  Company and InterSystem Multimedia, Inc.   SB-2 filed with the SEC on August 13,
                                                             1997

10.8              Purchase Order Agreement, dated June 26,   Incorporated by reference to Exhibit
                  1995, between Tadiran Telecommunications   10.8 to the Registration Statement on
                  Ltd. and the Company                       SB-2 filed with the SEC on August 13,
                                                             1997

10.9              License Agreement, dated as of             Incorporated by reference to Exhibit
                  September 26, 1996, between the Company    10.9 to the Registration Statement on
                  and En Kay Telecom Co., Ltd.               SB-2 filed with the SEC on August 13,
                                                             1997

                                       18
<PAGE>
EXHIBIT NO.       DESCRIPTION                                LOCATION
----------------  ----------------------------------------  ----------------------------------------

10.10             License Agreement, dated as of February    Incorporated by reference to Exhibit
                  21, 1997, between the Company and En Kay   10.10 to the Registration Statement on
                  Telecom Co., Ltd.                          SB-2 filed with the SEC on August 13,
                                                             1997

10.11             Remarketer Agreement, dated as of          Incorporated by reference to Exhibit
                  June 15, 1997, between the Company and     10.11 to the Registration Statement on
                  Minerva Systems, Inc.                      SB-2 filed with the SEC on August 13,
                                                             1997

10.12             Memorandum of Understanding, dated         Incorporated by reference to Exhibit
                  April 25, 1996, between Integrated         10.12 to the Registration Statement on
                  Network Corporation and the Company        SB-2 filed with the SEC on August 13,
                                                             1997

10.13             Letter of Agreement, dated March 31,       Incorporated by reference to Exhibit
                  1993, between the Company and Herzog,      10.13 to the Registration Statement on
                  Heine & Geduld, Inc. and Development       SB-2 filed with the SEC on August 13,
                  Agreement attached thereto                 1997

10.14             Subcontract Agreement, dated June 26,      Incorporated by reference to Exhibit
                  1997, between Unisys Corporation and the   10.14 to the Registration Statement on
                  Company                                    SB-2 filed with the SEC on August 13,
                                                             1997

10.15             Lease Agreement for Crossroad Commons,     Incorporated by reference to Exhibit
                  dated November 25, 1996, as amended,       10.15 to Amendment No. 1 to
                  between Lincoln Investment Management,     Registration Statement on SB-2 filed
                  Inc., as attorney in fact for the          with the SEC on October 8, 1997
                  Lincoln National Life Insurance Company,
                  and the Company

10.16             Lease Agreement, dated November 25,        Incorporated by reference to Exhibit
                  1997, between Centerpoint Plaza, L.P.      10.16 to the Form 10-KSB for the year
                  and the Company                            ended December 31, 1997 filed with the
                                                             SEC on March 31, 1998

10.17             Letter Agreement, dated October 3, 1997,   Incorporated by reference to Exhibit
                  between Dennis Smith and the Company       10.17 to the Form 10-KSB for the year
                                                             ended December 31, 1997 filed with the
                                                             SEC on March 31, 1998

10.18             Letter Agreement, dated January 8, 1998,   Incorporated by reference to Exhibit
                  between James Fultz and the Company        10.18 to the Form 10-KSB for the year
                                                             ended December 31, 1997 filed with the
                                                             SEC on March 31, 1999

10.19             Amendment to Employment,                   Incorporated by reference to Exhibit
                  Non-Solicitation, Confidentiality and      10.19 to the Form 10-KSB for the year
                  Non-Competition Agreement, dated January   ended December 31, 1997 filed with the
                  1, 1999, between the Company and Glenn     SEC on April 30, 1998
                  West

10.20             Form of Subscription Agreement, between    Incorporated by reference to Exhibit
                  the Company and each of RNI Limited        10.20 to Amendment No. 1 to Form 10-KSB
                  Partnership, First Empire Corporation,     for the year ended December 31, 1998
                  Greg A. Tucker and Michael Kesselbrenner   filed with the SEC on April 30, 1999

10.21             Form of Subscription Agreement, between    Incorporated by reference to Exhibit
                  the Company and each of Donald             10.21 to Amendment No. 1 to Form 10-KSB
                  Alexander, Leo Abbe, Centerpoint Plaza,    for the year ended December 31, 1998
                  L.P., William Chambers, Fenton Scruggs,    filed with the SEC on April 30, 1999
                  Dennis Smith, Kenneth Van Meter, George
                  Semb and Rodney Conard

                                       19
<PAGE>
EXHIBIT NO.       DESCRIPTION                                LOCATION
----------------  ----------------------------------------  ----------------------------------------

10.22             Form of Royalty Agreement, between the     Incorporated by reference to Exhibit
                  Company and each of Donald Alexander,      10.22 to Amendment No. 1 to Form 10-KSB
                  Leo Abbe, Centerpoint Plaza, LP, William   for the year ended December 31, 1998
                  Chambers, Fenton Scruggs, Dennis Smith,    filed with the SEC on April 30, 1999
                  Kenneth Van Meter, George Semb and
                  Rodney Conard

10.23             Agreement and Plan of Merger, dated        Incorporated by reference to Exhibit
                  August 10, 1999, between Celerity          99.1 to the Form 8-K filed with the SEC
                  Systems, Inc., FutureTrak Merger Corp.     on September 14, 1999
                  and FutureTrak International, Inc.

10.24             Line of Credit Agreement, dated            Incorporated by reference to Exhibit
                  September 30, 1999, between GMF            99.1 to the Form 8-K filed with the SEC
                  Holdings, May Davis Group and the Company  on October 8, 1999

10.25             Termination Agreement, dated December 7,   Incorporated by reference to Exhibit
                  1999, between the Company, FutureTrak      99.1 to the Form 8-K filed with the SEC
                  Merger Corp. and FutureTrak                on December 8, 1999
                  International, Inc.

10.26             Manufacturing Agreement, dated November    Incorporated by reference to Exhibit
                  30, 1999, between the Company, Primax      99.2 to the Form 8-K filed with the SEC
                  Electronics, Ltd and Global Business       on January 5, 2000
                  Group, Ltd.

10.27             Lease, dated December 17, 1999, between    Incorporated by reference to Exhibit
                  Andy Charles Johnson, Raymond Perry        99.1 to the Form 8-K filed with the SEC
                  Johnson, Tommy F. Griffin. and the         on January 5, 2000
                  Company

10.28             Amendment to the Line of Credit            Incorporated by reference to Exhibit
                  Agreement between Celerity and GMF         10.28 to the Registration Statement on
                  Holdings, Inc. dated October 16, 2000      SB-2 filed with the SEC on October 27,
                                                             2000

10.29             Purchase Agreement, dated June 22, 2000,   Incorporated by reference to Exhibit
                  between the Company and WIT Technologies   99.2 to the Form 8-K filed with the SEC
                  Inc.                                       on July 11, 2000

10.30             Manufacturing Service Agreement, dated     Incorporated by reference to Exhibit
                  January 4, 2001, between the Company and   99.1 to the Registration Statement on
                  Nextek, Inc.                               SB-2 filed with the SEC on December 27,
                                                             2000

10.31             Broadband Services Agreement, dated        Incorporated by reference to Exhibit
                  January 4, 2001, between the Company and   99.2 to the Form 8-K filed with the SEC
                  DeserScape L.P.                            on January 10, 2001

10.32             Cooperative Marketing Agreement, dated     Incorporated by reference to Exhibit
                  January 4, 2001, between the Company and   99.3 to the Form 8-K filed with the SEC
                  In4Structures LLC                          on January 10, 2001

10.33             Equity Line of Credit Agreement dated as   Provided herewith
                  of June 14, 2001 between Celerity
                  Systems, Inc. and Cornell Capital
                  Partners, L.P.

10.34             Registration Rights Agreement dated as     Provided herewith
                  of June 14, 2001 between Celerity
                  Systems, Inc. and Cornell Capital
                  Partners, L.P.

10.35             Consulting Services Agreement dated as     Provided herewith
                  of June 14, 2001 between Celerity
                  Systems, Inc. and Cornell Capital
                  Partners, L.P.

10.36             Escrow Agreement dated as of June 14,      Provided herewith
                  2001 among Celerity Systems, Inc. Meir
                  Levin and Cornell Capital Partners, L.P.

</TABLE>

                                       20
<PAGE>

                                   SIGNATURES

        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.

Date:   August 14, 2001                      CELERITY SYSTEMS, INC.

                                             By:  /s/Kenneth D. Van Meter
                                                  -----------------------------
                                                  Kenneth D. Van Meter





                                       21