U.S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


                                   FORM 10-QSB
<TABLE>
<CAPTION>

         (MARK ONE)
<S>   <C>     <C>                                                   <C>
      |X|   Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934

                                     For the quarterly period ended MARCH 31, 2002

      |_|   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 Incorporation                       (I.R.S. Employer Identification No.)
or Organization)

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 9,309,459 shares of Common Stock outstanding as of April 25 2002 after taking into account a
one-for-twenty reverse stock split.

</TABLE>





                                                       1
<PAGE>


PART I

<TABLE>
<CAPTION>
FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.

CELERITY SYSTEMS, INC.
 Balance Sheets
                                                                                         March 31, 2002
                                                                                           (unaudited)       December 31, 2001
                                                                                     --------------------------------------------
 <S>                                                                                          <C>                 <C>
 Assets
    Cash                                                                                      $      111,107      $      171,988
    Accounts receivable                                                                                1,908               4,282
    Inventory, net                                                                                 2,192,111           2,184,334
                                                                                     --------------------------------------------
         Total current assets                                                                      2,305,126           2,360,604
 Property and equipment, net                                                                         236,330             252,286
 Debt offering costs, net of accumulated amortization of $280,617
   and $157,418, respectively                                                                        916,238           1,076,187
 Other assets                                                                                         20,900              20,900
                                                                                     --------------------------------------------
      Total assets                                                                            $    3,478,594      $    3,709,977
                                                                                     ============================================

 Liabilities, Redeemable Preferred Stock and Stockholders' Deficit
 Accounts payable                                                                             $    2,095,965      $    2,114,855
 Accrued wages and related taxes                                                                      77,022              77,022
 Accrued interest                                                                                    897,360             768,995
 Other accrued liabilities                                                                           477,828             277,764
 Notes payable - Related party                                                                       125,000             117,589
 Equity warrant liability                                                                                  -             134,374
 Current maturities of long-term debt and capital lease obligations                                  140,000             150,000
                                                                                     --------------------------------------------
      Total current liabilities                                                                    3,813,175           3,640,599
 Long-term debt and capital lease obligations, less current maturities                             2,768,457           2,830,168
                                                                                     --------------------------------------------
      Total liabilities                                                                            6,581,632           6,470,767

 Commitments and contingencies (Notes 7 and 8)

 Series B convertible preferred stock, $.01 par value; authorized 100 shares; 95
      shares issued and outstanding at
      March 31, 2002 and December 31, 2001                                                           950,000             950,000

 Series C convertible preferred stock, $.01 par value;  authorized 100 shares; 6
      shares issued and outstanding at
      March 31, 2002 and December 31, 2001                                                            60,000              60,000

 Series D convertible  preferred stock,  $.01 par value;  authorized 100 shares;
      5.4 and 0 shares issued and outstanding at
      March 31, 2002 and December 31, 2001                                                            54,000                   -

 Series E convertible preferred stock, $.01 par value; authorized 100 shares; 10
      and 0 shares issued and outstanding at
      March 31, 2002 and December 31, 2001                                                           100,000                   -

</TABLE>

                                                        2
<PAGE>

<TABLE>
 <S>                                                                                          <C>                 <C>
 Common stock, $.001 par value, 250,000,000 shares authorized,
      8,939,504 and 4,939,766 issued and outstanding
      at March 31, 2002 and December 31, 2001, respectively                                            8,939               4,940
Additional paid-in capital                                                                        34,303,178          33,079,315
Accumulated deficit                                                                             (38,579,155)        (36,948,900)
                                                                                     --------------------------------------------
      Total stockholders' deficit                                                                (4,267,038)         (3,770,790)
                                                                                     --------------------------------------------
      Liabilities, Convertible Preferred Stock and Stockholders' Deficit                      $    3,478,594      $    3,709,977
                                                                                     ============================================
</TABLE>






                                                       3
<PAGE>

<TABLE>
<CAPTION>
 CELERITY SYSTEMS, INC.
 Condensed Statements of Operations
 Unaudited
                                                                                             Three Months Ended
                                                                                                 March 31,
                                                                                 -------------------------------------------
                                                                                              2002                 2001
                                                                                              -----                -----
   <S>                                                                                    <C>                   <C>
   Revenues                                                                               $      2,234          $     2,400
   Cost of revenues                                                                                  -                3,240
                                                                                 -------------------------------------------
           Gross margin                                                                          2,234                (840)
   Operating expenses                                                                          822,009              654,956
                                                                                 -------------------------------------------
           Loss from operations                                                              (819,775)            (655,796)
      Interest expense                                                                       (762,037)             (68,494)
      Income on equity warrant liability (Note 8)                                              104,745                    -
      Other income                                                                                 812                1,425
                                                                                 -------------------------------------------
           Net loss                                                                        (1,476,255)            (722,865)
           Amortization of beneficial conversion feature and accretion of
redeemable convertible preferred stock    (Note 4)                                           (154,000)             (30,628)
                                                                                                       ---------------------
                                                                                 ----------------------
           Net loss attributable to common shareholders                                   $(1,630,255)          $ (753,493)
                                                                                 ===========================================

   Basic loss per common share (Note 2):
          Net loss per share                                                              $     (0.21)          $    (0.23)
          Amortization of beneficial conversion feature and accretion of
redeemable convertible preferred stock                                                          (0.02)               (0.01)
          Net loss attributable to common shareholders                                    $     (0.23)          $    (0.24)
                                                                                          ===========           ==========

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

</TABLE>






                                                       4
<PAGE>

<TABLE>
<CAPTION>
CELERITY SYSTEMS, INC.
 Statement of Changes in Stockholders' Deficit
 For the Three Months Ended March 31, 2002
 Unaudited
                                                                                                                      Total
                                    Shares of                             Additional          Accumulated         Stockholders'
                                   Common Stock      Common Stock       Paid-In Capital         Deficit              Deficit
                                  ---------------    --------------    ------------------   -----------------    ---------------
<S>                                    <C>                <C>           <C>                     <C>               <C>
Balances, December 31, 2001            4,939,766        $    4,940      $     33,173,170        $(36,948,900)     $  (3,770,790)
Issuance of convertible
debenture with beneficial
conversion feature                                                                84,848                                  84,848
Issuance of convertible
preferred stock with beneficial
conversion feature                                                               154,000                                 154,000
Issuance of common stock as
payment of certain payroll and
accounts payable items                   132,239               132                55,098                                  55,230
Conversion of convertible
debentures to shares of common
stock                                  3,867,499             3,867               806,433                                 810,300
Close out of Equity Warrant
Liability                                                                         29,629                                  29,629
Accretion of convertible
preferred stock                                                                                    (154,000)           (154,000)
Net loss                                                                                         (1,476,255)         (1,476,255)

                                  ---------------    --------------    ------------------   -----------------    ---------------
Balances, March 31, 2002               8,939,504        $    8,939      $     34,303,178        $(38,579,155)     $  (4,267,038)
                                  ===============    ==============    ==================   =================    ===============

</TABLE>





                                                        5
<PAGE>

<TABLE>
<CAPTION>
 CELERITY SYSTEMS, INC.
 Condensed Statements of Cash Flows
 Unaudited
                                                                                                   Three Months Ended
                                                                                                        March 31
                                                                                        -----------------------------------------
                                                                                                    2002                2001
                                                                                                    ----                ----
 <S>                                                                                         <C>                   <C>
 Cash flows from operating activities:
    Net loss                                                                                 $   (1,476,255)       $   (722,865)
    Adjustments to reconcile net loss to net
         Cash used in operating activities:
             Depreciation and amortization                                                           228,241              80,128
             Noncash interest expense related to beneficial
                  conversion feature of debt                                                         611,438              46,001
             Noncash interest expense related to notes payable                                             -              36,860
             Noncash operating expense related to consulting fees                                          -              17,990
             Noncash operating expense related to payroll
                and directors' fees                                                                        -              19,214
             Noncash income related to equity warrant liability                                    (104,745)                   -
             Changes in current assets and liabilities:
                 Accounts receivable                                                                   2,373             (1,000)
                 Inventory                                                                           (7,777)           (658,505)
                 Accounts payable                                                                     27,656             345,902
                 Other current liabilities                                                           359,112                 946
                                                                                        ----------------------------------------
                     Net cash used in operating activities                                         (359,957)           (835,329)
 Cash flows from investing activities:
    Purchase of fixed assets                                                                         (4,174)           (246,385)
                                                                                        ----------------------------------------
                     Net cash used in investing activities                                           (4,174)           (246,385)
 Cash flows from financing activities:
    Proceeds from short-term borrowings                                                                    -              15,000
    Payments on short-term borrowings                                                                      -            (15,000)
    Proceeds from long-term debt                                                                     400,000           1,790,000
    Principal payments on long-term debt and capital lease obligations                             (210,000)            (20,000)
    Proceeds from issuance of common stock                                                                 -              30,000
    Proceeds from preferred stock and warrant offerings, net of offering costs                       154,000             685,072
    Financing and debt issue costs                                                                  (40,750)           (158,239)
                                                                                        ----------------------------------------
                     Net cash provided by financing activities                                       303,250           2,326,833
 Net increase in cash                                                                               (60,881)           1,245,119
 Cash, beginning of period                                                                           171,988              10,366
                                                                                        ----------------------------------------
 Cash, end of period                                                                         $       111,107       $   1,255,485
                                                                                        ========================================


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

</TABLE>





                                                       6
<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 March 31, 2002 and 2001,
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 three month  period  ended  March 31,  2002,  are not
necessarily  indicative  of the results that may be expected for the year ending
December  31,  2002.  The  condensed  financial  statements  should  be  read in
conjunction with the financial statements and notes thereto included in the Form
10-KSB of the  Company  as of and for the year  ended  December  31,  2001.  All
amounts and share  totals have been  restated to account for the  one-for-twenty
reverse stock split effective April 24, 2002.

         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.

         FASB Statement of Financial  Accounting  Standards No. 143  "Accounting
for Asset Retirement  Obligations"  ("SFAS 143") was issued in August 2001. SFAS
143 changes the accounting and reporting for asset retirement obligations.  SFAS
143 is effective for fiscal years  beginning after June 15, 2002. The Company is
currently  assessing  the  effect,  if  any,  on  its  financial  statements  of
implementing SFAS 143.

         In  October,  2001,  the  FASB  issued  SFAS  144,  Accounting  for the
Impairment or Disposal of Long-Lived  Assets.  SFAS 144 requires that long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair  value  less  cost to  sell.  SFAS 144 is  effective  for  fiscal  years
beginning  after  December 15, 2001.  Adoption of this  statement  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.  Since  inception in January,  1993 through March 31, 2002 the losses
total  approximately  $38,579,000.  As of March  31,  2002,  the  Company  had a
negative net working capital of  approximately  $1,508,000.  These factors taken
together  with  the lack of  sales  and the  absence  of  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 focused its sales
efforts to those which it  believes  have the best chance of closing in the near
term. In the first three months of 2002,  the Company  received  gross  proceeds
from private placements of convertible debt totaling $400,000 and Series D and E
Convertible  Preferred Stock totaling $154,000.  These funds enabled the Company
to  operate  for the last few  months,  however,  additional  financing  will be
necessary to sustain its  operations  and achieve its business plan. The Company
is attempting to obtain such additional  financing.  Management is also actively
seeking one or more strategic investors. The Company has also received orders to
provide  five of its  DigiKnow  Digital  Education  Systems  to  schools  in the
Midwest.  However,  there can be no  assurance  as to the  receipt  or timing of
revenues  from  operations  including  revenues  from  these  contracts  or that
management  will be able to find a strategic  investor or secure the  additional
financing necessary to sustain operations or achieve its business plan.


                                       7
<PAGE>
         The ability of the Company to continue as a going  concern is dependent
upon its ability to successfully  accomplish the plan described in the preceding
paragraph  and  eventually  attain  profitable   operations.   The  accompanying
financial  statements do not include any adjustments  that might be necessary if
the Company is unable to continue as a going concern.


2.       LOSS PER SHARE

         Basic and diluted  loss per share were  computed  by dividing  net loss
attributable 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 net loss and their effect would be  anti-dilutive.  At March
31, 2002, the number of shares  excluded from the  computation  because of their
anti-dilutive effect is approximately 32,896,300.  Following is a reconciliation
of the numerators and denominators of the basic earnings per share:
<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                          ------------------------------------
                                                                                  2002                2001
                                                                                  ----                ----
<S>      <C>                                                                  <C>                  <C>
Loss
         Basic and diluted:
                  Income (loss) applicable to common stockholders             $(1,630,255)         $(753,493)

Shares
         Basic and diluted:
                  Weighted-average common shares outstanding                     7,063,884          3,181,652
</TABLE>


3.       ISSUANCE OF CONVERTIBLE DEBENTURES

         The  Company  issued  $400,000   aggregate   principal   amount  of  4%
convertible  debentures  in the first  three  months of 2002,  resulting  in net
proceeds of approximately $359,000. The debentures have a term of five years and
are convertible into the Company's common stock, at the option of the holder, at
a price  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
$84,848  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. Upon conversion prior to the stated date of redemption the remaining
unamortized discount will be recognized as a non-cash interest expense.


4.       ISSUANCE OF CONVERTIBLE PREFERRED STOCK

         SERIES D

         In the  first  quarter  of 2002,  the  Company  consummated  a  private
placement of 5.4 shares of Series D  Convertible  Preferred  Stock  resulting in
gross  proceeds  of  $54,000.  The  Series  D Stock  provides  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 $0.01 per share  (which
conversion  price was adjusted to $0.20 per share for the reverse stock split on
April 24,  2002),  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 if permitted by applicable
law.

         On the date of issuance of the Series D  Convertible  Preferred  Stock,
the  effective  conversion  price was at a  discount  to the price of the common
stock into which it was  convertible.  The Company  recorded a $54,000  dividend
relative  to  the  beneficial  conversion  feature.  The  Series  D  Convertible
Preferred  Stock  is  considered   perpetual  preferred  stock  and,  therefore,
amortization  of the  $54,000  is  reflected  over the  period  from the date of
issuance to the earliest conversion date, resulting in full accretion during the
first quarter of 2002.

                                       8
<PAGE>
         SERIES E

         In the  first  quarter  of 2002,  the  Company  consummated  a  private
placement  of 10 shares of Series E  Convertible  Preferred  Stock  resulting in
gross proceeds of $100,000.  The Series E Convertible  Preferred  Stock provides
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 $0.001
per  share  (which  conversion  price  was  adjusted  to $0.02 per share for the
reverse stock split on April 24,  2002),  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 if permitted by applicable
law.

         On the date of issuance of the Series E  Convertible  Preferred  Stock,
the  effective  conversion  price was at a  discount  to the price of the common
stock into which it was convertible.  The Company  recorded a $100,000  dividend
relative  to  the  beneficial  conversion  feature.  The  Series  E  Convertible
Preferred  Stock  is  considered   perpetual  preferred  stock  and,  therefore,
amortization  of the  $100,000  is  reflected  over the period  from the date of
issuance to the earliest conversion date, resulting in full accretion during the
first quarter of 2002.

         The total amount that would be required for redemption for the Series D
and Series E Convertible Preferred Stock is as follows:
<TABLE>
                        <S>                                                            <C>
                        2002                                                           $       --
                        2003                                                                   --
                        2004                                                              154,000
                                                                               -------------------
                        Total required redemption for the Series D
                        and Series E Convertible Preferred Stock                       $  154,000
                                                                               ===================
</TABLE>


5.       SUPPLEMENTAL CASH FLOW INFORMATION

         During the first  three  months of 2002,  the  Company  issued  132,239
shares of common  stock with a value of $55,230 as payment for  certain  payroll
and accounts payable items.

         Also during the first three months of 2002, convertible debentures with
outstanding  principal and interest of $810,300 were  converted  into  3,867,499
shares of common stock.

         Also during the first three months of 2002,  $7,411 of noncash interest
expense was incurred  relating to amortization of warrants issued in conjunction
with certain notes payable.


7.       COMMITMENTS AND CONTINGENCIES

         In January  2002,  the  Company  terminated  the Equity  Line of Credit
entered into on June 14, 2001 due to delays in getting related shares registered
and 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 1999 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.  The  liability  for  liquidated  damages will
continue to accrue until the earlier of one year from the  issuance  date of the
convertible  debentures  or  the  date  a  new  registration  statement  becomes
effective.  The  Company is  preparing  a new  registration  statement  which it
intends to file in the second quarter of 2002.

         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,  sued the Company for
the non-payment of financial  printing fees. In 2002,  Merrill/New  York Company
obtained a judgment for $136,435  against the  Company.  Such  judgment has been
fully  accrued on the books of the  Company.  The Company  intends to appeal the
decision.

                                       9
<PAGE>

         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 shipment of products.
The Company intends to defend this action.

         On  February  14,  2002,  Metalade  FL,  Inc.  sued the  Company  for a
delinquent account. The action was brought in the Circuit Court for Knox County,
Tennessee  and is styled as Metalade  Fl, Inc. v.  Celerity  Systems,  Inc.  The
plaintiff  alleges it is owed in excess of $103,000  related to the  shipment of
products. The Company intends to defend this action.

         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.


8.       SUBSEQUENT EVENTS

         On April 9, 2002, the Company held its Annual meeting of  Shareholders.
The shareholders approved a one-for-twenty reverse stock split. In addition, the
shareholders  approved an increase in the Company's  authorized capital stock to
250,000,000  shares of common stock after taking into account the one-for-twenty
reverse stock split.  This reverse stock split became  effective at the close of
business on April 24, 2002.

         On April 24, 2002, the Company  entered into a purchase order financing
arrangement with Kidston Communications. Kidston Communications is controlled by
Ed  Kidston,  a  director  and  shareholder  of the  Company.  Pursuant  to this
arrangement,  Kidston  Communications  will purchase products and materials from
the Company in sufficient  quantities to fill open purchase  orders  received by
the Company.  Upon such purchase,  title to the products and materials needed to
fill the open purchase orders vests in Kidston Communications and are segregated
from the Company's  products and materials.  The Company is then responsible for
production of the final  products to be shipped to the  customers.  The purchase
price  for these  products  and  materials  is the  amount of the open  purchase
orders,  less a 15%  discount.  If the order is filled after 10 months,  then an
interest  charge of 1.5% per month will apply.  This  discount will be accounted
for as an interest expense on the Company's  financial  statements.  As of April
30, 2002,  Kidston  Communications  has financed open  purchase  orders having a
value of $485,941.

         In the second  quarter of 2002,  the Company  issued  370,000 shares of
common stock for  conversion of Series B Preferred  stock and 386,603  shares of
common stock for conversion of convertible debentures,  and issued 92,540 shares
of common stock as payment of certain payroll and accounts payable items.  Also,
in the second quarter of 2002, the Company granted  employees 302,500 options to
purchase shares of common stock as compensation for services provided.






                                       10
<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 COMPANY'S  PROJECTED SALES AND  PROFITABILITY,  (B) OUR COMPANY'S GROWTH
STRATEGIES,  (C) ANTICIPATED TRENDS IN OUR COMPANY'S INDUSTRY, (D) OUR COMPANY'S
FUTURE  FINANCING  PLANS AND (E) OUR  COMPANY'S  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 COMPANY'S  EXPECTATIONS AND ARE SUBJECT TO A
NUMBER OF RISKS AND  UNCERTAINTIES,  INCLUDING THOSE DESCRIBED IN "BUSINESS RISK
FACTORS" OF OUR FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2001. 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
COMPANY'S 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.

         We have  continued  to focus  most of our  development  and  production
efforts since 1999 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 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,  AL and IES in Gray,  TN under  which the T 6000  digital set top boxes
will be manufactured.

         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 focused 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.

         We had DE MINIMIS revenues in the three months ended March 31, 2002 and
2001.


         RESULTS OF OPERATIONS

           THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED
           MARCH 31, 2001

                  REVENUES

         We had revenues  $2,234 for the quarter ended March 31, 2002,  compared
to $2,400 for the same  period in 2001.  The low level of sales is the result of
constrained  sales and marketing  activities  caused by cash shortages.  We have
begun  focusing  our sales  efforts to those  which,  we believe,  have the best
chance of closing in the near term. In that regard, we have made progress in the
education markets.  In the three months ended March 31, 2002, we received orders
from three schools for approximately $587,000 of products.  These orders are not
considered sales until we ship the products.  Shipments are expected to occur in
the second and third  quarters of 2002.  We market our product for the education
market as the DigiKnow  Digital  Education  System.  Partial  financing  for the
purchase of inventory and payment of final assembly has been provided by Kidston
Communications,  a company  controlled by Ed Kidston, a director and shareholder
of our company.  A discussion  about the terms of this  financing  are set forth
below under the "Liquidity and Capital Resources" section.

                                       11
<PAGE>

                  COSTS OF REVENUES

         Costs of revenues were $-0- in the first  quarter of 2002,  compared to
$3,240 in 2001.  We had a gross  margin of $2,234 in the first  quarter of 2002,
compared to a negative gross margin of $840 in the same period of 2001.


                  OPERATING EXPENSES

         Operating  expenses  for the three  months  ending  March 31, 2002 were
$822,009,  compared  to  $654,956  for the same  period in 2001.  This  increase
results  primarily from higher payroll costs in 2002 of  approximately  $151,000
and increased  amortization  of debt offering costs of  approximately  $140,000.
These increases were partially offset by a decrease of approximately  $59,000 in
contract labor costs incurred for the  development of software to be used in our
interactive   digital  video  system  as  these  contractors  were  replaced  by
employees.  Also,  professional services decreased  approximately $67,000 in the
first quarter of 2002, compared to the same period in 2001.


                  INTEREST EXPENSES

         Interest expense in the first quarter of 2002 was $762,037, compared to
$68,494 in the same period of 2001.  Of these  amounts,  $611,437 and $43,853 in
2002 and 2001,  respectively,  are non-cash expenses incurred as a result of the
amortization  of a charge to  interest  expense  for the  beneficial  conversion
features of certain  convertible  debentures  outstanding  as of March 31, 2002.
Additionally,  the first  quarter of 2002 was impacted by $119,831 of liquidated
damages recorded due to the lack of having an effective  registration  statement
relating to those same convertible debentures.


                  EQUITY WARRANT INCOME

         For the three  months  ended  March 31,  2002,  we had income on equity
warrant  liability  of  $104,745.   This  amount  $represents  a  mark-to-market
adjustment  in  connection  with  warrants  to purchase  common  stock which are
outstanding.  The  value  of these  warrants  and the  resulting  mark-to-market
adjustment was determined using the Black-Scholes  Option Pricing Model with the
following  assumptions:  risk-free interest rate of 2.66%, expected dividends of
zero,  volatility  of 253.58% and expected  lives  ranging from 1 month to 4 1/2
years.


         NET LOSS

         As a result of the above  factors,  we had a net loss of  $1,476,255 or
$0.21 per share, for the quarter ended March 31, 2002, compared to a net loss of
$722,865, or $0.23 per share for the same period in 2001.

         We recognized a beneficial  conversion feature for various  convertible
debentures  outstanding  at  March  31,  2002  as  discount  on the  convertible
debentures and as additional paid-in capital. The unamortized discount remaining
at March 31, 2002, $1,079,243,  will be amortized as a non-cash interest expense
over the five  year  period  between  the date of  issuance  of the  convertible
debentures to the stated redemption date of the debentures. For the three months
ended March 31, 2002 and 2001, we had an amortization  of beneficial  conversion
feature of $611,437  and $43,853,  respectively.  Upon  conversion  prior to the
stated date of redemption the remaining  unamortized discount will be recognized
as a non-cash interest expense.

         In  addition,  we  had  outstanding  convertible  preferred  stock.  At
issuance the conversion price of the Series D Convertible Preferred Stock was at
a discount to the price of our common stock. The Series D Convertible  Preferred
Stock is  considered  perpetual  preferred  stock.  As a result,  we  recorded a
$54,000 dividend relative to the beneficial  conversion  feature of the Series D
Convertible  Preferred  Stock. At issuance the conversion  price of the Series E
Preferred Stock was at a discount to the price of our common stock. The Series E
Preferred  Stock is  considered  perpetual  preferred  stock.  As a  result,  we
recorded a $100,000  dividend relative to the beneficial  conversion  feature of
the Series E Preferred Stock.


         LIQUIDITY AND CAPITAL RESOURCES

         The primary  source of financing  for us since our  inception  has been
through  the  issuance  of common  and  preferred  stock  and debt.  We had cash
balances on hand of  $111,107  as of March 31, 2002 and  $171,988 as of December
31, 2001. Our cash position continues to be uncertain. Our primary need for cash
is to fund our ongoing  operations until such time that the sale of our products
generates enough revenue to fund operations.  These ongoing  operations  include
the purchase of parts used in the production of our products.  In addition,  our
need for cash includes satisfying current liabilities of $3,878,003,  consisting
primarily of accounts payable of $2,095,965,  accrued wages and related taxes of
$77,022,  accrued interest of $897,360,  other accrued  liabilities of $477,828,
notes  payable of $125,000  and current  portion of  long-term  debt and capital


                                       12
<PAGE>

lease obligations of $140,000.  These current  liabilities include a judgment of
$136,435 obtained by Merrill Corporation for non-payment of printing fees. We do
not  currently  have  sufficient  funds to pay these  obligations.  We will need
significant  new  funding  from  the  sale of  securities  to fund  our  ongoing
operations  and to satisfy  the above  obligations.  Except for  financing  from
Kidston Communications, we currently do not have any commitments for funding.

         In the first quarter of 2002, we issued $400,000 principal amount of 4%
convertible debentures resulting in net proceeds of approximately  $359,000, and
consummated a private placement of 5.4 shares of Series D Redeemable Convertible
Preferred  Stock and a  private  placement  of 10 shares of Series E  Redeemable
Convertible Preferred Stock resulting in gross proceeds of $54,000 and $100,000,
respectively.  On April 24,  2002,  we entered into a purchase  order  financing
arrangement with Kidston Communications. Kidston Communications is controlled by
Ed  Kidston,  a  director  and  shareholder  of our  company.  Pursuant  to this
arrangement, Kidston Communications will purchase products and materials from us
in sufficient quantities to fill open purchase orders. Upon such purchase, title
to the products and materials  needed to fill the open purchase  orders vests in
Kidston  Communications  and are segregated from our products and materials.  We
are then  responsible  for production of the final products to be shipped to the
customers.  The purchase price for these products and materials is the amount of
the open purchase orders,  less a 15% discount.  If any order is filled after 10
months, then an interest charge of 1.5% per month will apply. This discount will
be accounted for as an interest expense on our financial statements. As of April
30 2002, Kidston Communications has financed open purchase orders having a value
of $485,941.

         We are 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.  We have
granted a security  interest  in our  property  to our  landlord  and  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.

         During the quarter  ended March 31, 2002, we had a net decrease in cash
and cash equivalents of $60,881. Our sources and uses of funds were as follows:

         CASH USED IN OPERATING ACTIVITIES.  We used net cash of $359,957 in our
operating  activities in the three months ended March 31, 2002. Net cash used in
operating  activities  resulted  primarily  from a net  loss of  $1,476,255  and
non-cash  income  related to the equity warrant  liability of $104,745.  Our net
cash used in operating  activities  was  partially  offset by  depreciation  and
amortization expenses of $228,240, non-cash expenses of $611,438, an increase in
accounts  payable of $27,576  and an increase in other  current  liabilities  of
$359,112.  The increase in other  current  liabilities  includes  $113,000  from
deposits on new orders  received.  Accounts  payable are expected to remain high
until inventory levels can be reduced through sales.

         CASH  USED IN  INVESTING  ACTIVITIES.  We used  net cash of  $4,174  in
investing  activities in the three months ended March 31, 2002.  This relates to
the purchase of software for use in projects for the education market.

         CASH PROVIDED BY FINANCING ACTIVITIES. We received $303,250 in net cash
from financing activities,  consisting primarily of proceeds from long-term debt
of $400,000  and  preferred  stock of  $154,000.  This was  partially  offset by
principal  payments on long-term debt and capital lease  obligations of $210,000
and financing and debt issue costs of $40,750.

         Since our inception in January 1993 and through March 31, 2002, we have
an accumulated  deficit of $38,579,155.  We expect to incur operating losses for
the indefinite future as we continue to develop and market our technology. Since
January 1, 2002, we have  received  three new orders for the sale of our Digital
Education  System to school  systems in addition to one  currently  scheduled to
deliver  in the  second  quarter of 2002.  As of March 31,  2002 our  backlog of
unfilled orders is approximately $722,000. We are currently bidding on nearly 40
schools,  almost all in Ohio,  and are working to add  distributors  nationwide.
There  can  be no  assurance  as to the  receipt  or  timing  of  revenues  from
operations,  including,  in particular,  revenues from products  currently under
development.


                                       13
<PAGE>

         As of  March  31,  2002,  we had a  negative  net  working  capital  of
approximately  $1,508,049.  We have ceased  purchasing  any  material  amount of
inventory until inventory levels can be reduced.  We had no significant  capital
spending or purchase  commitments  at March 31, 2002 other than a facility lease
and inventory component purchase  commitments required in the ordinary course of
its business.

         We have no existing bank lines of credit.






                                       14
<PAGE>

PART II

OTHER INFORMATION
-----------------

ITEM 1.  LEGAL PROCEEDINGS.

         There is no pending  litigation  against  us,  other than those  claims
described below:

         o    We have a judgment  against  us for the  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 us for the  non-payment  of financial  printing  fees. In
              2002,  Merrill/New  York Company  obtained a judgment for $136,435
              against us. We intend to appeal this decision.

         o    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.  This action relates to amounts  alleged to be owed from
              the shipment of products. We intend to defend this action.

         o    On February 14, 2002,  Metalade FL, Inc.  sued us for a delinquent
              account.  The action was  brought  in the  Circuit  Court for Knox
              County,  Tennessee  and is styled as Metalade Fl, Inc. v. Celerity
              Systems,  Inc.  The  plaintiff  alleges  it is owed in  excess  of
              $103,000 related to the shipment of products.  We intend to defend
              this action.

         o    On October 27,  2001,  we  defaulted  on payments due of $150,000,
              plus accrued interest,  on certain unsecured notes. Written demand
              has been received from one of the two note holders. We are seeking
              to make arrangements with these note holders. In addition, certain
              creditors have  threatened  litigation if 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.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

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

         (c)               SALES OF UNREGISTERED SECURITIES.

         In January 2002, we issued  $400,000 of  convertible  debentures,  from
which we received  net  proceeds of  approximately  $359,000.  These  debentures
accrued  interest at 4% per year and are convertible into shares of common stock
at a  conversion  price  equal to 75% of the  average  closing  bid price of our
common stock for the 5 days prior to conversion. At our option, these debentures
may be paid in cash or  converted  into  shares  of  common  stock on the  fifth
anniversary unless converted earlier by the holder.

         In the first quarter of 2002, we consummated a private placement of 5.4
shares of Series D Convertible  Preferred  Stock  resulting in gross proceeds of
$54,000.  The Series D Stock  provides 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 $0.01 per share,  (which conversion price was adjusted
to $0.20 per share for the reverse  stock split on August 24,  2002,  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, we will offer to redeem such  preferred
shares then  outstanding  at a price equal to the original  issuance  price plus
accrued dividends if permitted by applicable law.

         On the date of issuance of the Series D  Convertible  Preferred  Stock,
the  effective  conversion  price was at a  discount  to the price of the common
stock into which it was convertible.  We recorded a $54,000 dividend relative to
the beneficial  conversion feature. The Series D Convertible  Preferred Stock is
considered perpetual preferred stock and, therefore, amortization of the $54,000
is  reflected  over  the  period  from  the  date of  issuance  to the  earliest
conversion date, resulting in full accretion during the first quarter of 2002.

                                       15
<PAGE>

         In the first quarter of 2002, we consummated a private  placement of 10
shares of Series E Convertible  Preferred  Stock  resulting in gross proceeds of
$100,000.  The Series E Convertible  Preferred  Stock provides 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 $0.001 per share (which
conversion  price was adjusted to $0.02 per share for the reverse stock split on
April 24,  2002),  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, we will
offer to redeem such preferred  shares then  outstanding at a price equal to the
original issuance price plus accrued dividends if permitted by applicable law.

         On the date of issuance of the Series E  Convertible  Preferred  Stock,
the  effective  conversion  price was at a  discount  to the price of the common
stock into which it was convertible. We recorded a $100,000 dividend relative to
the beneficial  conversion feature. The Series E Convertible  Preferred Stock is
considered  perpetual  preferred  stock  and,  therefore,  amortization  of  the
$100,000 is reflected  over the period from the date of issuance to the earliest
conversion date, resulting in full accretion during the first quarter of 2002.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         On October 27, 2001,  we  defaulted  on payments due of $150,000,  plus
accrued interest,  on certain unsecured notes.  Written demand has been received
from one of the two note holders. We are seeking to make arrangements with these
note holders. In addition,  certain creditors have threatened  litigation if 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.


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

         Our  company  held an annual  meeting of its  shareholders  on April 9,
2002. At the annual meeting,  the  shareholders  voted to (i) elect the board of
directors  and  (ii)  amend  the  Certificate  of   Incorporation  to  effect  a
one-for-twenty  reverse stock split of the issued and outstanding  common stock,
whereby each twenty shares outstanding would thereafter represent a single share
of stock and (iii)  amend the  Certificate  of  Incorporation  to  increase  the
authorized  capital  stock to  250,000,000  shares of common stock (after taking
into account the  one-for-twenty  reverse stock split). The directors elected at
the meeting were: Kenneth D. Van Meter, Fenton Scruggs, Edward Kidston and David
Hultquist.

                  At  the  annual  meeting,  the  shareholders   re-elected  the
following  directors  named in the following table by the vote set forth in such
table.


          NAME:                           FOR:        AGAINST:      ABSTAIN:
          -----------------------    -----------    -----------    ----------

          Kenneth D. Van Meter       180,667,077       --               --

          Fenton Scruggs             180,667,077       --               --

          Edward Kidston             180,667,077       --               --

          David Hultquist            180,667,077       --               --

                  At the annual  meeting,  the  shareholders  also  approved the
following matters by the vote set forth in such table.


MATTER:                                   FOR:           AGAINST:      ABSTAIN:

One-for-Twenty Reverse Stock Split    180,667,077         --             --

Increase Authorize Capital Stock      179,826,278         840,799        --


                                       16
<PAGE>

ITEM 5.  OTHER INFORMATION.

                  Not applicable.






                                       17
<PAGE>

<TABLE>
<CAPTION>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (A)      EXHIBITS.

EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>

3.1           Certificate of Incorporation of Celerity Systems,      Incorporated by reference to Exhibit 3.1 to the
              Inc.                                                   Registration Statement on SB-2 filed with the
                                                                     SEC on August 13, 1997

3.2           By laws 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

3.3           Certificate of Designation of Series C Preferred       Incorporated by reference to the Registration
              Stock                                                  Statement on Form SB-2 filed with the SEC on
                                                                     October 18, 2001

3.4           Certificate of Designation of Series D Preferred       Incorporated by reference to Exhibit 3.4 to the
              Stock                                                  Form 10-KSB for the year ended December 31, 2001
                                                                     filed with the SEC on March 27, 2002

3.5           Certificate of Designation of Series E Preferred       Incorporated by reference to Exhibit 3.5 to the
              Stock                                                  Form 10-KSB for the year ended December 31, 2001
                                                                     filed with the SEC on March 27, 2002

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, between          Incorporated by reference to Exhibit 4.9 to the
              Celerity and Mahmoud Youssefi, including exhibits      Registration Statement on SB-2 filed with the
                                                                     SEC on August 13, 1997
</TABLE>


                                                          18
<PAGE>
<TABLE>

EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>
4.10          Letter Agreement, dated July 11, 1997, between         Incorporated by reference to Exhibit 4.10 to the
              Celerity and Dr. Fenton Scruggs                        Registration Statement on 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

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

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

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

4.17          Form of Debenture in connection  with Line of          Incorporated by reference to Exhibit 99.4 to the
              Credit Agreement, dated September 30, 1999             Form 8-K filed with the SEC 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 2002 between      Incorporated by reference to Exhibit 4.2 to the
              Celerity and each of John Bridges, John Faure,         Registration Statement on S-3 filed with the SEC
              Loni Spurkeland, Robert Dettle, Michael Genta,         on February 15, 2000
              Lennart Dallgren

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

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

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

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

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


                                                          19
<PAGE>

<TABLE>

EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>
4.25          Form of 8% Convertible Debenture due 2003 between      Incorporated by reference to Exhibit 99.7 to the
              Celerity and each of Sui Wa Chau, Qinu Guan,           Form 8-K filed with the SEC on March 23, 2000
              Peter Chenan Chen, K&M Industry, Inc., Michael
              Dahlquist, Denise and Vernon Koto and Rance Merkel

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

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

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

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

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

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

10.4          [Reserved]

10.5          Letter Agreement, dated March 13, 1997, between        Incorporated by reference to Exhibit 10.5 to
              Celerity and William Chambers                          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, between         Incorporated by reference to Exhibit 10.6 to
              Celerity and Mark. C. Cromwell                         Amendment No. 1 to Registration Statement on
                                                                     SB-2 filed with the SEC on October 8, 1997

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

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

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

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

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


                                                          20
<PAGE>
<TABLE>

EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>
10.12         Memorandum of Understanding, dated April 25,           Incorporated by reference to Exhibit 10.12 to
              1996, between Integrated Network Corporation and       the Registration Statement on SB-2 filed with
              Celerity                                               the SEC on August 13, 1997

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

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

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

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

10.17         Letter Agreement, dated October 3, 1997, between       Incorporated by reference to Exhibit 10.17 to
              Dennis Smith and Celerity                              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, between       Incorporated by reference to Exhibit 10.18 to
              James Fultz and Celerity                               the Form 10-KSB for the year ended December 31,
                                                                     1997 filed with the SEC on March 31, 1999

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

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

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

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

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

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


                                                          21
<PAGE>

<TABLE>
EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>
10.25         Termination Agreement, dated December 7, 1999,         Incorporated by reference to Exhibit 99.1 to the
              between Celerity, FutureTrak Merger Corp. and          Form 8-K filed with the SEC on December 8, 1999
              FutureTrak International, Inc.

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

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

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

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

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

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

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

10.33         Equity Line of Credit Agreement dated as of            Incorporated by reference to the Registration
              June 14, 2001 between Celerity Systems, Inc. and       Statement on Form SB-2 filed with the SEC on
              Cornell Capital Partners, L.P.                         October 18, 2001

10.34         Registration Rights Agreement dated as of              Incorporated by reference to the Registration
              June 14, 2001 between Celerity Systems, Inc. and       Statement on Form SB-2 filed with the SEC on
              Cornell Capital Partners, L.P.                         October 18, 2001

10.35         Consulting Services Agreement dated as of              Incorporated by reference to the Registration
              June 14, 2001 between Celerity Systems, Inc. and       Statement on Form SB-2 filed with the SEC on
              Cornell Capital Partners, L.P.                         October 18, 2001

10.36         Escrow Agreement dated as of June 14, 2001 among       Incorporated by reference to the Registration
              Celerity Systems, Inc. Meir Levin and Cornell          Statement on Form SB-2 filed with the SEC on
              Capital Partners, L.P.                                 October 18, 2001

10.37         Warrant to purchase 2,500,000 shares of common         Incorporated by reference to the Registration
              stock dated as of June 14, 2001 given by Celerity      Statement on Form SB-2 filed with the SEC on
              Systems to Cornell Capital Partners, L.P.              October 18, 2001

10.38         Warrant to purchase 3,500,000 shares of common         Incorporated by reference to the Registration
              stock dated as of August, 2001 given by Celerity       Statement on Form SB-2 filed with the SEC on
              Systems to Cornell Capital Partners, L.P.              October 18, 2001

10.39         Letter Agreement dated August, 2001 between            Incorporated by reference to the Registration
              Celerity Systems and Yorkville Advisors                Statement on Form SB-2 filed with the SEC on
              Management, LLC                                        October 18, 2001

10.40         Consulting Services Agreement dated as of August,      Incorporated by reference to the Registration
              2001 between Celerity Systems, Inc. and Yorkville      Statement on Form SB-2 filed with the SEC on
              Advisors, LLC                                          October 18, 2001

10.41         Consulting Services Agreement dated as of              Incorporated by reference to the Registration
              September, 2001 between Celerity Systems, Inc.         Statement on Form SB-2 filed with the SEC on
              and Yorkville Advisors, LLC                            October 18, 2001
</TABLE>


                                                          22
<PAGE>

<TABLE>

EXHIBIT NO.   DESCRIPTION                                           LOCATION
-----------   ------------------------------------------------      -------------------------------------------------
<S>           <C>                                                    <C>
10.42         Advisory Agreement dated September 6, 2001             Incorporated by reference to the Registration
              between Celerity Systems, Inc. and Internet            Statement on Form SB-2 filed with the SEC on
              Finance International Corporation                      October 18, 2001

10.43         Financing Agreement dated as of August, 2001           Incorporated by reference to the Registration
              between Celerity Systems, Inc. and Artesian            Statement on Form SB-2 filed with the SEC on
              Direct Holdings Corporation                            October 18, 2001

10.44         Partial Guaranty Agreement dated August, 2001          Incorporated by reference to the Registration
              given by Ed Kidston to Celerity Systems, Inc.          Statement on Form SB-2 filed with the SEC on
                                                                     October 18, 2001

10.45         Termination Agreement                                  Incorporated by reference to Exhibit 10.45 to
                                                                     the Form 10-KSB for the year ended December 31,
                                                                     2001 filed with the SEC on March 27, 2002

10.46         Letter Agreement dated as of April 26, 2002            Provided herewith
              regarding the Purchase Order Financing


         (B)      REPORTS ON FORM 8-K.

                  On December 11, 2001,  Celerity filed a Form 8-K regarding the
dismissal of  PricewaterhouseCoopers  LLP as its  independent  certified  public
accountant.  The Form 8-K also stated that Celerity engaged HJ & Associates, LLC
as its new independent certified public accountant.

                  On April 10, 2002,  Celerity  filed a Form 8-K  announcing the
results of its annual shareholders' meeting.

</TABLE>







                                                          23
<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:    May 20, 2002                  CELERITY SYSTEMS, INC.


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























                                       24