<PAGE>

                     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, 2003

      |_|   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
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 639,687,294 shares of Common Stock outstanding as of August 6,
2003.

<PAGE>

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

FINANCIAL INFORMATION

                      CELERITY SYSTEMS, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheet
                                    Unaudited
                                                                   June 30, 2003
                                                                   -------------
Assets
   Cash                                                            $      3,983
   Inventory, net                                                     1,353,711
                                                                   ------------
        Total current assets                                          1,357,694
Property and equipment, net                                             108,335
Debt offering costs, net of accumulated amortization of $732,887        548,068
Other assets                                                             20,900
                                                                   ------------
     Total assets                                                  $  2,034,997
                                                                   ============
Liabilities and Stockholders' Deficiency
Accounts payable                                                   $  1,577,839
Judgments and defaults payable                                        1,260,990
Accrued interest                                                        423,983
Accrued wages and related taxes                                         327,041
Notes payable, related parties                                          158,950
Other accrued liabilities                                               155,140
Deferred revenue                                                        154,227
                                                                   ------------
     Total current liabilities                                        4,058,170
Long-term debt                                                        3,219,750
                                                                   ------------
     Total liabilities                                                7,277,920
Stockholders' Deficiency
Common stock, $.001 par value, 5,000,000,000 shares authorized,
    487,036,609 issued and outstanding                                  487,036
Additional paid-in capital                                           36,485,061
Accumulated deficit                                                 (42,215,020)
                                                                   ------------
     Total stockholders' deficiency                                  (5,242,923)
                                                                   ------------
     Total liabilities and stockholders' deficiency                $  2,034,997
                                                                   ============

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

                                       3

<PAGE>

                      CELERITY SYSTEMS, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Operations
                                    Unaudited

<TABLE>
<CAPTION>
                                                                   Three Months Ended             Six Months Ended
                                                                        June 30,                      June 30,
                                                              ---------------------------   ---------------------------
                                                                  2003            2002           2003           2002
                                                              -----------     -----------    -----------    -----------
<S>                                                           <C>             <C>            <C>            <C>
  Revenues                                                    $      --       $   462,049    $      --      $   464,283
  Cost of revenues                                                                422,619           --          422,619
                                                              -----------     -----------    -----------    -----------
       Gross margin                                                  --            39,430           --           41,664
  Expenses
  Operating expenses                                              216,501         598,525        376,292      1,219,835
     Interest expense                                             266,357         617,547        477,871      1,580,283
     Settlement of trade payables                                 (34,933)           --         (197,749)          --
     Income on equity warrant liability                              --              --             --         (104,745)
     Other income                                                    --            (3,529)          --           (4,341)
                                                              -----------     -----------    -----------    -----------
          Net loss                                               (447,925)     (1,713,113)      (656,414)    (2,649,368)
Beneficial conversion feature                                        --              --             --         (154,000)
                                                              -----------     -----------    -----------    -----------
          Net loss attributable to common shareholders        $  (447,925)    $(1,173,113)   $  (656,414)   $(2,803,368)
                                                              ===========     ===========    ===========    ===========
  Basic loss per common share:
     Net loss per share                                       $      --       $     (0.10)   $      0.01    $     (0.28)
     Beneficial conversion feature  of preferred stock               --                --             --          (0.01)
                                                              -----------     -----------    -----------    -----------
     Net loss per share attributable to common shareholders   $      --       $     (0.10)   $      0.01    $     (0.29)
                                                              ===========     ===========    ===========    ===========
</TABLE>


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

                                       4

<PAGE>

                      CELERITY SYSTEMS, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited

<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                               30-Jun
                                                                                   ----------------------------
                                                                                      2003               2002
                                                                                   ---------          ---------
<S>                                                                               <C>              <C>
Cash flows from operating activities:
   Net loss                                                                       $ (656,414)      $ (2,649,368)
   Adjustments to reconcile net loss to net
        cash used in operating activities:
            Noncash income related to settlement of trade payables                  (197,749)              --
            Noncash income related to equity warrant liability                          --             (104,745)
            Depreciation and amortization                                             21,068             47,671
            Noncash interest expense related to beneficial
                 conversion feature of debt                                          180,830            713,736
            Noncash interest expense related to debt offering costs                   84,706            391,002
            Noncash expense related to abandonment of fixed assets                    46,561
            Changes in current assets and liabilities:
                Current assets                                                       (43,568)           525,502
                Current liabilities                                                  200,037            315,600
                                                                                  ----------       ------------
                    Net cash used in operating activitities                         (364,529)          (760,602)
Cash flows from investing activities:
   Purchase of fixed assets                                                             --               (4,174)
                                                                                  ----------       ------------
                    Net cash used in investing activitities                             --               (4,174)
Cash flows from financing activities:
   Proceeds from short-term borrowings                                                30,000               --
   Proceeds from long-term debt                                                      349,000            775,000
   Principal payments on long-term debt and capital lease obligations                   --             (255,000)
   Proceeds from  preferred stock and warrant offerings, net of offering costs          --              154,000
   Financing and debt issue costs                                                    (15,500)           (73,850)
                                                                                  ----------       ------------
                    Net cash provided by financing activitities                      363,500            600,150
Net (decrease) in cash                                                                (1,029)          (164,626)
Cash, beginning of period                                                              5,012            171,988
                                                                                  ----------       ------------
Cash, end of period                                                                $   3,983       $      7,362
                                                                                  ==========       ============
Non-Cash investing and financing activities:
   Issuance of 4,555,617 shares of common stock as payment of certain
     payroll and accounts payable items                                            $   8,480
                                                                                  ==========
Conversion of convertible debentures to 233,510,413 shares of
  common stock                                                                     $ 295,999
                                                                                  ==========
Conversion of preferred stock to 2,645,000 shares of common stock                  $ 362,500
                                                                                  ==========
</TABLE>

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

                                       5
<PAGE>


                             CELERITY SYSTEMS, INC.

                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.    PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS

      The accompanying interim condensed  consolidated  financial statements and
notes to the financial  statements  for the interim  periods as of June 30, 2003
and for the six  months  ended  June  30,  2003 and  2002,  are  unaudited.  The
accompanying  interim unaudited  financial  statements have been prepared by the
Company in  accordance  with  accounting  principles  generally  accepted in the
United  States of America 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  adjustments)  considered  necessary for a fair presentation
have been  included.  Operating  results for the six month period ended June 30,
2003, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003. The condensed  consolidated  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,  2002.  All amounts and share  totals have been  restated to account for the
one-for-twenty  reverse stock split effective  April 24, 2002.  Certain June 30,
2002 balances have been reclassified to conform with the June 30, 2003 financial
statement presentation.

      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 June 30, 2003 the losses
total approximately $42,215,000. As of June 30, 2003, the Company had a negative
net working capital of  approximately  $2,700,000.  These factors taken together
with the lack of sales and the  absence  of  significant  financial  commitments
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.

      The Company is seeking the necessary  capital to maintain its  operations.
Additionally, the Company has focused its sales efforts on the education market.
In the first six  months of 2003,  the  Company  received  gross  proceeds  from
private  placements of convertible debt totaling  $349,000,  and from short-term
borrowings  of $30,000.  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  an order to provide its
Digital  Education System to a school 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.

      On June 3, 2003,  the  Company  filed  with the  Securities  and  Exchange
Commission to become a business  development  company  which is regulated  under
Section 54 of the  Investment  Company  Act of 1940.  As a business  development
company  the  Company  may sell  shares of its freely  trading  common  stock in
amounts up to $5,000,000 in a twelve-month  period.  Shares sold are exempt from
registration  under  Regulation E of the Securities Act of 1933. On June 4, 2003
the  Company  filed  an  Offering  Circular  under  Regulation  E to  sell up to
$4,500,000  of its common stock and a minimum price of $0.001 to a maximum price
of $0.02.  Between  June 30,  2003 and  August 6,  2003,  the  Company  has sold
97,500,000 shares resulting in net proceeds of $97,500.

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

      The Company has an investment in a wholly-owned subsidiary called Celerity
Systems,  Inc., a Nevada corporation  ("Celerity NV"), which is engaged,  either
directly or  indirectly  through  third  parties,  in the  production,  sale and
distribution  of digital set top boxes and digital  video  services.  On May 20,
2003 the Company  transferred  certain assets and  liabilities to Celerity NV in
exchange for 100% of the common stock of Celerity NV. The  transaction  has been
recorded at the book value of the assets and liabilities transferred. The assets
and liabilities transferred include:


                                       6
<PAGE>

                  Inventory, net                       $  1,310,144
                  Fixed assets, net                         112,114
                  Other assets                               20,900
                  Current liabilities                      (943,158)
                                                        -----------
                  Net assets transferred                $   500,000
                                                        ===========

CONSOLIDATION POLICY

      The  consolidated  financial  statements  include the accounts of Celerity
Systems, Inc. (a Delaware corporation) and its wholly-owned  subsidiary Celerity
Systems, Inc. (a Nevada corporation)  collectively referred to as the "Company".
All significant inter-company  transactions and balances have been eliminated in
consolidation.

NEW ACCOUNTING POLICIES

      In  December,  2002,  the  FASB  issued  SFAS  No.  148,  "Accounting  for
Stock-Based   Compensation-Transition   and  Disclosure-an   amendment  of  FASB
Statement No. 123" which is effective for financial statements issued for fiscal
years ending after December 15, 2002.  This Statement  amends FASB Statement No.
123, Accounting for Stock-Based Compensation,  to provide alternative methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee  compensation.  In addition,  this Statement amends the
disclosure  requirements  of Statement 123 to require  prominent  disclosures in
both annual and interim financial  statements about the method of accounting for
stock-based  compensation and the effect of the method used on reported results.
The  Company  continues  to follow the  pro-forma  disclosures  for stock  based
compensation as permitted in SFAS 123. Such pro-forma  disclosures have not been
provided as its effect is not material to the accompanying financial statements.

      In April, 2003, the FASB issued SFAS No. 149,  "Amendment of Statement 133
on  Derivative  Instruments  and  Hedging  Activities"  which is  effective  for
contracts  entered into or modified after June 30, 2003.  This Statement  amends
FASB  Statement  No. 133,  Accounting  for  Derivative  Instruments  and Hedging
Activities,  to  clarify  financial  accounting  and  reporting  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts.  The effect of the adoption of this new accounting  pronouncement  on
Celerity's financial statements has not been significant.

      In May,  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for Certain
Financial Instruments with Characteristics of both Liabilities and Equity" which
is effective for financial  instruments  entered into or modified  after May 31,
2003,  and otherwise is effective at the  beginning of the first interim  period
beginning after June 15, 2003. This Statement  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a  liability.  The
Company is still  evaluating the effect of this  pronouncement  on its financial
statements.

2.    INVENTORY

      Inventory at June 30, 2003 consists of:

                    Raw materials                              $ 1,289,342
                    Finished goods                                 278,219
                                                               -----------
                                                                 1,567,561
                    Reserve for lower of cost or market           (213,850)
                                                               -----------
                                                               $ 1,353,711
                                                               ===========

      The  reserve  for lower of cost or market  represents  a write  down to an
estimated net realizable  value.  The write down results from a lower of cost or
market  valuation on certain parts and finished  goods.  Such  determination  of
obsolete inventory may be subject to change in the near term.


                                       7
<PAGE>

3.    LOSS PER SHARE

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

4.    ISSUANCE OF CONVERTIBLE DEBENTURES

      The Company issued $349,000  aggregate  principal amount of 5% convertible
debentures  in the  first six  months  of 2003,  resulting  in net  proceeds  of
$348,000. The debentures have a term of three years and are convertible into the
Company's  common stock at a price equal to $.001 or $.00125 per share which was
the fair value of the Company's common stock at date of issuance.  The long-term
debt of the Company includes the following items:

                 4% convertible debentures                  $ 2,479,244
                 5% convertible debentures                      349,000
                 10% secured convertible debenture            1,250,000
                                                            -----------
                                                              4,078,244
                 Less:    Unamortized debt discount            (858,494)
                                                            -----------
                 Long-term debt less current maturities       3,219,750
                                                            ===========

      During the six months ended June 30, 2003 the Company  issued  164,049,335
shares of its common stock upon the  conversion  of $180,000 of 10%  convertible
debentures  and  69,461,078  shares of its common stock upon the  conversion  of
$107,600 of 4% convertible debentures.

      Between June 30, 2003 and August 6, 2003,  the Company  issued  50,150,685
shares of common  stock upon the  conversion  of  $55,000 of the 5%  convertible
debentures.  These  conversions  will  not  result  in  the  recognition  of any
unamortized debt discount as these converted debentures were not issued with any
beneficial conversion feature.

5.    JUDGEMENTS AND DEFAULTS PAYABLE

      In January 2002, the Company  terminated the Equity Line of Credit entered
into on September 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  at a rate of 2% of the principle  plus interest
per month.  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 has accrued
$807,640 for liquidated damages at June 30, 2003.

      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.

      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 and no amounts  have been  accrued at
June 30, 2003.

      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 entitled 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  and  Metalade  entered  into a consent  judgment  in the amount of
$108,000, of which approximately $32,000 has been paid. The remaining amount has
been accrued at June 30, 2003.

                                       8

<PAGE>

      On October 9, 2002,  Waytec  Electronics sued the Company for a delinquent
account.  The action was brought in the Circuit  Court of the City of Lynchburg,
Virginia. In this action the plaintiff, Waytec Electronics, has sued the Company
for  non-payment of inventory items and is seeking  $77,705.  In 2002, a default
judgment was entered  against the Company.  This amount has been accrued at June
30, 2003.

      On October 27,  2001,  the Company  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.  The  Company  is  seeking  to make
arrangements with these note holders.

      On March 25,  2003,  R R Donnelly & Sons sued the Company for a delinquent
account.  The  action  was  brought  in the  Chancery  Court  for  Knox  County,
Tennessee.  In this  action the  plaintiff,  R R  Donnelly & Sons,  has sued the
Company  for  non-payment  of  invoices  for  printing  services  and is seeking
$16,972. In June 2003, a default judgment was entered against the Company.  This
amount has been accrued at June 30, 2003.

      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.  These amounts are included in the Company's  accounts  payable and are
accruing applicable late fees and interest.

6.    OTHER TRANSACTIONS

REVENUES

      On April 24, 2002,  the Company  entered into a purchase  order  financing
arrangement with Kidston Communications.  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. Celerity 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 is being  accounted for as an interest
expense on the  Company's  financial  statements  and  amounts to  approximately
$114,723 as of June 30,  2003.  As of June 30, 2003 Kidston  Communications  has
financed open purchase orders having a value of $764,823.

ACCRUED EXPENSES

      At June  30,  2003,  the  Company  owes the  former  President  and  Chief
Executive Officer of the Company $226,406 in unpaid payroll.

NOTES PAYABLE-RELATED PARTY

      In September 2002, a former director and shareholder of the Company loaned
the Company $33,000.  The amount was to cover short-term  operating expenses and
is due upon demand.

      In July 2002,  the  President  and CEO of the  Company  loaned the Company
$950.  The  amount is to cover  short-term  operating  expenses  and is due upon
demand.

      At  June  30,  2003,   the  Company  has  an   outstanding   note  payable
(non-interest bearing) to a former member of the Company's Board of Directors in
the amount of $125,000.

7.    COMMON STOCK

      During the six months  ended June 30,  2003 the Company  issued  4,554,617
shares of common stock in settlement of $8,480 in unpaid payroll.

      During the six months  ended June 30,  2003 the Company  issued  2,645,000
shares of its common stock upon the  conversion of 36.25 shares of its preferred
stock.


                                       9

<PAGE>

8.    SUBSEQUENT EVENTS

      Between June 30, 2003 and August 6, 2003,  the Company  issued  97,500,000
shares of common stock for $97,500 and also 5,000,000  shares of common stock in
settlement of $6,000 of certain current liabilities.


                                       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, 2002. 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

      The  Company  is a business  development  company  that has  elected to be
regulated  pursuant  to Section 54 of the  Investment  Company  Act of 1940.  We
intend to focus our  investments in developing  companies,  but do not intend to
limit our focus on  investment  in any  particular  industry.  We intend to seek
investments in companies that offer attractive investment opportunities.

      The Company has an investment in a wholly-owned subsidiary called Celerity
Systems,  Inc.,  a Nevada  corporation,  which is  engaged,  either  directly or
indirectly  through third parties,  in the production,  sale and distribution of
digital set top boxes and digital  video  services.  On May 20, 2003 the Company
transferred  inventory,  fixed assets and certain liabilities to this subsidiary
in  exchange  for 250,000  shares of common  stock.  The assets and  liabilities
transferred have been recorded at their book value which was $500,000.

      Management has also focused on attempting to obtain the necessary  capital
to maintain our operations.  We are continuing to seek financing,  including (i)
filing an Offering  Circular Under  Regulation E to sell up to $4,500,000 of our
common stock (See "Liquidity and Capital  Resources"),  (ii) possible  strategic
investment  opportunities  or  (iii)  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. Since inception in January, 1993 through June 30, 2003
Celerity has had losses of  $42,215,020,  and  continues to suffer cash flow and
working  capital  shortages.  As of June 30,  2003,  Celerity had a negative net
working capital of approximately $2,700,000.

      We had no revenue  in the six  months  ended  June 30,  2003  compared  to
revenues of $464,283 in the six months ended June 30, 2002.

      CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The  Company  recognizes  revenue  in  accordance  with  Staff  Accounting
Bulletin 101 whereby revenue is realized when all of the following  criteria are
met: 1) Persuasive  evidence of an arrangement  exists; 2) Delivery has occurred
or services have been rendered;  3) The seller's price to the buyer is fixed and
determinable, and 4) Collectibility is reasonably assured.

      CONSOLIDATION POLICY

      The  consolidated  financial  statements  include the accounts of Celerity
Systems Inc (a Delaware  corporation) and its wholly-owned  subsidiary  Celerity
Systems Inc. (a Nevada corporation) collectively referred to as the ("Company").
All significant inter-company  transactions and balances have been eliminated in
consolidation.


                                       11
<PAGE>

      NEW ACCOUNTING POLICIES

      In  December,  2002,  the  FASB  issued  SFAS  No.  148,  "Accounting  for
Stock-Based   Compensation-Transition   and  Disclosure-an   amendment  of  FASB
Statement No. 123" which is effective for financial statements issued for fiscal
years ending after December 15, 2002.  This Statement  amends FASB Statement No.
123, Accounting for Stock-Based Compensation,  to provide alternative methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee  compensation.  In addition,  this Statement amends the
disclosure  requirements  of Statement 123 to require  prominent  disclosures in
both annual and interim financial  statements about the method of accounting for
stock-based  compensation and the effect of the method used on reported results.
The  Company  continues  to follow the  pro-forma  disclosures  for stock  based
compensation as permitted in SFAS 123. Such pro-forma  disclosures have not been
provided as its effect is not material to the accompanying financial statements.

      In April, 2003, the FASB issued SFAS No. 149,  "Amendment of Statement 133
on  Derivative  Instruments  and  Hedging  Activities"  which is  effective  for
contracts  entered into or modified after June 30, 2003.  This Statement  amends
FASB  Statement  No. 133,  Accounting  for  Derivative  Instruments  and Hedging
Activities,  to  clarify  financial  accounting  and  reporting  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts.  The effect of the adoption of this new accounting  pronouncement  on
Celerity's financial statements has not been significant.

      In May,  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for Certain
Financial Instruments with Characteristics of both Liabilities and Equity" which
is effective for financial  instruments  entered into or modified  after May 31,
2003,  and otherwise is effective at the  beginning of the first interim  period
beginning after June 15, 2003. This Statement  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a  liability.  The
Company is still  evaluating the effect of this  pronouncement  on its financial
statements.

RESULTS OF OPERATIONS

      THREE MONTHS  ENDED JUNE 30, 2003  COMPARED TO THREE MONTHS ENDED JUNE 30,
      2002

      REVENUES

      We had no  revenues  for the  quarter  ended June 30,  2003,  compared  to
$462,049 for the same period in 2002. The lack of sales in 2003 is the result of
constrained  sales  and  marketing  activities  caused  by cash  shortages.  The
revenues in 2002 resulted  from  deliveries  of our DigiSeek  Digital  Education
System to schools in Ohio and Pennsylvania. During the six months ended June 30,
2003 we received one new order and have a remaining  backlog of unshipped orders
of approximately  $258,000.  These orders are not considered sales until we ship
the products.  Shipments are expected to occur  primarily in 2003. We market our
product for the  education  market as the  DigiSeek  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 until October 30, 2002 and  shareholder of our company.  A discussion
about the terms of this  financing are set forth below under the  "Liquidity and
Capital Resources" section.

      COSTS OF REVENUES

      Costs of  revenues  were $-0- in the second  quarter of 2003  compared  to
$422,619  in 2002.  Costs in 2002  reflect  the  sales of our  DigiSeek  Digital
Education System.

      OPERATING EXPENSES

      Operating expenses for the three months ending June 30, 2003 were $216,501
compared  to  $598,525  for the same  period  in  2002.  This  decrease  results
primarily  from a reduction  of  approximately  $296,000 in payroll  costs as we
continue to operate  with 3 employees  in 2003,  a  reduction  of  approximately
$91,000 in legal and other professional  services,  and by approximately $42,000
of reduced depreciation,  amortization,  insurance and facility expenses.  These
reductions  were  partially  offset by a loss on  abandonment  of certain  fixed
assets of $46,000 in 2003.

      INTEREST EXPENSES

      Interest  expense in the second quarter of 2003 was $266,357,  compared to
$617,547  in the same period of 2002.  Of these  amounts,  amortization  of debt
offering  costs  totaled  $44,088 in the first  quarter of 2003 as  compared  to
$190,303 in the


                                       12
<PAGE>

same  period of 2002.  Additionally,  the second  quarter  of 2003 was  impacted
favorably  by $214,429  compared to the same period in 2002 from lower  interest
expenses associated with convertible  debentures and by lower liquidated damages
recorded due to the lack of having an effective  registration  statement related
to the convertible debentures.

      We  recognized a  beneficial  conversion  feature for various  convertible
debentures  outstanding  at  June  30,  2003  as  discount  on  the  convertible
debentures and as additional paid-in capital. The unamortized discount remaining
at June 30, 2003,  $858,494,  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 June 30, 2003 and 2002, we had an  amortization  of beneficial  conversion
feature of $111,752 and $102,298,  respectively.  Upon  conversion  prior to the
stated date of redemption the remaining  unamortized discount will be recognized
as a non-cash interest expense.

      SETTLEMENT OF TRADE PAYABLES

      During the second quarter of 2003, Celerity settled certain trade payables
wherein the total amount due was reduced by $34,933.

      NET LOSS

      As a result of the above  factors,  we had a net loss of $447,925 or $0.00
per share,  for the  quarter  ended  June 30,  2003,  compared  to a net loss of
$1,173,113, or $0.10 per share for the same period in 2002.

      SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

      REVENUES

      We had no revenues  for the six months  ended June 30,  2003,  compared to
$464,283 for the same period in 2002. The lack of sales in 2003 is the result of
constrained  sales  and  marketing  activities  caused  by cash  shortages.  The
revenues in 2002 resulted  from  deliveries  of our DigiSeek  Digital  Education
System to schools  in Ohio and  Pennsylvania.  In the six months  ended June 30,
2003 we received one new order and have a remaining  backlog of unshipped orders
of approximately  $258,000.  These orders are not considered sales until we ship
the products.  Shipments are expected to occur  primarily in 2003. We market our
product for the  education  market as the  DigiSeek  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 until October 30, 2002 and  shareholder of our company.  A discussion
about the terms of this  financing are set forth below under the  "Liquidity and
Capital Resources" section.

      COSTS OF REVENUES

      Costs of  revenues  were $-0- in the second  quarter of 2003  compared  to
$422,619  in 2002.  Costs in 2002  reflect  the  sales of our  DigiSeek  Digital
Education System.

      OPERATING EXPENSES

      Operating  expenses for the six months  ending June 30, 2003 were $376,292
compared  to  $1,219,835  for the same  period in 2002.  This  decrease  results
primarily  from a reduction  of  approximately  $616,000 in payroll  costs as we
continue to operate  with 3 employees  in 2003,  a  reduction  of  approximately
$187,000 in legal and accounting fees, and by  approximately  $90,000 of reduced
depreciation,  amortization,  insurance and facility expenses.  These reductions
were  partially  offset by a loss on  abandonment  of  certain  fixed  assets of
$46,000 in 2003.

      Interest expense in the first six months of 2003 was $477,871, compared to
$1,580,283 in the same period of 2002. Of these  amounts,  amortization  of debt
offering costs totaled $84,706 in the first half of 2003 as compared to $391,002
in the same period of 2002. Additionally, the first quarter of 2003 was impacted
favorably by $152,459  compared to the same period in 2002 from a lower level of
liquidated damages recorded due to the lack of having an effective  registration
statement  related  to the  convertible  debentures  offset by  higher  interest
expenses associated with convertible debentures.

      We  recognized a  beneficial  conversion  feature for various  convertible
debentures  outstanding  at  June  30,  2003  as  discount  on  the  convertible
debentures and as additional paid-in capital. The unamortized discount remaining
at June 30, 2003,  $858,494,  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 six months
ended June 30, 2003 and 2002, we


                                       13
<PAGE>

had an  amortization of beneficial  conversion  feature of $69,078 and $713,735,
respectively.  Upon  conversion  prior  to the  stated  date of  redemption  the
remaining  unamortized  discount  will  be  recognized  as a  non-cash  interest
expense.

      SETTLEMENT OF TRADE PAYABLES

      During  the  first six  months of 2003,  Celerity  settled  certain  trade
payables wherein the total amount due was reduced by $197,749.

      EQUITY WARRANT INCOME

      For the six  months  ended June 30,  2003 we had income on equity  warrant
liability  of $-0- as  compared to  $104,745  for the same period in 2002.  This
amount  represents a  mark-to-market  adjustment in connection  with warrants to
purchase common stock which are outstanding (see Cumulative  Effect of Change in
Accounting   Principle).   The  value  of  these   warrants  and  the  resulting
mark-to-market   adjustment  at  June  30,  2002,  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 $656,414 or $0.01
per share,  for the six months  ended June 30,  2003,  compared to a net loss of
$2,649,368, or $0.28 per share for the same period in 2002.

      BENEFICIAL CONVERSION FEATURE

      Issued  during the first  quarter  of 2002,  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 redeemable  convertible  preferred  stock and
debt.  We had cash  balances  on hand of  $3,983 as of June 30,  2003.  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 $4,058,168,  consisting  primarily of
accounts  payable of  $1,577,839,  accrued  wages and related taxes of $327,041,
accrued interest of $423,983,  other accrued  liabilities of $155,140,  deferred
revenue of  $154,227,  notes  payable of  $158,950.  These  current  liabilities
include a judgment of $136,435  obtained by Merrill  Corporation for non-payment
of printing  fees,  a consent  judgment of $108,000  with  Metalade FL, Inc. for
non-payment  of  inventory  purchases,  a judgment  of $16,972  obtained by R.R.
Donnelley for  non-payment of printing fees, and a judgment of $77,705  obtained
by Waytec Electronics for non-payment of inventory purchases.

      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.

      As discussed in the overview  section,  on June 3, 2003, the Company filed
with the  Securities  and Exchange  Commission to become a business  development
company  which is regulated  under Section 54 of the  Investment  Company Act of
1940.  As a business  development  company  the  Company  may sell shares of its
freely  trading  common stock up to $5,000,000 in a twelve month period.  Shares
sold are exempt from  registration  under  Regulation E of the Securities Act of
1933.  To that end, at our Annual  Meeting of  Shareholders  held on January 14,
2003, the shareholders approved an increase in our authorized capital stock to 5
billion  shares of common  stock.  On June 4, 2003 the Company filed an Offering
Circular  under  Regulation E to sell up to $4,500,000 of its common stock and a
minimum price of $0.001 to a maximum price of $0.02. Through August 6, 2003, the
Company has sold 42,500,000 shares resulting in net proceeds of $42,500.


                                       14
<PAGE>

      On April 24, 2002,  the Company  entered into a purchase  order  financing
arrangement with Kidston Communications.  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. Celerity 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 is being  accounted for as an interest
expense on the  Company's  financial  statements  and  amounts to  approximately
$114,723 as of June 30,  2003.  As of June 30, 2003 Kidston  Communications  has
financed, since April 24, 2002, open purchase orders having a value of $764,823.

      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 six months ended June 30,  2003,  we had a net decrease in cash
and cash equivalents of $1,029. Our sources and uses of funds were as follows:

      CASH USED IN  OPERATING  ACTIVITIES.  We used net cash of  $364,529 in our
operating  activities  in the six months ended June 30,  2003.  Net cash used in
operating  activities resulted primarily from a net loss of $656,414 and noncash
income from gain on  extinguishments  of debt of $197,749.  Our net cash used in
operating  activities  was partially  offset by  depreciation  and  amortization
expenses of $21,068,  non-cash expenses of $311,097, and a net increase in other
current assets and liabilities of $156,469. The increase in other current assets
and liabilities includes $221,155 from an increase in accrued interest offset by
a decrease of $21,118 in accounts payable and other current  liabilities less an
increase in inventory of $43,568.  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 $-0- in investing
activities in the six months ended June 30, 2003.

      CASH PROVIDED BY FINANCING  ACTIVITIES.  We received  $363,500 in net cash
from  financing  activities,  consisting  primarily of proceeds from  short-term
borrowings of $30,000, and long-term convertible debt of $349,000.

      Since our  inception in January 1993 and through June 30, 2003, we have an
accumulated deficit of approximately  $42,215,000.  We expect to incur operating
losses  for the  indefinite  future as we  continue  to  develop  and market our
technology.  Since  January 1, 2003, we have received one new order for the sale
of our Digital Education System to and Ohio school system.

      As  of  June  30,  2003,  we  had  a  negative  net  working   capital  of
approximately  $2,700,000.  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 June 30, 2003 other than a certain facility
lease and  inventory  component  purchase  commitments  required in the ordinary
course of its business.

      We have no existing bank lines of credit.

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


                                       15
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

      Based on their evaluation of the effectiveness of our disclosure  controls
and  procedures  within 90 days of the  filing  date of this  report,  our Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures  are effective for  gathering,  analyzing and disclosing
the  information  we are  required to  disclose  in our reports  filed under the
Securities and Exchange Act of 1934. There have not been significant  changes in
our controls or in other factors that could significantly  affect these controls
subsequent to the evaluation date.


                                       16

<PAGE>

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

OTHER INFORMATION

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

      o     On October  9, 2002,  Waytec  Electronics  sued us for a  delinquent
            account.  The action was brought in the Circuit Court of the City of
            Lynchburg,   Virginia.   In  this  action  the   plaintiff,   Waytec
            Electronics,  has sued us for  non-payment of inventory items and is
            seeking $77,705. In 2002, a default judgment was entered against us.

      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 entered into a consent order
            for $108,000, of which approximately $32,000 has been paid.

      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
            order of  products  not  received  by us. 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.

      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.

      o     On March  25,  2003,  R R  Donnelly  & Sons sued the  Company  for a
            delinquent account. The action was brought in the Chancery Court for
            Knox County, Tennessee. In this action the plaintiff, R R Donnelly &
            Sons, has sued the Company for  non-payment of invoices for printing
            services and is seeking  $16,972.  In June, 2003, a default judgment
            was entered against the Company.

ITEM  2. CHANGES IN SECURITIES AND USE OF PROCEEDS

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

         (c)               Sales of Unregistered Securities.

      In the second  quarter of 2003,  the  Company  issued  $210,000  principal
amount of 5% convertible  debentures resulting in net proceeds of $209,000.  The
debentures  have a term of three years and are  convertible  into the  Company's
common stock at a price per share equal to $0.001or  $0.00125  per share,  which
would  result in the  issuance on  205,000,000  shares of common stock upon full
conversion.

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. (See
Note 5 Judgements and Defaults Payable)

                                       17

<PAGE>

         See also "Legal Proceedings."

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

         None.

ITEM 5.  OTHER INFORMATION

         Not applicable.


                                       18

<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A)      EXHIBITS.

<TABLE>
<CAPTION>
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

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 September 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
</TABLE>


                                       19
<PAGE>

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

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

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

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 September 30, 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 September 26,       Incorporated by reference to Exhibit 10.8 to the
                      1995, between Tadiran Telecommunications Ltd. and   Registration Statement on SB-2 filed with the
                      Celerity                                            SEC on August 13, 1997
</TABLE>


                                       20

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.           DESCRIPTION                                         LOCATION
-----------           -----------                                         --------
<S>                   <C>                                                 <C>
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 September 15,     Incorporated by reference to Exhibit 10.11 to
                      1997, between Celerity and Minerva Systems, Inc.    the Registration Statement on SB-2 filed with
                                                                          the SEC on August 13, 1997

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 September 30, 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 September 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 September 30, 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 September 30, 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 September 30, 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

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 September 22, 2000,       Incorporated by reference to Exhibit 99.2 to the
                      between Celerity and WIT Technologies Inc.          Form 8-K filed with the SEC on July 11, 2000
</TABLE>


                                       21

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.           DESCRIPTION                                         LOCATION
-----------           -----------                                         --------
<S>                   <C>                                                 <C>
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     Incorporated by reference to Exhibit 99.3 to theForm 8-K
                      4, 2001, between Celerity and In4Structures LLC     filed with the SEC on January 10, 2001

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

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

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

10.36                 Escrow Agreement dated as of September 14, 2001     Incorporated by reference to the Registration
                      among Celerity Systems, Inc. Meir Levin and         Statement on Form SB-2 filed with the SEC on
                      Cornell 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 September 14, 2001 given by       Statement on Form SB-2 filed with the SEC on
                      Celerity 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

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         Incorporated by reference to Exhibit 10.46 to
                      regarding the Purchase Order Financing              form SB-2 filed with the SEC on June 28, 2002

10.47                 Letter Agreement dated June 12, 2002 between        Incorporated by reference to Exhibit 10.47 to
                      Cornell Capital Partners and Celerity Systems,      form SB-2 filed with the SEC on June 28, 2002
                      Inc.

31.1                  Certification re: Section 302                       Provided herewith

32.1                  Certification re: Section 906                       Provided herewith
</TABLE>

      (B)   REPORTS ON FORM 8-K.

            None.


                                       22
<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 13, 2003         CELERITY SYSTEMS, INC.

                                 By: /s/ Robert Legnosky
                                     ----------------------------------------
                                          Robert Legnosky, President


                                       23