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 SEPTEMBER 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. AND SUBSIDIARY
                      -------------------------------------
                 (Name of Small Business Issuer in Its Charter)

DELAWARE                                    52-2050585
--------                                    ----------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation 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 1,956,153,949 shares of Common Stock outstanding as of October
28, 2003.

<PAGE>

                                     PART I


FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS


CELERITY SYSTEMS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheet

                                                                   September 30,
                                                                       2003
                                                                    (unaudited)
                                                                   -------------
Assets

 Cash                                                              $    115,292
 Inventory, net                                                       1,355,198
                                                                   ------------
   Total current assets                                               1,470,490

Property and equipment, net                                             100,777
Debt offering costs, net of accumulated amortization of $994,597        286,358
Other assets                                                             20,900
                                                                   ------------

  Total assets                                                     $  1,878,525
                                                                   ============

Liabilities and Stockholders' Deficiency

Accounts payable                                                   $  1,320,507
Judgments and defaults payable                                          982,608
Accrued interest                                                        334,001
Accrued wages and related taxes                                         327,041
Notes payable, related parties                                          173,950
Other accrued liabilities                                               149,709
Deferred revenue                                                         78,790
                                                                   ------------

  Total current liabilities                                           3,366,606

Long-term debt                                                        1,796,957
                                                                   ------------

  Total liabilities                                                   5,163,563
Stockholders' deficiency
Common stock, $.001 par value, 5,000,000,000 shares authorized,
   1,566,153,949 issued and outstanding                               1,566,153
Additional paid-in capital                                           37,717,690
Accumulated deficit                                                 (42,568,881)
                                                                   ------------
  Total stockholders' deficiency                                     (3,285,038)
                                                                   ------------

  Total liabilities and stockholders' deficiency                   $  1,878,525
                                                                   ============

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

<PAGE>
<TABLE>
<CAPTION>

CELERITY SYSTEMS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
                                                   Three Months Ended            Nine Months Ended
                                                     September 30,                 September 30,
                                            -----------------------------    --------------------------
                                                  2003          2002           2003          2002
                                                  ----          ----           ----          ----
<S>                                         <C>              <C>             <C>            <C>
Revenues                                    $      75,437    $    141,030    $    75,437    $   605,313
Cost of revenues                                   56,853         122,142         56,853        544,761
                                            -------------    ------------    -----------    -----------
  Gross margin                                     18,584          18,888         18,584         60,552

Expenses
 Operating expenses                               151,855         590,829        528,146      1,810,664
 Interest expense                                 855,702         363,117      1,333,573      1,943,400
 Settlement of trade payables and
  convertible debenture                          (635,112)        (37,935)      (832,860)       (37,935)
 Income on equity warrant liability                    --              --             --       (104,745)
 Other (income) expense                                --          (1,414)            --         (5,755)
                                            -------------    ------------    -----------    -----------
  Net loss                                       (353,861)       (895,709)    (1,010,275)    (3,545,077)
Beneficial conversion feature                          --              --             --       (154,000)
                                            -------------    ------------    -----------    -----------
 Net loss attributable to common
  shareholders                              $    (353,861)       (895,709)    (1,010,275)    (3,699,077)
                                            =============    ============    ===========    ===========

 Basic and diluted loss per common share:
  Net loss per share                        $          --    $      (0.02)   $    (0.002)   $     (0.14)
  Beneficial conversion feature  of
   preferred stock                                     --              --             --          (0.01)
                                            -------------    ------------    -----------    -----------

    Net loss per share attributable to
     com$on shareholders                    $          --    $      (0.02)   $    (0.002)   $     (0.15)
                                            =============    ============    ===========    ===========

Weighted average shares outstanding           812,340,803      47,549,523    487,128,411     24,692,630
                                            =============    ============    ===========    ===========

The accompanying notes are an integral part of these unaudited condensed  consolidated financial statements
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

CELERITY SYSTEMS, INC. AND SUBSIDIARY
Condensed  Consolidated Statements of Cash Flows
(Unaudited)                                                                           Nine Months Ended
                                                                                         September 30,
                                                                                 ---------------------------
                                                                                    2003           2002
                                                                                    ----           ----
<S>                                                                               <C>            <C>
Cash flows from operating activities:
 Net loss                                                                         $(1,010,275    $(3,545,077)
 Adjustments to reconcile net loss to net
   cash used in operating activities:
    Noncash income related to settlement of trade payables
          and convertible debentures                                                 (832,860)           -
    Noncash income related to equity warrant liability                                    -         (104,745)
    Depreciation and amortization                                                      28,626         67,801
    Noncash interest expense related to beneficial
         conversion feature of debt                                                   550,781        898,058
    Noncash interest expense related to debt offering costs                           346,416        461,986
    Noncash expense related to valuation of fixed assets                               46,561            -
    Changes in current assets and liabilities:                                            -
     Current assets                                                                   (45,055)       614,353
     Current liabilities                                                              202,631        507,696
                                                                                  -----------    -----------
      Net cash used in operating activitities                                        (713,175)    (1,099,928)

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                                                   45,000         33,950
 Proceeds from long-term debt                                                         365,455      1,140,000
 Principal payments on long-term debt and capital lease obligations                       -         (305,000)
 Proceeds from  issuance of common stock                                              428,500         93,000
 Proceeds from  preferred stock and warrant offerings,
  net of offering costs                                                                   -          154,000
 Financing and debt issue costs                                                       (15,500)      (109,350)

                                                                                  -----------    -----------
      Net cash provided by financing activitities                                     823,455      1,006,600

Net increase (decrease) in cash                                                       110,280        (97,502)
Cash, beginning of period                                                               5,012        171,988
                                                                                  -----------    -----------

Cash, end of period                                                               $   115,$92         74,486
                                                                                  ===========    ===========


Non-Cash investing and financing activities:
Issuance of 79,555,617 shares of common stock as payment of certain payroll
 and accounts payable items                                                       $    83,793
                                                                                  ===========
Conversion of convertible debentures to 819,127,753 shares of common stock        $ 2,095,344
                                                                                  ===========
Conversion of preferred stock to 2,645,000 shares of common stock                 $   362,500
                                                                                  ===========

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

</TABLE>

<PAGE>

                             CELERITY SYSTEMS, INC.

                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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.

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 September 30,
2003 and for the nine months ended  September 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 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 nine month period ended  September 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 September
30, 2002 balances have been  reclassified to conform with the September 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  September  30, 2003 the
losses total  approximately  $42,569,000.  As of September 30, 2003, the Company
had a negative net working capital of  approximately  $1,896,000.  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 to those  which it
believes  have the best  chance of closing  in the near term.  In the first nine
months of 2003, the Company  received gross proceeds from private  placements of
convertible  debt totaling  $364,000 and from short-term  borrowings of $45,000.
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  elected  to become a  Business  Development
Company  which is regulated  under Section 54 of the  Investment  Company Act of
1940. On June 4, 2003 the Company filed an Offering  Circular Under Regulation E
to sell up to  $4,500,000  of its common stock at a minimum price of $0.001 to a
maximum  price of $0.02.  Between June 30, 2003 and October 28, 2003 the Company
sold 671,000,000 shares resulting in net proceeds of $673,500.

     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.

                                       3
<PAGE>

     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 sold 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:

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


     CONSOLIDATION POLICY

     The condensed  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  September 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
implementation  of SFAS  150 did not have a  material  impact  on the  Company's
financial statements.

     In January,  2003,  the FASB issued  FASB  Interpretation  No. 46 (FIN 46),
"Consolidation  of Variable Interest  Entities,  an interpretation of Accounting
Research  Bulletin  No.  51.  FIN  46  expands  upon  and  strengthens  existing
accounting  guidance  that  addresses  when  a  company  should  include  in its
financial statements the assets, liabilities and activities of another entity. A
Variable  interest entity is any legal structure used for business purposes that
either does not have equity investors with voting rights or has equity investors
that do no provide sufficient  financial resources for the entity to support its
activities.  FIN 46 requires a variable  interest entity to be consolidated by a
company if that  company  is subject to a majority  of the risk of loss from the
variable interest  entity's  activities or entitled to receive a majority of the
entity's  residual  returns or both. The  consolidation  requirements  of FIN 46
apply  immediately to variable interest entities created after January 31, 2003.
The consolidation  requirements apply to older entities in the first fiscal year
or interim period  beginning after June 15, 2003.  However,  on October 8, 2003,
the FASB deferred the latest date by which all public entities must apply FIN 46
to the first  reporting  period ended after December 15, 2003. The effect of the
adoption of this new accounting pronouncement on Celerity's financial statements
has not been significant.

                                       4
<PAGE>


2.   INVENTORY

     Inventory at September 30, 2003 consists of:

               Raw materials             $  1,295,629
               Finished goods                 273,419
                                         ------------
                                            1,569,048
               Reserve for lower of
               cost or market                (213,850)
                                         ------------
                                         $  1,355,198
                                         ============

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 $364,000  aggregate  principal  amount of 5% convertible
debentures  in the first  nine  months of 2003,  resulting  in net  proceeds  of
$363,000. 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 the date of  issuance.  The
long-term debt of the Company includes the following items:

          4% convertible debentures                      $  872,500
          5% convertible debentures                         213,000
          10% secured convertible debenture               1,200,000
                                                         ----------
                                                          2,285,500
          Less: Unamortized debt discount                  (488,543)
                                                         ----------
          Long-term debt less current maturities          1,796,957
                                                         ==========

     During  the  nine  months  ended  September  30,  2003 the  Company  issued
197,049,325  shares of its common stock upon the  conversion  of $230,000 of 10%
convertible  debentures,  146,150,685  shares  of  its  common  stock  upon  the
conversion of $151,000 of 5% convertible  debentures and  475,927,743  shares of
its common stock upon the conversion of $1,714,344 of 4% convertible debentures.
The  holders of these  debentures  agreed to forgive  the  amounts  accrued  for
interest and  liquidated  damages of  $525,157.  This income was  recognized  as
settlement of trade payables and convertible debentures.

     Subsequent to September 30, 2003, the Company issued  137,500,000 shares of
common stock upon the conversion of $550,000 of the 4%  convertible  debentures.
These  conversions will result in the recognition of  approximately  $116,000 of
unamortized debt discount as interest expense in the fourth quarter of 2003.

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
$564,180 for liquidated damages at September 30, 2003.

                                       5
<PAGE>

     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
September 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 September 30, 2003. The parties  settled this debt for a payment
of $20,000 in cash and $15,000 in common stock of the Company at  September  30,
2003.  The  remaining  approximately  $40,000  was  recognized  as  income  from
settlement of trade payables in the third quarter of 2003.

     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
September 30, 2003.

     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.

     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 September, 2003, a default judgment was entered against the Company.
This amount has been accrued at September 30, 2003.

     On July 7, 2003,  Premier  Components  Distribution  sued the Company for a
delinquent  account.  The action  was  brought  in the  Chancery  Court for Knox
County,   Tennessee.   In  this  action  the   plaintiff,   Premier   Components
Distribution,  has sued the Company for  non-payment  of invoices  for  printing
services and is seeking $45,861. In August, 2003, a default judgment was entered
against the Company. This amount has been accrued at September 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  September   30,  2003.   As  of  September  30,  2003  Kidston
Communications has financed open purchase orders having a value of $764,823.

                                       6
<PAGE>

      ACCRUED EXPENSES

     At September  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 and also in  September  2003,  a  former  director  and
shareholder of the Company loaned the Company  $48,000.  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 September 30,  2003,  the Company has an  outstanding  note payable to a
former member of the Company's Board of Directors in the amount of $125,000.

7.   COMMON STOCK

     During  the  nine  months  ended  September  30,  2003 the  Company  issued
79,555,617 shares of common stock in settlement of $83,793 in unpaid payroll and
accounts payable.

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

     During  the  nine  months  ended  September  30,  2003 the  Company  issued
418,500,000  shares of its  common  stock  for cash  proceeds  in the  amount of
$428,000.

8.   SUBSEQUENT EVENTS

     Between  September  30,  2003 and  October 28,  2003,  the  Company  issued
252,500,000  shares of common stock for $255,000 and also 137,500,000  shares of
common  stock in  settlement  of the  conversion  of $550,000 of 4%  convertible
debentures.

                                       7
<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 September 30,
2003 Celerity has had losses of  $42,569,000,  and continues to suffer cash flow
and working capital shortages. As of September 30, 2003, Celerity had a negative
net working capital of approximately $1,896,000.

     We had  revenues in the nine  months  ended  September  30, 2003 of $75,437
compared to revenues of $605,313 in the nine months ended September 30, 2002.

     GOING CONCERN

     The Company's  financial  statements  have been prepared on a going concern
basis,  which  contemplates  the  realization  of assets and the  settlement  of
liabilities  and  commitments in the normal course of business.  The Company has
had  recurring  losses and  continues  to suffer cash flow and  working  capital
shortages.  Since  inception  in January,  1993 through  September  30, 2003 the
losses total  approximately  $42,569,000.  As of September 30, 2003, the Company
had a negative net working capital of  approximately  $1,896,000.  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.

     CRITICAL ACCOUNTING POLICIES

     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.

                                       8
<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
implementation  of SFAS  150 did not have a  material  impact  on the  Company's
financial statements.

     In January,  2003,  the FASB issued  FASB  Interpretation  No. 46 (FIN 46),
"Consolidation  of Variable Interest  Entities,  an interpretation of Accounting
Research  Bulletin  No.  51.  FIN  46  expands  upon  and  strengthens  existing
accounting  guidance  that  addresses  when  a  company  should  include  in its
financial statements the assets, liabilities and activities of another entity. A
Variable  interest entity is any legal structure used for business purposes that
either does not have equity investors with voting rights or has equity investors
that do no provide sufficient  financial resources for the entity to support its
activities.  FIN 46 requires a variable  interest entity to be consolidated by a
company if that  company  is subject to a majority  of the risk of loss from the
variable interest  entity's  activities or entitled to receive a majority of the
entity's  residual  returns or both. The  consolidation  requirements  of FIN 46
apply  immediately to variable interest entities created after January 31, 2003.
The consolidation  requirements apply to older entities in the first fiscal year
or interim period  beginning after June 15, 2003.  However,  on October 8, 2003,
the FASB deferred the latest date by which all public entities must apply FIN 46
to the first  reporting  period ended after December 15, 2003. The effect of the
adoption of this new accounting pronouncement on Celerity's financial statements
has not been significant.

RESULTS OF OPERATIONS

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

     REVENUES

     We had  revenues  from one  sale of  $75,437  for the  three  months  ended
September  30, 2003,  compared to revenue from one sale of $141,030 for the same
period  in 2002.  The low level 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 three  months  ended  September  30, 2003 we
received  no new orders and have a  remaining  backlog  of  unshipped  orders of
approximately $163,000.  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  $56,853 in the third  quarter of 2003  compared to
$122,142  in 2002.  Costs in both  periods  reflect  the  sales of our  DigiSeek
Digital Education System.

                                       9
<PAGE>

     OPERATING EXPENSES

     Operating  expenses for the three  months  ending  September  30, 2003 were
$151,855,  compared  to  $590,829  for the same  period in 2002.  This  decrease
results primarily from a reduction of approximately $235,000 in payroll costs as
we continue to operate with 3 employees  in 2003,  a reduction of  approximately
$126,000  in  legal  and  other  professional   services,  and  a  reduction  of
approximately  $44,000 in  depreciation,  amortization,  insurance  and facility
expenses.  These  reductions  were  partially  offset by an increase in property
taxes of $12,600 and loss on  abandonment  of certain fixed assets of $46,000 in
2003.

     INTEREST EXPENSES

     Interest expense in the three months ended September 30, 2003 was $855,702,
compared to $363,117 in the same period of 2002. Of these amounts,  amortization
of debt offering costs totaled $261,710 in the third quarter of 2003 compared to
$73,484 in the same  period of 2002.  This  increase  results  primarily  from a
redemption  of  approximately  $1,607,000  of  convertible  debentures  and  the
recognition   of  related  debt   offering   costs  due  to  early   retirement.
Additionally,  the third  quarter of 2003 was impacted  unfavorably  by $146,540
compared to the same period in 2002 from higher liquidated  damages recorded due
to the  lack of  having  an  effective  registration  statement  related  to the
convertible debentures.

     We  recorded  a  beneficial  conversion  feature  for  various  convertible
debentures  outstanding  at  September  30, 2003 as discount on the  convertible
debentures and as additional paid-in capital. The unamortized discount remaining
at September  30,  2003,  $488,543,  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  September  30, 2003 and 2002,  we had an  amortization  of
beneficial  conversion  feature of $369,951  and  $184,322,  respectively.  Upon
conversion  prior to the stated date of  redemption  the  remaining  unamortized
discount will be recognized as a non-cash interest expense.  Of the amortization
amount  in the  third  quarter  of  2003,  approximately  $245,600  is from  the
conversion of $1,607,000 of debentures prior to the stated date of redemption.

     SETTLEMENT OF TRADE PAYABLES

     During the third quarter of 2003,  Celerity settled certain trade payables,
accrued interest and liquidated  damages and convertible  debentures wherein the
total amount due was reduced by $635,112.

     NET LOSS

     As a result of the above  factors,  we had a net loss of  $353,861 or $0.00
per share, for the three months ended September 30, 2003, compared to a net loss
of $895,709, or $0.02 per share for the same period in 2002.

     NINE  MONTHS  ENDED  SEPTEMBER  30,  2003  COMPARED  TO NINE  MONTHS  ENDED
SEPTEMBER 30, 2002

     REVENUES

     We had  revenues of $75,437 for the nine months ended  September  30, 2003,
compared to $605,313 for the same period in 2002. The low level 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 nine months ended
September  30,  2003 we received  one new order and have a remaining  backlog of
unshipped  orders of  approximately  $163,000.  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 $56,853 in the for the nine months ended  September
30, 2003 compared to $544,761 in 2002.  Costs in both periods  reflect the sales
of our DigiSeek Digital Education System.

                                       10
<PAGE>

     OPERATING EXPENSES

     Operating  expenses  for the nine  months  ending  September  30, 2003 were
$528,146,  compared to  $1,810,664  for the same period in 2002.  This  decrease
results primarily from a reduction of approximately $851,000 in payroll costs as
we continue to operate with 3 employees  in 2003,  a reduction of  approximately
$319,000 in legal and accounting fees, and a reduction of approximately $115,000
in 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 first nine months of 2003 was $1,333,573,  compared
to $1,943,400 in the same period of 2002. Of these amounts, amortization of debt
offering costs totaled  $347,416 in the first nine months of 2003 as compared to
$464,486 in the same period of 2002. Additionally, the first quarter of 2003 was
impacted  favorably by $82,960  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  recorded  a  beneficial  conversion  feature  for  various  convertible
debentures  outstanding  at  September  30, 2003 as discount on the  convertible
debentures and as additional paid-in capital. The unamortized discount remaining
at September  30,  2003,  $488,543,  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
nine  months  ended  September  30,  2003 and 2002,  we had an  amortization  of
beneficial  conversion  feature of $550,781  and  $898,058,  respectively.  Upon
conversion  prior to the stated date of  redemption  the  remaining  unamortized
discount will be recognized as a non-cash interest expense.  Of the amortization
amount in the nine months ending September 30, 2003,  approximately  $245,600 is
from the  conversion of  $1,607,000  of  debentures  prior to the stated date of
redemption.

     SETTLEMENT OF TRADE PAYABLES

     During  the first  nine  months of 2003,  Celerity  settled  certain  trade
payables,  accrued  interest and liquidated  damages and convertible  debentures
wherein the total amount due was reduced by $832,860.

     EQUITY WARRANT INCOME

     For the nine  months  ended  September  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 September  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 $1,010,275 or $0.002
per share, for the nine months ended September 30, 2003,  compared to a net loss
of $3,699,077, or $0.14 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  $115,292  as of  September  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


                                       11
<PAGE>

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 $3,366,606,  consisting  primarily of
accounts  payable of  $1,320,507,  accrued  wages and related taxes of $327,041,
accrued  interest of $334,001, other accrued  liabilities of $149,709,  deferred
revenue of $78,790,  notes payable of $173,950 and current  portion of long-term
debt of  $141,455.  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 elected 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 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.  Between June
30, 2003 and October 28, 2003 the Company has sold 671,000,000  shares resulting
in net proceeds of $673,500.

     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  September   30,  2003.   As  of  September  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 nine months ended  September  30, 2003, we had a net increase in
cash and cash  equivalents  of  $110,280.  Our sources and uses of funds were as
follows:

     CASH USED IN  OPERATING  ACTIVITIES.  We used net cash of  $713,175  in our
operating  activities in the nine months ended September 30, 2003. Net cash used
in operating  activities  resulted  primarily  from a net loss of $1,010,275 and
noncash income from settlements of trade payables and convertible  debentures of
$832,860.  Our net cash used in operating  activities  was  partially  offset by
depreciation  and  amortization  expenses  of  $28,626,   non-cash  expenses  of
$943,758,  and a net  increase  in  other  current  assets  and  liabilities  of
$157,576. The increase in other current assets and liabilities includes $413,060
from an  increase  in accrued  interest  offset by a  decrease  of  $210,429  in
accounts payable and other current  liabilities less an increase in inventory of
$45,055. 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 nine months ended September 30, 2003.

     CASH  PROVIDED BY FINANCING  ACTIVITIES.  We received  $823,455 in net cash
from  financing  activities,  consisting  primarily of proceeds from  short-term
borrowings of $45,000,  long-term  convertible debt of $349,955 and common stock
of $428,500.

                                       12
<PAGE>

     Since our inception in January 1993 and through September 30, 2003, we have
an accumulated  deficit of $42,568,881.  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  September  30,  2003,  we had a  negative  net  working  capital  of
approximately  $1,896,000.  We have ceased  purchasing  any  material  amount of
inventory until inventory  levels can be reduced.  We had no capital spending or
purchase  commitments of significance at September 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.

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.


                                       13
<PAGE>
                                     PART II

                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     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 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  September  30, 2003.  The parties  settled this debt for a
          payment of $20,000 in cash and $15,000 in common  stock of the Company
          at  September  30,  2003.  The  remaining  approximately  $40,000  was
          recognized as income from  settlement  of trade  payables in the third
          quarter of 2003.

     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. We intend to
          appeal this decision.

     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  September,  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 three months ended  September 30, 2003,  the Company  issued $15,000
principal  amount of 5%  convertible  debentures  resulting  in net  proceeds of
$15,000.  The Debentures have a term of three years and are convertible into the
Company's  common  stock at a price per share  equal to $0.001 or  $0.00125  per
share,  which would result in the issuance on 15,000,000  shares of common stock
upon full conversion.

                                       14
<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     On October 27, 2001,  we  defaulted  on payments due of $150,000,  of which
$141,455 is remaining unpaid, 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)

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

     None.

ITEM 5.  OTHER INFORMATION

     Not applicable.

                                       15
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (A)  EXHIBITS.

EXHIBIT     DESCRIPTION                        LOCATION
NO.
-------     ---------------------------------  ---------------------------------
3.1         Certificate of Incorporation of    Incorporated by reference to
            Celerity Systems, Inc.             Exhibit 3.1 to the 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      Incorporated by reference to the
            Series C Preferred Stock           Registration Statement on Form
                                               SB-2 filed with the SEC on
                                               October 18, 2001

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

3.5         Certificate of Designation of      Incorporated by reference to
            Series E Preferred Stock           Exhibit 3.5 to the 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,    Incorporated by reference to
            1997, between Celerity and         Exhibit 4.9 to the Registration
            Mahmoud Youssefi, including        Statement on SB-2 filed with the
            exhibits                           SEC on August 13, 1997

                                       16
<PAGE>

4.10        Letter Agreement, dated July 11,   Incorporated by reference to
            1997, between Celerity and Dr.     Exhibit 4.10 to the Registration
            Fenton Scruggs                     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        Incorporated by reference to
            Agreement, between Celerity and    Exhibit 4.13 to Amendment No. 1
            each of RNI Limited Partnership,   to Form 10-KSB for the year ended
            First Empire Corporation, Greg A.  December 31, 1998 as filed with
            Tucker and Michael Kesselbrenner   the SEC on April 30, 1999

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

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

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

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

4.18        Form of Warrant issued September   Incorporated by reference to
            30, 1999                           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   Incorporated by reference to
            due 2002 between Celerity and      Exhibit 4.2 to the Registration
            each of John Bridges, John Faure,  Statement on S-3 filed with the
            Loni Spurkeland, Robert Dettle,    SEC on February 15, 2000
            Michael Genta, Lennart Dallgren

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

4.29        Form of Warrant issued September   Incorporated by reference to
            30, 2000                           Exhibit 99.3 to the Form 8-K
                                               filed with the SEC on April 5,
                                               2000

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

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

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

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

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

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

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

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

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

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

                                       18
<PAGE>

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

10.13       Letter of Agreement, dated         Incorporated by reference to
            September 30, 1993, between        Exhibit 10.13 to the Registration
            Celerity and Herzog, Heine &       Statement on SB-2 filed with the
            Geduld, Inc. and Development       SEC on August 13, 1997
            Agreement attached thereto

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

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

10.16       Lease Agreement, dated November    Incorporated by reference to
            25, 1997, between Centerpoint      Exhibit 10.16 to the Form 10-KSB
            Plaza, L.P. and Celerity           for the year ended December 31,
                                               1997 filed with the SEC on
                                               September 30, 1998

10.17       Letter Agreement, dated October    Incorporated by reference to
            3, 1997, between Dennis Smith and  Exhibit 10.17 to the Form 10-KSB
            Celerity                           for the year ended December 31,
                                               1997 filed with the SEC on
                                               September 30, 1998

10.18       Letter Agreement, dated January    Incorporated by reference to
            8, 1998, between James Fultz and   Exhibit 10.18 to the Form 10-KSB
            Celerity                           for the year ended December 31,
                                               1997 filed with the SEC on
                                               September 30, 1999

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

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

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

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

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

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

                                       19
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       20
<PAGE>

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

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

10.44       Partial Guaranty Agreement dated   Incorporated by reference to the
            August, 2001 given by Ed Kidston   Registration Statement on Form
            to Celerity Systems, Inc.          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       Incorporated by reference to
            April 26, 2002 regarding the       Exhibit 10.46 to form SB-2 filed
            Purchase Order Financing           with the SEC on September 28,
                                               2002

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

31.1        Certification re: Section 302      Provided herewith

32.1        Certification re: Section 906      Provided herewith


     (B)  REPORTS ON FORM 8-K.

     None.

                                       21
<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: November 14, 2003                    CELERITY SYSTEMS, INC.

                                           By:   /S/ ROBERT LEGNOSKY
                                                 ------------------------------
                                                 Robert Legnosky, President


                                       22