Research Report

**********RESEARCH REPORT**********

from STOCKFIRST and TheInvestorOnline
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eLEC Communications Corp.
(Nasdaq: ELEC)
Recommended: 01/04/01 - $1.03
Price as of: 06/01/01 - $1.01
Target: $3.00
52 Wk Range: $0.406 - $3.469

Market Capitalization - $14.9M
Shares Outstanding - 14.9M
Float - 13.3M
Daily Volume (3-month avg) - 48.5K
Daily Volume (10-day avg) - 41.0K
Delayed Quote - http://quote.yahoo.com/q?s=elec&;d=v1

* Financial Summary

eLEC Communications Corp. is a full-service telecommunications
company that focuses on developing integrated telephone service in
the local exchange carrier industry. eLEC reported revenues for the
first quarter ended February 28, 2001, of $4,730,647, an increase
of $2,504,414, or 141%, over the revenues from the first quarter of
fiscal year 2000. The company also reported a net loss of
($1,473,772), or ($0.10) per share, and an EBITDA loss of
($1,105,976), or ($0.08) per share for the quarter ended February
28, 2001. These amounts compare to a net loss of ($648,900), or
($0.06) per share and an EDITDA loss of ($524,372), or ($0.04)
per share for the prior year quarter.

The gross profit increased by approximately $933,000 to
$1,674,808, or 35.4% of revenues, for the fiscal 2001 quarter, from
$741,777, or 33.3% of revenues, for the fiscal 2000 quarter.

* Business Description

eLEC Communications Corp. is a full-service telecommunications
company that focuses on developing integrated telephone service in
the emerging competitive local exchange carrier industry. The
Company offers an integrated set of telecommunications products
and services, including local exchange, local access, domestic and
international long distance telephone, calling cards, paging, Internet
access, dedicated access, high speed access via Digital Subscriber
Lines (DSL), Website design, Website hosting, Internet-based
yellow pages directory listings and other enhanced
telecommunications services.

eLEC is a competitive local exchange carrier, a "CLEC," and they
are building the company using the unbundled network element
platform ("UNE-P"). The UNE-P service offering is the most rapid
and profitable way to enter a new market. The Company believes
that it is more important to build a customer base first - before
building the network. Using this method, eLEC is able to use their
capital resources wisely and avoid the high cost of underutilized
facilities. Furthermore, eLEC believes that a large portion of their
UNE-P base will eventually migrate to packet telecommunications
offerings, such as local voice over DSL. Therefore, the most
intelligent way to build their business is to lease circuit-switched
equipment via UNE-P and build a packet-switched network.

Visit the Company's website at www.elec.net

More from Investors Spotlight -
www.theinvestoronline.com/research/elecspotlight.htm

* Analyst Summary

eLEC's chart has show quite an improvement lately and is now in
the midst of what technicians refer to as a flag formation. A flag
formation is one in which the stock is consolidating in a rectangular
tight range for 3-15 days following a big move. This is considered a
bullish consolidation when following an up-move and is usually the
half way point in a move. If the stock breaks out to the upside, look
for a probable move from the breakout equal to the distance from
the beginning of the move to to the top of the flag, which would be
$1.29 [See chart ($0.53 to $0.92 = $0.39, $0.92 + $0.39 = target of
$1.31)]. Flags reach their target 86% of the time and once a
breakout occurs only fail 4% of the time, so this stock looks good
right now. Bullish consolidating flags like this one breakout to the
downside 14% of the time. The stats are with us on this one. Good
luck. We believe the stock has a $2.50 a share value on price to
sales and a $3.00 discounted value on price to book. We also
believe it's a speculative value play based on sales growth and assets
alone. If they reach profitability in 2001, they could be valued near
$7.
Much of eLEC's value resides in their approach to the market,
which allows for rapid market entry via the UNE-P service offering,
with high growth potential, a very large addressable market, and
high margins. Additional strength is provided due to no stranded
plant costs, no costs associated with technological obsolescence and
no costly delays that occur when a company has to install equipment
in the field. The Company will reach breakeven much sooner than
most companies and they will do it with flexibility - which is very
important in a dynamic marketplace. eLEC is not captive to their
own network, like many other companies. Other companies have a
relatively small addressable market and are forced to overspend on
marketing in order to attract customers to their network. eLEC has a
ubiquitous reach in each state in which they are licensed.

85 million lines as an addressable market in 26 states. When eLEC
receives licensing in all 48 states, the addressable market may be
approaching 200 million lines. Rapid market entry, high margins,
ubiquity, no equipment installations, no salesmen carrying around
network maps, the ability to telemarket the entire state, ability to
service multi-location businesses within the state and with multistate
presences. eLEC attracts customers first, building a customer base,
instead of putting equipment in the field first, like everyone else has.
The Company is, in essence, a virtual LEC. They are using the
existing infrastructure of the incumbents to further their business so
they can 'own' their customers. They are provisioning DSL in
Orlando FL from Norwalk, CT, without having any equipment in
the field (The Company is virtual). eLEC runs their DSL pipe thru 3
ATM clouds owned by the incumbents. eLEC controls the
bandwidth and services for the customer by capping both ends of
the pipe. We know of no one else who is doing this. eLEC
Communications Corp. is creative, flexible and talented. The
spending to build networks has come back to haunt many of those
that went with the network first plan. Those companies are now
scrambling to stay alive. eLEC's model of building the customer
base first appears to be the answer.

Kaufman Bros, LP recently initiated coverage with a Buy, go to
www.kbroresearch.com for report.

Visit the Company Website at www.elec.net and go to
www.theinvestoronline.com/research/elecrep3.html to see complete
Research Report.
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