Investing activities provided $8,691 during the three-month period ending March 31, 2001, as compared to providing $469,627 during the three-month period ending March 31, 2000.  During the first quarter of 2001 we sold certain assets that we no longer required, primarily as a result of the acquisition of Switchboard. The sale of these assets resulted in proceeds of approximately $25,000.  We invested approximately $16,500 during the first quarter of 2001 in new equipment as compared to approximately $130,000 during the first quarter of 2000.  During the first quarter of 2000 a loan to a stockholder was repaid generating $600,000 of cash.

Financing activities generated $652,588 during the quarter ending March 31, 2001, versus consuming $872,058 during the first quarter of 2000.  During the 2001 period we borrowed $726,535 on our line of credit and paid $118,007 owed to the sellers of Marino Electric.  In March 2001 we also refinanced and increased an equipment loan, which generated approximately $50,000.  This was partially offset by scheduled principal reductions on our mortgage and auto loans of approximately $6,000.  During the first quarter of 2000 we paid $800,000 on the amounts due to the sellers of Marino Electric, made scheduled principal payment on our mortgage and auto loans of $7,058 and refunded $110,000 to two investors in the private placement before issuance of their stock.  These uses of cash were partially offset by $45,000 received as part of the private placement.

In March 2001, we replaced loans we had with LaSalle Bank N.A. and Oxford Trust with a credit facility from American National Bank & Trust of Chicago.  The new facility includes a $2 million revolving credit line and a $500,000 term note.  The revolving credit line has an initial term of one year and bears interest at a rate equal to American National Bank's corporate base rate.  Availability under the line is tied to our inventory and receivable balances.  The term note has a term of three years and bears interest at the bank's corporate base rate.

Our liquidity at the current time continues to be strained due primarily to continuing losses that have resulted from a large investment in corporate infrastructure that management hopes will lead to significant increases in sales of its EnergySaver^TM and TP3 product lines in the last half of 2001.  Anticipating the requirement for additional capital, not only to fund current operations but also to fund our business plan for future periods and satisfy certain obligations, we began the process of raising additional equity last year.  In September 2000, we retained Newcourt Capital Securities, Inc. (an affiliate of the CIT Group, Inc.) to act as our exclusive placement agent with the anticipation that Newcourt would participate as an investor to some degree in the equity that we seek to raise.  We are currently in discussions with several potential equity investors, but the process of securing investor commitments continues with ongoing negotiation.  To help with our current liquidity situation, in April 2001, Newcourt provided us with a $2 million bridge facility.  Pursuant thereto, we issued to Newcourt Capital USA, Inc. ("Newcourt") our $1,000,000 Senior Subordinated Convertible Promissory Note that may be converted into equity at the option of Newcourt.  We received $1 million of proceeds from such note on April 18^th and will be able to draw the remaining $1 million upon the satisfaction of certain additional conditions.  We expect to satisfy these conditions by the end of May.  Indebtedness under the bridge note facility is due July 16, 2001 (or earlier if we close a private placement of at least $8 million of equity) and bears interest at 3% over the prime rate.  If we close a private placement of equity, we expect to repay the bridge loan from the proceeds unless Newcourt elects to convert the bridge loans into equity.  As part of the transaction, we issued warrants for 1,700,000 shares of common stock to Newcourt, exercisable at $2.50 per share.

If we are successful in raising additional funds through the issuance of equity securities, our existing stockholders will likely experience dilution of their present equity ownership position and voting rights, depending on the number of shares issued and the terms and conditions of the issuance, and the new equity securities will likely have rights, preferences, or privileges senior to those of the Company's common stock.  We believe this dilution is reasonable in light of the Company's growth prospects made possible by the additional equity.

In the event we are not successful in raising additional equity, we would have to significantly scale back our growth plans, reduce staff and delay planned expenditures on research and development and capital expenditures in order to continue as a going concern.

Cautionary Note Regarding Forward-Looking Statements

This discussion includes forward-looking statements that reflect Electric City's current expectations about its future results, performance, prospects and opportunities.  Electric City has tried to identify these forward-looking statements by using words such as "may," "will," "expects," "anticipates," "believes," "intends," "estimates" or similar expressions.  These forward-looking statements are based on information currently available to Electric City and are subject to a number of risks, uncertainties and other factors that could cause Electric City's actual results, performance, prospects or opportunities in the remainder of 2001 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements.  These risks, uncertainties and other factors include, without limitation, the Company's limited operating history, the Company's history of operating losses, consumers' acceptance, the Company's use or licensed technologies, risk of increased competition, the Company's ability to successfully integrate acquired businesses products and technologies, the Company's ability to manage its growth, the Company's commercial scale development of products and technologies to satisfy consumers demands and requirements, the need for additional financing and the terms and conditions of any financing that is consummated, the limited trading market for the Company's securities, the possible volatility of the Company's stock price, the concentration of ownership, and the potential fluctuation in the Company's operating results.  For further information about these and other risks, uncertainties and factors, please review the disclosures included under the caption "Risk Factors" in Electric City's filings with the Securities and Exchange Commission. Except as required by the federal securities laws, Electric City undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this document.