Wellfleet Partners, inc.

Dear Friends:

In a recent WORTH Magazine article, Peter Lynch, the world renown Money Manager that made the Fidelity Fund a household name, asked several of his friends to once again in 1999 identify their favorite stocks for the near and short term. Although each of the respective seven money managers had their respective share of success in 1998 by sticking with the perennial large cap winners, or Nifty Fifty such as Dell, Intel, Pfizer, what surprised me was the equal amount of losers from last year's picks e.g. Washington Mutual, CB Richard Ellis, Four Seasons Hotel, Firearms Training Systems, Timberland… This shows how difficult it is even for the professionals to prognosticate! Of their new picks, only 4 of 14 were from S&P 500 and were in industries and corners of the market previously overlooked. Does this signal a changing of the trend favoring the 50 largest S&P companies and perhaps revisiting the values associated with the Russell 2000, down 9% for the previous year! Mr. Lynch once again reiterates the opportunities associated with small to mid-size stocks and the deep belief that these stocks, over the long run, will provide a higher return to the investor.

There are several theories supporting this conclusion: First, the romantic notion attached to finding new companies that revolutionize the market. Certainly the Internet phenomenon pertains to this; Second, quantitative analysis seem to confirm the data (the Ibbotson Associates Yearbook that has been tracking returns since 1926 to the present); and Third, it is logical to assume that at some point in their history, a large company's ability to grow has to be constrained by its relative size. The extra return of small cap stocks though is balanced by the greater volatility and speculation. For every Microsoft, Dell and Compaq, which had yet to go public by 1977, there are hundreds if not thousands of failures. In addition, market realities hinder the smaller investor many of whom are unable to participate in these success stories initial and secondary capital stages. That is left to Venture Capitalists, private investment banking facilities that "Angel" investors.

Our goal at Wellfleet Partners, Inc. ("WPs") is to generally attempt to find the second stage of financing for our private investors. Within a month we hope to finally offer to select clientele our first such offering. To date we have participated, on a principal basis only, in seven transactions in which we acquired unregistered equity and/or options in six different companies. Each would be considered a small mid-size company with the largest generating approximately 1998 revenues of $600 million and the smallest $15 million, several are on the west coast, one is internationally based, and the balance are on the east coast with two in New York alone. The prevailing common denominator in our investments to date has been that all but one are primarily technology based in their current business and/or business plan going forward and their towards utilizing the Internet and E-Commerce for the future growth.

We at WP believe that the Internet will have a far greater impact on our lives in the millennium than to date. Although the latter is admittedly substantial, the Net is continuing to grow and expand at a rate of acceleration and innovation leaving all previous technologies in the dust. The Net touches and has changed everything and its technology has been accepted in business and society at an astounding rate. Brought to the general public only 5 years ago, over 90 million individuals and businesses are currently connected to the Net. It is a medium for the exchange of information, communication, economic transactions, storage of data and for the creation of dynamic links in business between the consumers and companies and inter-companies as well. New businesses and business models are being added daily to this technological metamorphosis. Since the Internet was not created to handle the traffic needs of today's deployed applications, new networks will offer greater scalability and a new set of companies will emerge if history is our guide. Several will be equipment manufacturers that will form the foundation of the new network.; others will supply or offer the software; and others yet will supply the services that enable everyday experiences such as reading and sending e-mail or buying goods such as electronic devices cheaper online (i.e. HardwareStreet.com) to transform our lives. With all the opportunities in front of us, investors have to start thinking like venture capitalists, understanding the great risks associated with "start-up", modest revenue producing technology based companies. Balancing high risk - high reward portfolios now may mean diversifying among the entire Internet spectrum rather than merely from different industries. One area of particular growth we are closely watching is business-to-business E-Commerce which we believe over the next few years will greatly out pace growth in consumers purchases over the net. The aforementioned HardwareStreet.com, one of the lowest cost providers of electronic devices and hardware over the Internet, is projecting over 100% growth per year for the foreseeable future. As a private company with prior seed financing by venture capitalists and management, it is exactly the type of emerging growth company we are seeking to finance.

Both Zachary and I aggressively pursue all avenues to enhance our knowledge of the new developments in technology. Recently, Zachary attended the three day Private Equity 1999 Conference sponsored by the Strategic Research Institute and the New York Venture Group in Phoenix, Arizona. A variety of prestigious financial service companies, venture capital firms and private investors caucused on the state of the market and investment opportunities. He feels it was extremely illuminating and that great opportunities lie ahead in Internet related or E Commerce based companies. We are also especially voracious about absorbing the culture we live in through books, magazines, newspapers, music, television, movies…I am constantly reading, watching and listening to new trends, what people are talking about, what new technological developments are being financed… This helps us connect with our clients, current and potentially new corporate clientele and keep up with the world we live in. I am genuinely fascinated by the flow of popular culture and thus the beneficial need to have a comprehensive knowledge on as many conceivable subjects as possible. We are particularly interested in the current movement in the financial service industry towards the formation of low cost electronic and Internet brokerages trading services, research market data and related financial products such as mortgage banking as well. In particular, we are carefully watching the development of Internet Financial Services, Inc. (known to its online clients as A.B. Watley), a company in which WPs recently participated in financing and expecting to go public in the spring and M.H. Meyerson, Inc. (Nasdaq symbol "MHMY"), an established small New Jersey based financial service firm specializing in fixed income securities, which recently announced the formation of Emeyerson.com, Inc. to begin operating in late 1999.

It would be unfair not to revisit our prior letters that discussed general market prognostications for 1999 and the "January Effect" with those stocks that we purchased for ourselves: Savior Technology Group, Inc. ("SVTG"), Synergy Brands, Inc. ("SYBR") and to a lesser extent Eateries, Inc. ("CCUR") had significant appreciations from early December to the end of January; Response USA, Inc. ("RSPN") and All American Semiconductor, Inc. ("SEMI") did relatively nothing. We remain very bullish on RSPN as well as SVTG which recently announced all-time results in revenues and operating income for the forth quarter ($200 million and $.27 respectively) and SYBR which just announced the formation of its second website, "healthbeauty.com".

With regards to 1999, we continue to be bullish on technology, in particular, Internet stocks regardless of their prior lofty and quick appreciation. Many fund managers that previously scoffed at Net stocks are starting to participate in their continued wild run. What choice do they have as Net stocks have made up approximately 50% of the gain in the S&P 500 index since the forth quarter of 1998. How can we compete with other fund manager's performance on their own benchmarks without participating in the hottest segment of the market. Yet, we temper our enthusiasm for the aforementioned stocks by avoiding those that are extremely volatile or have already enjoyed enormous growth (e.g. Amazon.com, America Online, Yahoo-unless on substantial dips); we look for companies whose growth is closely tied to the Net and those with a predictable and sustainable high growth rate associated with a dominant or ascertainable franchise.

The economy remains strong and Federal Reserve Chairman Alan Greenspan's policies have contributed to essentially a zero inflation trend. Oil prices, which are down 50% over the past year, remains at just $11 a barrel as the need to purchase crude as an inflation hedging speculation for gold, base metals and other commodity assets is practically nonexistent. Thus, investors can keep their assets in stocks and bonds. In addition, the likelihood of oil prices appreciating is slim as the aforementioned inflation premium has been all but practically eliminated, technological improvements in exploration make it easier and cheaper to discover, extract and distribute oil and there is already a glut of oil reserves in the world. Cheap oil (every business uses energy) is akin to a tax cut and will raise economic growth across the board. Finally, even in the midst of a political scandal in the White House, Clinton's impeachment hearings should in no way remind anyone of the economic horrors that accompanied President Nixon's resignation. The economics of the 70's and 90's are polar opposites and even if Clinton is removed from office, as unlikely as that is to happen, the economic prosperity as evidenced by the low inflation and energy costs should continue.

My partner Zachary Prensky, our associate Jeffrey Goldberg, our Advisory Counsel and I are, as previously written, committed to bringing private opportunities in attractive, emerging growth companies to our clientele. In addition, we will continue to make principal investments as those opportunities present themselves. Finally, we are pleased to announce an affiliation with Select Mortgage, Inc., a locally based full service mortgage brokerage company. We hope to jointly market our current, as well as future financial service. We are equally pleased to have Isaac Zucker, Esq. Formally retained as Corporate Counsel and David S. Untracht and Associates as WP's accountants.

Continued best of luck on all your investments and fondest regards to your family.