Wellfleet Partners, inc.

There is an interesting story surrounding the history of the Gutenberg Bible and the birth of the most lasting medium so far, the printing press. In Germany, a small city called Mainz recently celebrated the 600th birthday of its most famous son, Henchen Gensfleisch zur Laden zum Gutenberg. Although there were no newspapers obviously to print up his memorable achievements nor any known descendants or even portraits, we do have a cursory background on the man. Born about 1400, he was educated at the University of Erfurt and then, after graduation, became a souvenir maker for pilgrims. He later embarked upon a project known as a "aventur"; loosely translated, it defines a project that involves risk that may or may not become profitable. Sounds like venture capital! Of course he later opened the first movable printing business and finally produced what scholars call the B42, the 42 line Bible. Many of the world's greatest inventions started just like Gutenberg's printing press, an "aventur". Those that have succeeded over the past decade have created wealth, albeit paper wealth, unbeknownst to man.

As the Winter begins, we enter a new era in venture capital. The Private Equity Confidence Survey, conducted quarterly, reported that the majority of VC's do not expect prospects for exit by flotation on the public markets to improve over the next six months and only 45% anticipate improvement in the financial performance of the companies they have invested in. Many VC's and investment banks have adopted a wait and see attitude with their portfolio companies, which require or deserve rescue and which will ultimately fail.

As the aforementioned clearly illustrates, this past quarter has not been an easy nor pleasant time for venture capitalists and their fledgling e-commerce companies. With diminishing funds available for many start-ups and early stage companies, cutting expenses has become as important as raising new capital. Terms such as "burn rate" and "down rounds" have become part of the Silicon Valley lexicon. Spreadsheets illustrating when the cash runs out has become the CFO's nightmare. It's at these times that the entrepreneurial spirit emerge: Ways to raise additional funds, mergers/acquisitions, increasing revenues, cutting costs, layoffs..., it runs the gambit and tries a man's or woman's fortitude, integrity and sense of honor. VC Funds who have numerous investments expect a percentage of their companies to fail; Angel Investors, who are more selective, perhaps take failure more personally. Regardless, this was truly a summer of discontent and reality is certainly checking back in.

As the eternal optimists, we at Wellfleet Partners, Inc. ("WPs") look to the future. Life is a cycle and there is too much VC money in circulation to remain on the sidelines for an indefinite period of time. The internet is like an active volcano, with the bubble welling up in its core, building pressure and mass until it finally implodes. Eventually, it should rear its head again. The question remains, did we learn from our mistakes? How will we avoid the losers of the first great internet venture capital hysteria? We have some thoughts: First, it's important to decipher whether the model is simply trying to move revenues from the old economy to the new (e.g. books, groceries...). Someone has to win and someone has to lose as this model does not make us either read or eat more; it merely shifts revenues; Second, some models create new markets (e.g. online trading, auction markets...). But certainly time to market and quality of management are important factors in the race to success; and Finally, the old laws of Supply and Demand still apply. The internet created new demands (e.g. eBay, Yahoo...) and new forms of supply (i.e. Amazon). Companies that enter a satiated market are doomed to fail.

We in no way anticipate any form of an Internet depression. Our high-tech economy keeps inflation low, intense competition keeps the prices of goods stable and the economy is at full employment. The Internet with its promise of enormous efficiencies, is constantly expanding itself and the new economy has proven to be remarkably resilient. The stock market as well, under the Fed’s guidance has likewise been pliant. Although the Bloomberg Internet Index is down approximately 35% year-to-date, equity valuations in the Internet’s sectors are still strong. After every market correction it has been a modest upswing. The stock market has, for the most part, reflected the new economy.

Although WPs always look to add to our growing portfolio of investments, this past quarter we focused our attention on maximizing and in some cases sustaining ours and our clients' shareholder value by attempting to put together strategic partnerships amongst our companies and in working with management to get through these difficult times. We made only one investment, that in Cloudsource, Inc., a full service web site development firm specializing in low-end and easily affordable custom web sites located in Oakland, California. Zachary was appointed to its Board of Directors and we have already put into action strategic alliances with several of our portfolio companies. Indeed, we are already housing a new full-time consultant of the company to service our own clientele and referral base. Two of our portfolio companies, Aluminium.com and Icras, Inc. made meaningful announcements recently as well. Aluminium.com announced the signing of an exclusive joint venture agreement with metals-Russia.com, the leading Internet marketplace and information source for the Russian metals industry. The agreement makes the vast Russian metals industry accessible exclusively on the net to users of aluminium.com, accelerates expansion into other metals such as copper and steel and establishes an exclusive supply channel guaranteeing a minimum of $1 BILLION in metal accessible to Aluminium.com’s user base over the next 24 months. Icras signed an Agency agreement with Daiwa Securities America, Inc. for a Private Placement of up to $25M (Series D Round), which it hopes, depending on market conditions, to bring to the market by early 2001. Finally, we are in the process of incubating our third company, Epiphany Holdings, Inc. (Spider Financial). We have hired a fifth professional to join our organization on a full time basis, Moshe Kinderlehrer, to assist us in these endeavors and act as Epiphany’s Project Manager. Look for more details on Epiphany in the near future.

The State of Israel has become a fertile ground for venture capital and technology innovations. It offers the four main seeds for technological innovations: a culture of Entrepreneurship, a healthy appetite for venture capital, a strong academic/scientific backdrop and a nurturing government. Despite a population of only about 6 million, Israel has been on the cutting edge of numerous new technological developments. With more Israeli companies trading on the US markets than any other country except for Canada, it's a hot bed of venture capital activity.

We are extremely pleased to announce our formal affiliation with Tri-United Technologies, LLC ("TUT"), an Internet and development company whose main business development offices are in Jerusalem, Israel and specializes in financing, accelerating and incubating internationally based hi-tech businesses. TUT's portfolio of investments includes Hypersell, DietWatch.com, Contact Networks, Charmed Technologies and Selis Networks. Under the leadership of its Chairman & CEO, Sholom Menora, TUT has amassed a portfolio of over 30 hi-tech international investments and anticipates to include three from WP's portfolio, Epiphany Holdings, Inc. (Spider Financial), Aluminium.com and CommFin in the near future. TUT and WPs have reached an agreement in which each will offer space and resources at the other's facilities, introduce all members of the combined portfolios for strategic partnerships and will attempt to partner on new transactions. As an example, TUT has retained WPs to incubate Hypersell and it is anticipated to be the lead VC and Investment Bank for Epiphany Holdings Europe, a subsidiary of Epiphany. Jonathan Shebson, a Vice President of TUT has been appointed to the Advisory Board of Spider Financial, Inc. At this very serious and volatile time in the Middle East, our hearts and prayers reach out to our Israeli brethren.

Finally, we have recently been involved in several charitable fund raising projects including that for a soup kitchen in Israel and "food for the needy" in Queens, New York. It is our great pleasure at Wellfleet to take an active interest in these projects. Although our job is to create sustainable wealth for our clients and shareholders, we never lose sight of the bigger picture and our obligations to those more needy than us. I want to thank all of you that share in our vision and participated in the recent fund raising drives we sponsored. Also, we want to wish Jonathan Bennett and his lovely wife Beth a hearty mazel tov on the birth of their son and Jeff Mann on his recent engagement. May G-d bless all of us with health, happiness and a good year.

NOTE: This report was produced by Wellfleet Partners, Inc. ("WPs") from various public research sources, for the sole purpose of general information. WPs makes no warranties to its factual content and is not a brokerage firm nor securities dealer; therefore, nothing contained in this report shall constitute an offer to sell, solicit or buy any securities or investment advice. Investment in these securities mentioned here involves risk and should not be considered without first reading the target Company’s most recent financial statements, 10Q and 10K, its Private Placement or Offering Memorandum or Business Plan, if applicable, and discussing the investment with your registered representative or professional financial advisor. Venture capital is inherently extremely risky. Mr. Lev is a registered representative of Starr Securities, Inc. a NYSE and NASD member broker-dealer.