Wellfleet Partners, inc.

In a fascinating lengthy recent cover article in Forbes Magazine, titled “The Billionaire Who Cracked DeBeers”, Lev Leviev was profiled for his attack on the most successful cartel in the world. The 47 year old Uzbeki-born and current Israeli citizen, when not enlarging his enormous empire of diverse international holdings, is a devout lubavitcher who gives over $30M a year towards the well being of the worldwide Jewish organization. He has singlehandley become the scurge of the “infamous syndicate known as DeBeers” and today his companies are the world’s largest cutter and polisher of precious gems and the primary source of rough stones to cutters, jewelry makers and polishers across the globe. For hundreds of years “sight holders”, a select group of approximately 120 were allowed to buy DeBeers rough diamonds at take it or leave it prices and quality. In the late 90’s, due to Leviev’s insolence and brash attitudes, his companies and indeed countries like Russia & Australia as well began by-passing DeBeers. By dealing directly with these diamond producing governments he became the first dealer with his hands in every facet of production: mining, cutting, polishing, wholesale and retail. Leviev’s influence reaches the highest levels of numerous governments and he has developed close relationships with Vladimir Putin and Ariel Sharon, the President and Prime Minister of Russia and Israel respectively. As the only vertically integrated diamond dealer in the world, DeBeers has not been resting on its laurels and clout. It has formed a joint venture with LVMH, Moet Hennessy, Louis Vutton to create a retail venue upscale brand. In addition, they eliminated 35 of its 120 long-term sight holders and added 10 new ones. While Levier’s conglomerate has made him a powerful multi-billionaire, it’s his passion for bringing European Jews back to, or to become more involved with Chabad Lubabitch that is his prime passion. He is actively involved with Russia Jewry, the State of Israel and recently opened a school in Queens, New York. Leviev recently made “aliyah” or a permanent move to Israel yet maintains his close affiliations in Russia. To accumulate such an internationally diverse empire and fortune, it truly shows that “Diamonds are Forever”.

“In human affairs, times of advancement are preceded by times of disorder.
Success comes as you weather the storm.”
- Tao Te Ching

The market for venture capital and emerging growth companies has recovered but remains no where near the highs of the “go go 90’s”. Even after the steep declines since April 2000, many growth stocks remain expensive relative to their earnings. With real estate prices still high, money market yields barely negligible and the bond market unattractive in times of fast growth, where are the bargains? Actually Angel investing has enjoyed a recent resurgence. Well heeled, business savvy investors are once again getting in on the ground floor of promising start-ups and emerging growth companies. While these investments can remain illiquid for up to a decade, when successful the returns can be very attractive. In addition, angel investing allows the participants to get in on the ground floor and exact control over management and founders.

“Opportunities multiply as they are seized.”
- Sun Tzu

In Europe, there is an early sign of improving confidence in the financial services arena. After years of heavy cutbacks, Bank of America Corp recently announced that it’s hiring 140 investment bankers for its London based operations. Led by the US economic recovery, European firms, especially UK based ones, are also becoming cautiously optimistic about the improving worldwide economic landscape.

Perhaps the best barometer of recovery will be when the IPO market reopens. Two spectacular venture backed dot.com companies, Google and Saleforce.com are expected to bring to the market their long awaited initial public offering in 2004. Google, for example, is a mere 5 years old yet is recognized as a word we now use to say “searching for information”. With such promising young companies succeeding, investors will once again search for the IPO’s that will allow them to share in the VC’s traditional spoils.

“The test of a first-rate intelligence, is the ability to hold two opposed ideas in the
mind at the same time and still retain the ability to function.”
- F. Scott Fitzgerald

During the past quarter we welcomed to our family of portfolio companies Frontline Communications, Inc. (“FNT”), Pearl River, NY Total Equipment, Locust Valley, NY; Black Pearl, Mountainview, Ca; Vertisoft Corporation, Roswell, GA; TAT Technologies (“TATTF”), Gedera, Israel ; Chembio Diagnostic Systems, Inc., Medford, NY; International Intelligence Consulting, New York, NY; Format Healthcare Inc., Marina Del Ray, CA; and Synergy Brands, Inc. (“SYBR”), Mellville, NY. Starobin Partners, Inc., through its brokerage affiliate J.P. Turner, also want to welcome to our team of Register representatives, Louis Bruno and sincerely congratulate our Controller Zalman Zimmerman on his recent nuptials.

“They do not go where the path may be; they go where there is no path and leave a trail.”
- Ralph Waldo Emerson

Finally, we are extremely pleased to announce that Wellfleet Partners, Inc., in conjunction with our dear friends Stan Wunderlich of KCSA Public Relations Worldwide and Scott Munro of Inveraray Partners, Inc. in Palo Alto, California and in partnership with UK Trade and Investment, will be the hosts of the First Annual USA-UK Strategic Investment and Exchange Seminar, on December 4th and 5th, 2003 at the British Consulate-General. While many of you have already received the “Save The Date”, (or it’s attached hereto) an official invitation will shortly be sent out. We look forward to seeing you at that event.

On behalf of all the employees of WPs & Starobin Partners, Inc. , I would like to wish all of our Jewish friends a very happy and healthy New Year and may this year be filled with joy, prosperity and most importantly peace!

Sincerely,

WELLFLEET PARTNERS, Inc.
Spider Financial, Inc.
Starobin Partners, Inc.

Note: This report was produced by Wellfleet Partners, Inc. (“WPs”) from various public research sources, for the sole purpose of general information. WP makes no warranties to its factual content and is not a brokerage firm, registered Investment Advisor 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, Offering Memorandum or Business Plan, if applicable, and discussing the investment with your registered representative or professional financial advisor. Venture capital and investment in the market is inherently extremely risky. Mr. Lev, the author of this newsletter as well as other members of WPs and SR, are registered representatives of J.P. Turner & Company, LLC, an NASD member broker-dealer principally headquartered in Atlanta, Georgia.