May 18, 2022

Investing in small/micro cap companies and special situations within a concentrated portfolio

Artko Capital 1Q 2022 Partner Letter

For the first calendar quarter of 2022, an average partnership interest in Artko Capital LP was down 11.4% net of fees. At the same time, investments in the most comparable market indexes—Russell 2000, Russell Microcap, and the S&P 500—were down 7.5%, 7.6%, and 4.6% respectively. Our detailed results and related footnotes are available in the table at the end of this letter. Our results this quarter came from Currency Exchange International as well as modest contributions from US Ecology warrants while the rest of the portfolio declined with the broader markets.

P a g e

Peter Rabover

Portfolio Manager

Artko Capital LP

May

, 202

Dear Partner,

For the first

calendar quarter of 20

, a

n average

partnership inter

est in Artko Capital LP

was down

net of fees. At the same time, investment

in the most comparable market indexes

—

Russell 2000, Russell

Microcap, and the S&P 500

—

were

down

%, and

% respectively

Our

detailed

results

and

related footnotes

are available in the table at the en

d of this letter

Our results this quarter came from

Currency Exchange International

as well as modest contributions from US Ecology warrants

while the rest

of the portfolio declin

ed with the broader markets

2Q21

3Q21

4Q21

1Q22

1 year

3 year

5 year

Inception

7/1/2015

Inception

Annualized

Artko LP Net

0.5%

-6.1%

-3.4%

-11.4%

-19.2%

7.1%

4.9%

69.3%

8.1%

Russell 2000 Index

4.3%

-4.4%

2.1%

-7.5%

-5.8%

11.7%

9.7%

80.6%

9.2%

Russell MicroCap Index

4.1%

-5.0%

-2.7%

-7.6%

-11.0%

13.0%

9.9%

72.9%

8.5%

S&P 500 Index

8.6%

0.6%

11.0%

-4.6%

15.6%

18.9%

15.9%

150.0%

14.5%

On the recent sell

offs

In our last

few letters

to you

we wrote that our main concern continued to be willful ignorance by the

Federal Reserve

in both believing in

a unicorn

like concept of “transitory inflation” and

that

three 25 bp

hikes would fix the problem

pecifically:

“...we strongly belie

ve that while signaling three to four rate hikes, the Federal Reserve, which has painted

itself into a corner, will likely be forced to do seven or eight hikes, including a few surprise mid

meeting

ones. This is likely to create more market shocks and lead

to more psychologically painful adjustments in

the

most speculative corners of the market, where higher

quality small caps will also not be immune,

despite

strong fundamentals. In short, our expectations for the price performance of our portfolio is one

volatility in 2022, where despite our best efforts on being invested in high

quality growing companies,

there is a chance where “our baby” may be thrown out with the bathwater in the short term

...”

Sometimes we hate being right.

The market figured out that small gradual increases are unlikely

and it is

obvious that increases will be measured in 100s of basis points, not

small

multiples of 25s. We believe

the real new risk today is that a

clearly

embarrassed Fed

will try to act

TOO

tough

, which they’ve openly

admitted

they would

, and

unnecessar

ily “over

do it” and cause a recession. T

his seems to be the common

view in the market today which is why the small cap indexes

are down close to 20% year to

date

. Despite

having a portfolio with

rock

solid balance sheets at

10%+ of net cash as a percent of market cap and

substantial

revenue and profit

growth with few recession

risks, as of today

our portfolio’s

median

valuation is close

4.0x EBITDA

and

as we predicted,

“

our baby

”

is getting thrown out with the

bath

water. After listening to our management team

’

s 1

quarter 2022 earnings reports and subsequent

conversations

remain confident that our portfolio

companies will continue to grow through the

turbulent and uncertain months ahead due to

strong backlogs, staple products

and secular tailwinds far

outweighing short term economic

uncertainties.

Thus

believe

that t

oday’s market performance feels

much mor

e like the

“taper tantrum” and Grexit/Brexit

like drawdowns based on uncertainty versus

the

late 2008/March 2020

based drawdowns on decimated fundamentals.

That is, we consider these to be

growing pains of the market adjusting to a more normalized economy

where the cost of capital is more

than zero and

marginal fundamentals

based investors once again tak

share from

the speculative mania

P a g e

investors of the las

t few years.

In general, this is the least worried

we have

been in a

negative market

performance scenario and we consider not having enough capital to invest in

the

tremendous

opportunities available in the microcap space today as our biggest problem

Enhanced

Portfolio

Additions

•

1847 Goedeker

Inc $2.25 6/02/2026 Warrants

(

GOED WS

)

–

quired a

n 8

% position in the

warrants of 1847 Goedeker Inc (GOED) at an average

cost

of $0.6

starting in late December 2021 and

are

continuously adding through

out

2022 to lower our price average.

We are

ver

excited about this

investment and

think the market has given us a fantastic multibagger opportunit

Our investment

in GOED, a

high

growth

appliance

commerce

company, is very reminiscent of our

investment in HireQuest

(HQI)

where a large

successful private company merged with a substantially

smaller and

underperforming but public competitor. In the case of HQI, it merged with a

$20mm

market

cap competitor Command Center and it took a while for the market to realize that the new

company is a Free Cash Flow (FCF) generating machine led

by an industry veteran

and it was no longer

the company

represented

its

historical

numbers

. GOED is not dis

similar as

it was a

small

, $50mm

revenue run rate,

and on the verge of bankruptc

company

that

merged with a substantially larger

competitor, Appliance Connection

in 2021

he combined company is expected to generate close to

$650

mm in revenues and

close to

mm/$

mm in EBITDA/EBIT in 2022, growing revenues

over

20%

, despite an incredibly challenging economic environment.

This was

again

reaffirmed on the

company’s most recent

earnings call in May.

Despite all this, at the en

d of the quarter the company,

at a ~$1.40 stock price, sport

ed a market cap/enterprise value of $150mm/$170mm

or 2.3x/3.0x

EBITDA/EBIT, an absurdly low price implying ba

nkruptcy or an imminent consumer collapse

. Given

that Bank of America just approved a $

140mm

lending agreement to the

company

, the size of its

entire market cap at the time,

and unlike furniture

most appliance purchases can

not be deferred

(try

going without a refrigerator for a few weeks) we find the aforementioned scenarios

highly

impr

obable.

what makes

GOED (or Appliance Connection) so special?

For one

we believe the

appliance

commerce

industry, with an approximately

20% share of the total

appliance

pie

is still substantially

behind

the furniture industry at over 40%

penetration

and these secular tailwinds are expected to

result in the industry growth of 20

30%

a year

in the intermediate future

it continues to take share

from brick and mortar retail

This

is consistent with the 20% revenue growth guided by management

the

ir earnings call in late March 2022

and reaffirmed in May 2022

The

industry is currently pretty

stratified with

large brick and mortar

Home Depot, Lowes

and

Best Buy

controlling approximately

70% of the

, while the rest is characterized by leg

acy “mom & pop” competitors

where the

Appliance Connection CEO and founder, Albert F

ouerti

sees the most opportunity to take market

share.

The key differentiators for the

company

are service

such as delivery and installation which

the

bigger box competi

tors

for whom appliances are a small part of their business

are not great at, and

selection, where most

places have 10

20 best

sellers

available versus the

365

low

to high

end items

carried by GOED.

We believe a post

merger investor

rotation

;

a capital structure, where a company at a stock price of

$1.70 and 106mm shares outstanding, has 98mm warrants at an exercise price of $2.25

;

and general

economic fears have driven the stock price to

unrealistic valuation levels of low single

digit

profit

multiples

The company’s

peers are trading at

high single

/low double

digit multiples

with lower

growth

opportunities

. We believe that this valuation gap is unsustainable and

with our near

term

price target of over $5.00 per share, the warrants are the best opportunity to play this special

P a g e

situation.

With the newly approved loan

confidence in forward guidance

and management’s

willingness to continue to buy back stock and

clean up the capi

tal structure

we believe it

s not a

matter of “if” but “when”

the market wakes up to one of the best investment opportunities in the

small cap world.

Partnership Updates

We welcomed one new partner to the partnership this quarter, bringing our total to

at the end of

March

We have completed our audit without any issues for the sixth year in a row

the results of which

you should have received last month.

Despite the current economic challenges,

are excited about the

continued growth in partners a

nd are thankful for your business

Next Fund Opening

Our next partnership openings will be June 1

, 202

. Please reach out for updated offering documents and

presentations at

info@artkocapital.com

or 415.531.2699.

P a g e

Appendix

: Performance Statistics Tabl

Artko LP Gross

Artko LP Net

Russell 2000

Index

Russell

MicroCap Index

S&P 500 Index

YTD

-11.1%

-11.4%

-7.5%

-7.6%

-4.6%

1 Year

-18.1%

-19.2%

-5.8%

-11.0%

15.7%

3 Year

10.5%

7.0%

11.8%

13.0%

18.9%

5 Year

7.9%

4.8%

9.7%

9.9%

16.0%

Inception 7/1/2015

114.1%

69.3%

80.6%

72.9%

150.0%

Inception Annualized

11.9%

8.1%

9.2%

8.5%

14.5%

Monthly Average

1.2%

0.9%

1.2%

Monthly St Deviation

6.8%

6.5%

5.7%

6.3%

4.2%

Correlation w Net

1.00

0.71

0.69

0.62

P a g e

Legal Disclosure

The Partnership’s

performance is based on operations during a period of general market growth and

extraordinary market volatility during part of the period, and is not necessarily indicative of results the

Partnership may achieve in the future. In addition, the results are

based on the periods as a whole, but

results for individual months or quarters within each period have been more favorable or less favorable

than the average, as the case may be. The foregoing data have been prepared by the General Partner and

have not bee

n compiled, reviewed or audited by an independent accountant and non

year end results

are subject to adjustment.

The results portrayed are for an investor since inception in the Partnership and the results reflect the

reinvestment of dividends and other e

arnings and the deduction of costs, the management fees charged

to the Partnership and a pro forma reduction of the General Partner’s special profit allocation, if

applicable. The General Partner believes that the comparison of Partnership performance to a

ny single

market index is inappropriate. The Partnership’s portfolio may contain options and other derivative

securities, fixed income investments, may include short sales of securities and margin trading and is not

as diversified as the indices, shown. Th

e Standard & Poor's 500 Index contains 500 industrial,

transportation, utility and financial companies and is generally representative of the large capitalization

US stock market. The Russell 2000 Index is comprised of the smallest 2000 companies in the Ru

ssell 3000

Index and is generally representative of the small capitalization U.S. stock market. The Russell Microcap

Index is comprised of the smallest 1,000 securities in the Russell 2000 Index plus the next 1,000 securities

(traded on national exchanges)

. The Russell Microcap is generally representative of the microcap segment

of the U.S. stock market. All of the indices are unmanaged, market weighted and reflect the reinvestment

of dividends. Due to the differences among the Partnership’s portfolio and t

he performance of the equity

market indices shown above, however, the General Partner cautions potential investors that no such

index is directly comparable to the investment strategy of the Partnership.

While the General Partner believes that to date

the Partnership has been managed with an investment

philosophy and methodology similar to that described in the Partnership’s Offering Circular and to that

which will be used to manage the Partnership in the future, future investments will be made under

fferent economic conditions and in different securities. Further, the performance discussed herein does

not reflect the General Partner’s performance in all different economic cycles. It should not be assumed

that investors will experience returns in the f

uture, if any, comparable to those discussed above. The

information given above is historic and should not be taken as any indication of future performance. It

should not be assumed that recommendations made in the future will be profitable, or will equal,

the

performance of the securities discussed in this material. Upon request, the General Partner will provide

to you a list of all the recommendations made by it within the past year.

This document is not intended as and does not constitute an offer to se

ll any securities to any person or

a solicitation of any person of any offer to purchase any securities. Such an offer or solicitation can only

be made by the confidential Offering Circular of the Partnership. This information omits most of the

information

material to a decision whether to invest in the Partnership. No person should rely on any

information in this document, but should rely exclusively on the Offering Circular in considering whether

to invest in the Partnership.