August 5, 1998

SPECIAL UPDATE REPORT

WORDCRAFT SYSTEMS, INC.

Today, August 6, 1998, Howard Stillman, a special situation analyst with over 25 years experience, released a strong buy recommendation on Wordcraft Systems (OTC BB:WORC) with a price target of $1.50. Formerly the director of research for two NYSE member firms, he has been approved as a supervisory analyst by the New York Stock Exchange. His phone number is 760-737-9580. Mr. Stillman has spent considerable time over the last two months meeting with the management of Wordcraft (OTC BB:WORC). Following our cEomments we have included the full text of his report for your benefit.

We have received numerous inquiries from our subscribers about the status of the SWIM contract. Discussions with Management of Wordcraft lead us to conclude that the formal signing of the contract will be announced by mid August. Terms will be more favorable than we originally anticipated. In the interim, the stock has continued to drift down from its $.72 high. For those subscribers with a longer-term view towards this Company and micro cap investments, we believe there is a good a chance your patience will be rewarded.

Here is the full text of Mr Stillman's report:

Howard N. Stillman
Investment Analyst
760-737-9580

WORDCRAFT SYSTEMS, INC.
OTC SYMBOL-WORC

BUY PRICE OBJECTIVE $1 1/2

CORPORATE STRATEGY:

Wordcraft Systems, Inc. is seeking out new opportunities for its sophisticated software applications, while expanding its core business through the enhancement of its customer base. As to the former, an agreement is imminent to license a successful Sewer/water Infrastructure Management System (SWIM) developed by a major water utility in Southern California. The agreement will provide Wordcraft the opportunity to market this technology to over 4,000 water utility companies in the United States affording a market potential of over $400 million. Complementing this activity is its established development and marketing of fax software for multifunction fax machine systems known as "HydraFax". The U.S. Navy has tested and approved the unique fax security feature of its software. As a result, the Navy has signed an agreement with Pitney Bowes to use HydraFax with the latter's fax machines representing a potential 15,000-20,000 machines nationwide. This and possible contracts with other federal agencies should generate millions in sales over the years ahead. These developments bode well for dramatic operating growth for Wordcraft in the years ahead as this business materializes.

HIGHLIGHTS

1. SWIM systems for water utilities represents a potential market of over $400 million during the years ahead.
2. Pitney Bowes' contract with the U.S. Navy and other federal agencies using Wordcraft's "HydraFax" software is expected to impact dramatically on revenue by 1999.
3. Management team in place to support and effectuate growth programs.
4. SWIM utility systems expected to average $200,000 per contract, with on going future revenue from maintenance services to be provided. Operations are to be conducted through its soon to be acquired Next Century Systems, Inc.
5. HydraFax software is sold to a broad list of fax manufacturers in addition to Pitney Bowes, including: Konica, Danka, Dex and Omnifax, which represent just a small portion of the large roster of corporate clients.
6. Positive earnings are forecast for the immediate future predicated on how quickly the potential new business unfolds.

SUMMARY AND CONCLUSION:

Wordcraft seems well positioned to capitalize on its exciting new business potential of its favored fax software and the huge market to be served once the SWIM venture is effectuated. At current price levels the shares posses speculative growth potential to risk oriented investors seeking above average appreciation potential.

OPERATIONS:

The planned relationship with the developer, a solidly established information technology and telecommunications services company, which generated over $41 million in revenue for 1997, enhances Wordcraft's stature as a company with exciting growth potential. Not only has the SWIM system been implemented successfully in Southern California, but a number of other water utilities in California have expressed interest in installing this highly automated maintenance program. These alone represent over $3 million in orders from the getgo. Part and parcel with this program is the GIS facility mapping data (Geographical Information Systems) which can be used in conjunction with SWIM to provide utility software products aimed at substantially increasing operation efficiency and reducing operating costs of users. These products operate in Windows NT and Unix, the most popular platforms in business today. Management believes water utilities are generally highly profitable entities that can

The HydraFax software is currently being sold to a broad list of customers including: America On Line, AT & T, Bear Stearns & Co., Boeing, Colgate Palmolive, Ford Motor, Kelloggs, Pacific Bell, Toyota, Walt Disney Records and numerous other major companies. The multi-functional peripheral market is expected to grow to 4.2 million units by the year 2001 from just 1.4 million in 1997 according to industry projections.

MANAGEMENT:

Harry Jedig, Chairman/CEO, has an extensive general management background in domestic and international commerce. Harrysen Mittler, President/CFO, has launched four successful businesses during his career. Wally Turner, the CEO of Next Century Systems, has marketed software for over 25 years since starting with IBM in the early seventies.

FINANCES:

A plan to raise around $2.5 million in debt and or equity capital will be underway shortly to finance the new endeavor.

OUTLOOK:

A recent industry study has indicated that 79% of water utilities are still looking to automate their maintenance departments. In the current era of corporate quest for greater efficiency, the SWIM system of preventive maintenance, automated route crew scheduling and assistance in countless decision support tasks is a viable product that could generate outstanding growth for Wordcraft for may years to come.

This report is read at your own risk. It was prepared on a fee basis on information that is reliable, but cannot be guaranteed as to its accuracy or completeness.

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