Yellow Dog Linux Enthusiasts,

A year ago June, I delivered two emails, both concerning
Apple's stated (and now nearly complete) transition to the Intel architecture
and how Terra Soft, as the provider of the leading Power Linux OS, was
responding.

With this, I bring closure to this year of transition, sharing with you
a summary of the transformation of our company and foreshadowing of good
things to come.
A time for refocus.
In retrospect, we enjoyed our position as a unique Apple Proprietary Solutions
Provider, Value Added Reseller. In the same respect, I realize now we had
become comfortable there, not pursuing our full potential as an HPC Linux
engineering firm.

Through a number of introspective team meetings, we redefined our core
competencies, rediscovered what we enjoy doing, and then determined how best
to profit from the marriage of these two. As such, we are moving ahead with
focus on Board Support Packages, provision of Integrated Solutions, and
application development.


Board Support Packages.
We rediscovered and have now more fully embraced our expertise in the
development of Board Support Packages (BSPs). As such, we remain the first
and only provider of a commercial Linux operating system for the IBM Cell
processor through our work with Mercury Computer.

Just this past week we completed the Yellow Dog Linux v5.0 BSP for Mercury,
offering advanced support for their BladeCenter Cell blades. We will continue
to work with Mercury to provide a Cell Linux OS for each of their products as
their Cell line unfolds (http://mc.com/products/boards.cfm).

We have also completed a Yellow Dog Linux v5.0 BSP for Themis
(http://www.themis.com) in support of the 'TPPC64', the industry's first 6U
VMEbus SBC built upon the IBM 970FX (G5) processor.


Integrator VAR.
Our relationship with IBM has gained both breadth and depth, granting us
champions and support across several divisions. We now resell the IBM p5
series Power rackmounts and IBM BladeCenter JS21 blades which provide an
incredible 4x performance density improvement over the former Apple Xserve
product line
(http://www.terrasoftsolutions.com/products/ibm/bladecenter.shtml)

We are now providing quotes for the Mercury Cell blades and associated,
optimized Cell libraries. With a forthcoming product line that includes a
high performance 1U rackmount and accelerator card, we firmly believe Cell
holds a strong position in the near HPC future.


APPLICATION DEVELOPMENT
In 2005 Terra Soft returned to its roots of software development with the
release of Y-Bio v1.1. This full featured gene sequence analysis suite suite
(http://www.terrasoftsolutions.com/products/y-bio/) is now OEM'd by Penguin
Computing and resold by Scalable Informatics.

Y-HPC v2.0 is in development with slated launch at SC2006 this November. This
fully redeveloped product moves to bridge the Power and x86 gap as the
world's first commercial, cross-architecture cluster construction suite. With
an immediate focus on the heterogeneous BladeCenter offerings, Y-HPC will
grow to support a wide variety of x86 and Power compute nodes.

As promised, Yellow Dog Linux is refocused on the desktop with a pending fall
release of the consumer v5.0 product. Built upon the FC5 base, YDL v5.0 will
be made available through YDL.net accounts and the public mirrors with less
emphasis on a shipping, box product. While we can't let the dog out of the
bag just yet, we can state that YDL has never looked so good.


HPC CLUSTERING
Under contract with a currently non-disclosed customer, this August Terra Soft
completed the construction of a 3000 sq-ft supercomputing facility as an
expansion to its Northern Colorado headquarters. Able to house greater than
2000 servers, the immediate contracted cluster will be comprised of more than
4000 Power cores. Running Yellow Dog Linux, Y-HPC, and Y-Bio, this cluster
will provide realworld bioinformatics research for key DOE and University
labs with the close of the year.

---------------

As you can see from the scope of this review, we have been very busy. So much
so, that we may have appeared relatively quiet from the outside. If the
reference to the "lull before the storm" holds a water, then I would close by
warning that we are about to unleash a storm.

Sincerely,
Kai Staats, CEO
Terra Soft Solutions