From The CEO

Dear Customers and Partners,

In January we introduced GeoExpress 6 as a response to customer demand for easier image manipulation and editing of MrSID and JPEG 2000 files. Mission critical tasks like reprojecting and color balancing can now be accomplished without the time-consuming process of moving the files through multiple applications or decompressing and compressing large geospatial images back and forth. GeoExpress 6 also includes seamless integration with Oracle Spatial databases.

In March of last year we told you about our partnership with Oracle and developments that would enable customers to store MrSID and JPEG 2000 files natively in Oracle Geospatial 10gR2. This quarter, we introduced you to LizardTech's Spatial Express and new functionality making it easier than ever to manage large geospatial images within Oracle Spatial without creating expensive pyramids and to dramatically reduce image storage space requirements. You will see more exciting developments from LizardTech through our partnership with Oracle in the coming quarters as we integrate LizardTech's Express Server with Oracle Spatial, so stay tuned.

On the document imaging front, at the end of 2005 we announced a partnership with North American Publishing Corporation to bring digital replicas of their magazines online using LizardTech's DjVu document compression technology. This partnership continues to make DjVu stand out as the most efficient and cost effective solution for delivering exact digital replicas of print publications such as newspapers and magazines to subscribers and readers.

Please visit us at Booth #511 at ESRI in August to learn about all the new developments for the geospatial industry, and bookmark our Web site (www.lizardtech.com) for the latest on our document imaging and DjVu technology.

Finally, I would like to announce that I am transitioning my day-to-day responsibilities at LizardTech to Jim White, who is becoming the general manager of the LizardTech Division of Celartem Inc., as I am returning to my home town in Barcelona and moving from CEO to chairman of the board of directors of Celartem Inc. Jim has been with the company for eight years and came to LizardTech from Los Alamos National Laboratory, where he led the group that originally developed the MrSID technology. He has been a tremendous asset to the company all these years and having him take on this role gives me the great comfort of knowing that the company is in the best hands possible.

In the past three years since LizardTech was acquired we have experienced a great transformation, we had a record revenue year for our geospatial product line in 2004 and we are on the way to breaking that record again this year. In March 2005 we accomplished another milestone with the integration with our sister company Extensis in Portland. These last three years, I have been extremely fortunate in having had the opportunity to work with such a talented and enthusiastic group of professionals and with such great products and technologies. I look forward to continuing to serve the company in my new role.

Best regards,

Carlos

From Jim White, General Manager

I would like to take this opportunity to say just how excited I am to be taking on the new role of general manager. As we near the end of fiscal year 2006, it is apparent that the demand for our products has strengthened; our fourth-quarter performance reflects strong execution against our strategy of delivering premium software solutions. We remain focused on our core values of nurturing long-term customer relationships and fostering employee professional growth. I want to extend my appreciation to all of our customers and resellers for their continued support and commitment. I would also like to recognize Carlos publicly for his unwavering commitment to LizardTech over the last three years and express my gratitude that he will remain on as Chairman of the Board. I look forward to working with all of you to continue building on the company's strengths and ensure further success and growth in fiscal year 2007.