State of the Business Report
From the President and CTO J. F. Johns III 11/28/2007

It's hard to believe that another year has already passed, but here at Xstream Mobile Solutions time is flying. I am very pleased to report that we have accomplished a great many of our goals and objectives from last year. And we are excited about the future of our company.

Let's start off with a brief recap of the progress that we've made in year 2006 and beginning of 2007. In year 2006 we deployed our flagship software, Xstream Safe, in the Will County EMA. We’re proud to say after more than a year of utilizing our product internally, Will County EMA is quite pleased with its performance. Xstream currently has systems in use by the Lemont Illinois EMA and they also have been using it for a year with great success. Additionally, in year 2006 we discussed the possibilities of installations in the Kankakee County Sheriff's Department and the Manteno Police Department. That now has been successfully completed and phase 1 is installed and operating. We have now begun the deployment of our systems in 28 school districts in Kankakee and Iroquois counties, over 70 schools. This is a major achievement for our sales team. In November 2007 we deployed our SAFE system with the New Lenox Police Dept. and should be operating by years end. XSM has also deployed our Safe system with the Metro East Emergency Response Team in southern Illinois. Ultimately, XSM has agreed to deploy an additional 5 systems covering the entire state of Illinois. Also over the last year we have made great strides in our relationships with the cellular providers, achieving high-level contacts and important technical relationships, helping in securing a higher level of performance and customer care for our software systems customers. We have now installed our XSM Sentinel secure servers in a hardened Equinix IBX server location in downtown Chicago. These are just a few of the many great things going on at XSM on a daily basis.

XSM has done a great deal of marketing directly to every sheriff's office in every county in the state of Illinois. We also have attended many professional emergency and educational conferences and trade shows, which is outlined in the news section of our web site. This has had a very positive affect on our product visibility and we now receive calls and inquiries regarding our products and services from many counties, organizations and municipalities’ statewide and nationwide, requesting demonstrations and meetings regarding our safety products.

Many of the items we discussed in last year's letter are still pending. With regards to the city of Chicago, we are still in discussions regarding the possibility of our product being deployed in the city of Chicago. Based on these discussions we still have every reason to believe that our product could be utilized in the city of Chicago and/or Cook County.

In my report last year, I mentioned the possibility of some new products; those products are now in development or are released and we're pleased to say should be hitting the market shortly. All of these products are available for review on our web site in the product development section.

And now onto the future :

In the end of 2007 and beginning of 2008, Xstream is preparing to experience major achievements, the first of which is by no means a small accomplishment. As I write this report, we have received the green light in Iroquois and Kankakee County IL to begin deployment of our safety products in over 70 schools in 28 school districts. This will mark the first utilization of XSM's safety products in educational organizations, the fulfillment of a major corporate goal - to see our safety products expand the level of protection our children enjoy.

Xstream Mobile Solutions is actively seeking to expand its sales force and create third party distribution agreements for our corporate and safety products. We have had discussions with Motorola, Sprint/Nextel, and Federal Signal. We have also partnered with Microsoft, Symantec, Verizion, AT&T, US Cellular and T-Mobile to increase our product visibility. Any third party distribution deal should create a substantial revenue stream from these external agreements.

We're proud and pleased to announce the addition of Major Pat Carr, an extremely talented and highly experienced military security professional. Pat brings many years of distribution experience and is closely tied with many safety organizations through out the state. Pat’s bio is on the XSM web site.

In regards to our educational distribution, we're pleased to say that we are in discussions with several school districts that were not mentioned earlier in this report. Those districts are 230 and district 122 that, should we consummate an agreement with them, will also help us to expand and grow into the educational market. These schools represent a significant portion of the south suburban areas.

Although we were unable to achieve the fiscal numbers we were hoping for at the end of 2006 we do feel that we are currently on track to achieve those numbers and then greatly expand on them for fiscal year 2007.

We are pleased to announce that we currently have many pending safety product sales in the State of Illinois. Various counties, cities, healthcare providers, and Emergency organizations that we are in discussions with are scheduled for additional meetings. Some are currently reviewing our products based on an earlier meeting. Many of these entities have indicated they are interested in potentially coming on board. This will obviously enhance our position in the state of Illinois. With the addition of these communities we will have achieved the goal of assisting in the protection of well over a million people. We are also actively pursuing deals in Indiana and Texas.

XSM devotes a great deal of time and economics towards keeping the Xstream Mobile Solutions web site as informative and accurate as possible. We feel that this is the best way to stay directly in touch with the public and our stockholders. You can be certain that if there's something happening at XSM (that we can talk about openly) it will be on our web site.

In closing, it is my opinion that Xstream Mobile Solutions Corp, is poised to create great possibilities and experience rapid grow. This being said it will still require a vigilant effort from all those involved with a steady resolve to see that this happens, and I believe we will.

The possibility or likelihood of exceeding all these expectations is highly likely. That being said it is possible that they may not be met. We at Xstream Mobile Solutions believe, given the appropriate market attention and sales effort, we should far exceed these expectations. The product line that we have developed is solid and reliable, the customer base that we appeal to has been, without exception, very receptive to our systems. The ability to sell and implement our systems is only inhibited by our ability to put it in front of as many potential end-users as possible.

Again, I would like to personally thank all of the great people that have been instrumental in our growth and helping us to build our company. XSM will always pursue the highest possible standards in everything and anything that we do, and will never settle for second best. Our commitment to safety is not just part of our business, it is our passion.