UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
quarterly period ended:  June 30, 2010


Or


 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




Commission
File No. 333-140378




WEBSAFETY,
INC.


(Exact
name of small business issuer as specified in its charter)





Nevada
                  (State
      or other jurisdiction of incorporation or
                  organization)
                20-5150818
                  (I.R.S.
      Employer Identification
No.)





2201
W. Royal Lane, Suite 200, Irving, Texas 75063


(Address
of Principal Executive Offices)





(214)
716-6909


(Issuer’s
telephone number)





BLINDSPOT
ALERT, INC.


(1
Hampshire Court, Newport Beach, CA 92660)




Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes x No  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company.





 ̈ Large accelerated
      filer
             ̈  Accelerated
      filer ̈ Non-accelerated
      filer
            x  Small
      reporting company





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):


Yes  ̈     No
x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of August 16, 2010:





Class
              
              Outstanding shares as of August 16, 2010Common
      Stock, $0.001 par value
              
              66,876,774







INDEX


PagePART 1-FINANCIAL
INFORMATION
                                                                
                                                                3Item 1.  Financial
      Statements
                                                                
                                                                3Balance
      Sheets as of June 30, 2010 (unaudited) and December 31,
    2009
                                                                
                                                                F-1Statements
      of Operations (unaudited) for the three and six months ended June 30, 2010
      and June 30, 2009
                                                                
                                                                F-2Statements
      of Cash Flows (unaudited) for the six months ended June 30, 2010 and June
      30, 2009.
                                                                
                                                                F-3Statements
      of Stockholders's Equity (deficit) for the year ended December 31, 2009
      and the six months ended June 30, 2010 (unaudited)
                                                                
                                                                F-4Notes
      to Financial Statements
                                                                
                                                                F-5Item 2.  Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
                                                                
                                                                4Item 3.  Quantitative and Qualitative
      Disclosures about Market Risk
                                                                
                                                                6Item 4.  Control and
      Procedures
                                                                
                                                                6PART II-OTHER INFORMATION
                                                                
                                                                7Item 1.  Legal
      Proceedings
                                                                
                                                                7Item 1A.  Risk
      Factors
                                                                
                                                                7Item 2.  Unregistered Sales of Equity
      Securities and Use of Proceeds
                                                                
                                                                10Item 6.  Exhibits
                                                                
                                                                10SIGNATURES
                                                                
                                                                11




2




PART
I - FINANCIAL INFORMATION




Item
1. Financial Statements




INTERIM
FINANCIAL STATEMENTS


(UNAUDITED)





Table
of Contents





PAGEBALANCE
      SHEETS
                    F-1STATEMENTS
      OF OPERATIONS
                    F-2STATEMENTS
      OF CASH FLOWS
                    F-3STATEMENTS
      OF STOCKHOLDERS EQUITY
                    F-4FOOTNOTES
      TO FINANCIAL STATEMENTS
                    F-5




3


WEBSAFETY,
      Inc.Formerly
      Known as BlindSpot Alert, Inc.BALANCE
      SHEETS


As
      ofJune
      30, 2010
                                                          
                                                          
                                                          December
      31, 2009ASSETS
                                                          
                                                          (Unaudited)
                                                          
                                                          
                                                          (Unaudited)Current
      assets:Cash
                                                          
                                                          $
                                                          55,823
                                                          
                                                          
                                                          $
                                                          5,748Accounts
      receivable
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          17,171Total
      current assets
                                                          
                                                          
                                                          55,823
                                                          
                                                          
                                                          
                                                          22,919Property
      and Equipment:Computer
      equipment, computer software and furniture, net
                                                          
                                                          
                                                          12,944
                                                          
                                                          
                                                          
                                                          14,433Software
      license and website development, net
                                                          
                                                          
                                                          128,150
                                                          
                                                          
                                                          
                                                          138,383Total
      property and equipment
                                                          
                                                          
                                                          141,094
                                                          
                                                          
                                                          
                                                          152,816Other
      Assets:Deposits
                                                          
                                                          
                                                          6,820
                                                          
                                                          
                                                          
                                                          6,820WebSafety
      Technology, net
                                                          
                                                          
                                                          2,117,111
                                                          
                                                          
                                                          
                                                          2,587,580Option
      to acquire
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Total
      other assets
                                                          
                                                          
                                                          2,123,931
                                                          
                                                          
                                                          
                                                          2,594,400$
                                                          2,320,848
                                                          
                                                          
                                                          $
                                                          2,770,135LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                                                          
                                                          $
                                                          440,263
                                                          
                                                          
                                                          $
                                                          233,733Accrued
      expense
                                                          
                                                          
                                                          1,675
                                                          
                                                          
                                                          
                                                          13,868Deferred
      revenue
                                                          
                                                          
                                                          74,298
                                                          
                                                          
                                                          
                                                          114,740Liability
      to issue shares
                                                          
                                                          
                                                          115,864
                                                          
                                                          
                                                          
                                                          103,120Total
      current liabilities
                                                          
                                                          
                                                          632,101
                                                          
                                                          
                                                          
                                                          465,461Stockholders'
      equity:Preferred
      stock; $.001 par value, 25,000,000 sharesauthorized,
      3,230,002 and 3,833,335  shares issued andoutstanding
      respectively
                                                          
                                                          
                                                          3,230
                                                          
                                                          
                                                          
                                                          4,230Common
      stock; $.001 par value, 300,000,000 sharesauthorized,
      66,704,549 and 54,895,714  shares issued andoutstanding,
      respectively
                                                          
                                                          
                                                          66,705
                                                          
                                                          
                                                          
                                                          54,896Additional
      paid in capital
                                                          
                                                          
                                                          5,896,813
                                                          
                                                          
                                                          
                                                          4,817,805Deficit
      accumulated
                                                          
                                                          
                                                          (4,278,000
                                                          )
                                                          
                                                          
                                                          (2,572,257
                                                          )Total
      stockholders' equity
                                                          
                                                          
                                                          1,688,748
                                                          
                                                          
                                                          
                                                          2,304,674$
                                                          2,320,848
                                                          
                                                          
                                                          $
                                                          2,770,135




The
accompanying notes are an integral part of these financial
statements.


F-1


STATEMENTS
      OF OPERATIONSFor
      The Three  and Six Months Ended June 30, 2010 and
      2009(Unaudited)






(Unaudited)
                                          
                                          
                                          (Unaudited)For
      The Three Months Ended June 30
                                          
                                          
                                          Six
      Months Ended June 30,2010
                                          
                                          
                                          2009
                                          
                                          
                                          2010
                                          
                                          
                                          2009Revenue
                                          
                                          $
                                          76,712
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          122,490
                                          
                                          
                                          
                                          -Cost
      of goods sold
                                          
                                          
                                          (26,785
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (58,142
                                          )Gross
      margin
                                          
                                          
                                          49,927
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          64,348
                                          
                                          
                                          
                                          -Operating
      expenses:General
      and administrative expenses
                                          
                                          
                                          657,678
                                          
                                          
                                          
                                          156,764
                                          
                                          
                                          
                                          1,270,185
                                          
                                          
                                          
                                          329,550Impairment
      loss
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Research
      & Development
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,500
                                          
                                          
                                          
                                          -Loss
      on option acquire
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          245,000Depreciation
      and amortization expense
                                          
                                          
                                          248,388
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          497,406
                                          
                                          
                                          
                                          -Total
      operating expenses
                                          
                                          
                                          906,066
                                          
                                          
                                          
                                          156,764
                                          
                                          
                                          
                                          1,770,091
                                          
                                          
                                          
                                          574,550-
                                          
                                          
                                          
                                          -(Loss)
      from operations
                                          
                                          
                                          (856,139
                                          )
                                          
                                          
                                          (156,764
                                          )
                                          
                                          
                                          (1,705,743
                                          )
                                          
                                          
                                          (574,550
                                          )Other
      income (expense):Interest
      income
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Other
      income
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Interest
      expense
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Total
      other income (expense)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -(Loss)
      before provision for income taxes
                                          
                                          
                                          (856,139
                                          )
                                          
                                          
                                          (156,764
                                          )
                                          
                                          
                                          (1,705,743
                                          )
                                          
                                          
                                          (574,550
                                          )Provision
      for income taxes
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
      (loss)
                                          
                                          $
                                          (856,139
                                          )
                                          
                                          $
                                          (156,764
                                          )
                                          
                                          $
                                          (1,705,743
                                          )
                                          
                                          $
                                          (574,550
                                          )Basic
      and diluted loss per share
                                          
                                          $
                                          (0.013
                                          )
                                          
                                          $
                                          (0.007
                                          )
                                          
                                          $
                                          (0.028
                                          )
                                          
                                          $
                                          (0.026
                                          )Basic
      and diluted weighted averagecommon
      shares outstanding
                                          
                                          
                                          64,635,157
                                          
                                          
                                          
                                          22,300,000
                                          
                                          
                                          
                                          61,144,778
                                          
                                          
                                          
                                          22,300,000





The
accompanying notes are an integral part of these financial
statements.


F-2


Websafety,
      Inc.Formerly
      Known as BlindSpot Alert, Inc.STATEMENTS
      OF CASH FLOWSFor
      the Six Months Ended June 30, 2010 and 2009(Unaudited)




(Unaudited)Six
      Months Ended June 30,2010
                                  
                                  
                                  2009Operating
      activities:Net
      loss
                                  
                                  $
                                  (1,705,743
                                  )
                                  
                                  $
                                  (574,550
                                  )Adjustments
      to reconcile net loss tonet
      cash used in operating activities:Depreciation
      and amortization expense
                                  
                                  
                                  497,406
                                  
                                  
                                  
                                  -Stock
      compensation expense
                                  
                                  
                                  257,821Stock
      issued for services
                                  
                                  
                                  311,905
                                  
                                  
                                  
                                  18,000Impairment
      charge for WQN License
                                  
                                  
                                  -
                                  
                                  
                                  
                                  245,000Loss
      on option expiration
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Loss
      on sale of equipment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Changes
      in operating assets and liabilities:Decrease
      (increase) in accounts receivable
                                  
                                  
                                  17,171
                                  
                                  
                                  
                                  -Decrease  in
      prepaid expense
                                  
                                  
                                  -
                                  
                                  
                                  
                                  7,137Decrease
      in subscriptions receivable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  200Decrease
      in advance to shareholder
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,104
                                  )Increase
      in deposit
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Increase
      (decrease) in advance from shareholder
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Increase  in
      accounts payable
                                  
                                  
                                  206,530
                                  
                                  
                                  
                                  98,035Decrease
      in short-term borrowing
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Decrease
      in lease payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Decrease
      in deferred revenue
                                  
                                  
                                  (40,442
                                  )
                                  
                                  
                                  -Increase
      in accrued expense
                                  
                                  
                                  551
                                  
                                  
                                  
                                  54Net
      cash (used in) operating activities
                                  
                                  
                                  (454,801
                                  )
                                  
                                  
                                  (207,228
                                  )Investing
      activities:Purchase
      of long term assets
                                  
                                  
                                  (15,215
                                  )
                                  
                                  
                                  (89,295
                                  )Increase
      (decrease) investment in option to acquire
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (150,000
                                  )Net
      cash (used in) investing activities
                                  
                                  
                                  (15,215
                                  )
                                  
                                  
                                  (239,295
                                  )Financing
      activities:Proceeds
      from borrowing
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Proceeds
      from sale of equipment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Repayment
      of advances from shareholders
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Proceeds
      from stock sales
                                  
                                  
                                  520,091
                                  
                                  
                                  
                                  469,001Net
      cash provided by financing activities
                                  
                                  
                                  520,091
                                  
                                  
                                  
                                  469,001Net
      changes in cash
                                  
                                  
                                  50,075
                                  
                                  
                                  
                                  22,478Cash,
      beginning of year
                                  
                                  
                                  5,748
                                  
                                  
                                  
                                  224,269Cash,
      end of period
                                  
                                  $
                                  55,823
                                  
                                  
                                  $
                                  246,747Cash
      paid during the period for:Interest
      paid
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Tax
      paid
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Non
      Cash Investing and Financing Activities:Issuance
      of common stock for services
                                  
                                  $
                                  123,785
                                  
                                  
                                  $
                                  28,000Voluntary
      conversion of shareholders advance to pain in Capital
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Common
      stock issued for equipment
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -




The
accompanying notes are an integral part of these financial
statements.


F-3




WEBSAFETY,
      INC.Formerly
      Known as BlindSpot Alert, Inc.STATEMENTS
      OF STOCKHOLDERS' EQUITY (DEFICIT)For
      the Year Ended December 31, 2009 and the Six Months Ended June 30,
      2010(Unaudited)
  Additional
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    TotalPreferred
      Stock
                                                    
                                                    
                                                    Common
      Stock
                                                    
                                                    
                                                    Subscription
                                                    
                                                    
                                                    Paid-in
                                                    
                                                    
                                                    Accumulated
                                                    
                                                    
                                                    Stockholders'Shares
                                                    
                                                    
                                                    Amount
                                                    
                                                    
                                                    Shares
                                                    
                                                    
                                                    Amount
                                                    
                                                    
                                                    Receivable
                                                    
                                                    
                                                    Capital
                                                    
                                                    
                                                    (Deficit)
                                                    
                                                    
                                                    Equity
      (Deficit)Balances
      December 31, 2009
                                                    
                                                    
                                                    4,230,002
                                                    
                                                    
                                                    $
                                                    4,230
                                                    
                                                    
                                                    
                                                    54,895,714
                                                    
                                                    
                                                    $
                                                    54,896
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    4,817,805
                                                    
                                                    
                                                    $
                                                    (2,572,257
                                                    )
                                                    
                                                    $
                                                    2,304,674Issuance
      of common stock for cashJanuary
      6, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    $
                                                    100
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    44,900
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    45,000January
      27, 2010 one issuance at $0.043
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,600,000
                                                    
                                                    
                                                    $
                                                    1,600
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    68,400
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    70,000March
      9, 2010 one issuance at $0.05
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    400,000
                                                    
                                                    
                                                    $
                                                    400
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    19,600
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    20,000March
      9, 2010 one issuance at $0.045
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    33,333
                                                    
                                                    
                                                    $
                                                    33
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    14,967
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    15,000March
      9, 2010 one issuance at $0.045
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    23,000
                                                    
                                                    
                                                    $
                                                    23
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    10,327
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    10,350-Issuance
      of common stock for services
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -January
      6, 2010 one issuance at $0.04
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    $
                                                    100
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    3,900
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    4,000January
      6, 2010 one issuance at $0.04
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    $
                                                    200
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    7,800
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    8,000January
      6, 2010 one issuance at $0.04
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    28,000
                                                    
                                                    
                                                    $
                                                    28
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,092
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,120March
      17, 2010 one issuance at $0.025
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    7,000,000
                                                    
                                                    
                                                    $
                                                    7,000
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    168,000
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    175,000-Stock
      Compensation Expense
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    128,911
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    128,911Net
      loss for the period ended March 31, 2010
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (849,604
                                                    )
                                                    
                                                    
                                                    (849,604
                                                    )Balances  March
      31, 2010
                                                    
                                                    
                                                    4,230,002
                                                    
                                                    
                                                    $
                                                    4,230
                                                    
                                                    
                                                    
                                                    64,380,047
                                                    
                                                    
                                                    $
                                                    64,380
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    5,285,701
                                                    
                                                    
                                                    $
                                                    (3,421,861
                                                    )
                                                    
                                                    $
                                                    1,932,451Issuance
      of common stock for cashApril
      5, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    26,500
                                                    
                                                    
                                                    $
                                                    27
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    11,898
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    11,925April
      5, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    155,400
                                                    
                                                    
                                                    $
                                                    155
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    69,775
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    69,930April
      5, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    22,222
                                                    
                                                    
                                                    $
                                                    22
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    9,978
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    10,000June
      2, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    $
                                                    50
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    22,450
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    22,500June
      18, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    534,192
                                                    
                                                    
                                                    $
                                                    534
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    239,852
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    240,386Issuance
      of common stock for servicesJune
      2, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    15,000
                                                    
                                                    
                                                    $
                                                    15
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    6,735
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    6,750June
      2, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    4,522
                                                    
                                                    
                                                    $
                                                    5
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,030
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,035June
      2, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    55,555
                                                    
                                                    
                                                    $
                                                    56
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    24,944
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    25,000June
      18, 2010 one issuance at $0.45
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    $
                                                    200
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    89,800
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    90,000-Conversion
      of preferred shares to common shares at 1.25 to 1
                                                    
                                                    
                                                    (1,000,000
                                                    )
                                                    
                                                    
                                                    (1,000
                                                    )
                                                    
                                                    
                                                    1,250,000
                                                    
                                                    
                                                    $
                                                    1,250
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (250
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -Issuance
      of common stock to adjust issue price
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    11,111
                                                    
                                                    
                                                    $
                                                    11
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    4,989
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    5,000Stock
      Compensation Expense
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    128,910
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    128,910Net
      loss for the period ended June 30, 2010
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (856,139
                                                    )
                                                    
                                                    
                                                    (856,139
                                                    )Balances  June
      30, 2010
                                                    
                                                    
                                                    3,230,002
                                                    
                                                    
                                                    $
                                                    3,230
                                                    
                                                    
                                                    
                                                    66,704,549
                                                    
                                                    
                                                    $
                                                    66,705
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    5,896,813
                                                    
                                                    
                                                    $
                                                    (4,278,000
                                                    )
                                                    
                                                    $
                                                    1,688,748
  The
accompanying notes are an integral part of these financial
statements.
 
 F-4




WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




Note
1.  Condensed Financial Statement




The
accompanying financial statements have been prepared by the Company without
audit.  In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at June 30, 2010, and for all
periods presented herein, have been made.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted.  It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company’s December 31, 2009 audited
financial statements.  The results of operations for the six months ended
June 30, 2010 are not necessarily indicative of the operating results that can
be anticipated for a complete operating period.




Note
2. Significant Accounting Policies




Going
Concern




The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.  The
Company has incurred cumulative net losses of approximately $4,149,090 from the
period of July 3, 2006 (Inception) through June 30, 2010 and has used
significant cash in support of its operating activities raising substantial
doubt about the Company’s ability to continue as a going concern.  The
Company in 2010 has raised additional capital and will seek additional sources
of capital through the issuance of debt or equity financing, but there can be no
assurance the Company will be successful in accomplishing its
objectives.




The
ability of the Company to continue as a going concern is dependent on additional
sources of capital and the success of the Company’s plan.  The
financial statements do not include any adjustments to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.




Use
of Estimates




The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.  The Company is subject to uncertainty of future
events, economic, environmental and political factors and changes in the
Company’s business environment; therefore, actual results could differ from
these estimates.  Accordingly, accounting estimates used in the preparation
of the Company’s financial statements will change as new events occur; more
experience is acquired, as additional information is obtained and as the
Company’s operating environment changes.  Changes are made in estimates as
circumstances warrant.  Such changes in estimates and refinement of
estimation methodologies are reflected in the statements.




Earnings per
Share:





Basic
earnings per common share is computed by dividing net earnings by the weighted
average number of common shares outstanding during each year presented. Diluted
earnings per common share give the effect to the assumed exercise of stock
options when dilutive. In a loss year, the calculation for basic and diluted
earnings per share is considered to be the same, as the impact of potential
common shares is anti-dilutive. At June 30, 2010, there were 2,100,000 stock
options and 1,328,027 stock warrants issued and outstanding that could dilute
future earnings.


F-5


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010


Stock-Based
Compensation:
  In
December 2004, FASB issued FASB ASC 718 (Previously SFAS No. 123R,Share-Based Payment.)   FASB ASC 718 establishes standards for
the accounting for transactions in which an entity exchanges its equity
instruments for goods or services.  It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair
value of the entity’s equity instruments or that may be settled by the issuance
of those equity instruments.  FASB ASC 718 focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions.  FASB ASC 718 requires that the
compensation cost relating to share-based payment transactions be recognized in
the financial statements.  That cost will be measured based on the
fair value of the equity or liability instruments issued.





The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of EITF 96-18,
“Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” and EITF 00-18,
“Accounting Recognition for Certain Transactions Involving Equity Instruments
Granted to Other Than Employees.”  The measurement date for the fair
value of the equity instruments issued is determined at the earlier of
(i) the date at which a commitment for performance by the consultant or
vendor is reached or (ii) the date at which the consultant or vendor’s
performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement.  Stock-based compensation related to
non-employees is accounted for based on the fair value of the related stock or
options or the fair value of the services, whichever is more readily
determinable in accordance with SFAS 123R.




Fair
Value of Financial Instruments





The fair
value of the Company’s financial instruments is determined by using available
market information and appropriate valuation methodologies. The Company’s
principal financial instruments are cash, accounts receivable, accounts payable,
common stock and preferred stock. At June 30, 2010 and December 31, 2009, cash,
accounts receivable, and accounts payable, due to their short maturities, and
liquidity, are carried at amounts which reasonably approximate fair
value.





The
Company measures the fair value of its financial instruments using the
procedures set forth below for all assets and liabilities measured at fair value
that were previously carried at fair value pursuant to other accounting
guidelines.




Under
FASB ASC 820(Prior authoritative literature: SFAS No. 157, “Fair Value Measurements”),
fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date.




FASB ASC
820 establishes a three-level hierarchy for disclosure to show the extent and
level of judgment used to estimate fair value measurements.




Level 1 —Uses
unadjusted quoted prices that are available in active markets for identical
assets or liabilities as of the reporting date. Active markets are those in
which transactions for the asset or liability occur in sufficient frequency and
volume to provide pricing information on an ongoing basis.




Level 2 —Uses
inputs, other than Level 1, that are either directly or indirectly observable as
of the reporting date through correlation with market data, including quoted
prices for similar assets and liabilities in active markets and quoted prices in
markets that are not active.  Level 2 also includes assets and
liabilities that are valued using models or other pricing methodologies that do
not require significant judgment since the input assumptions used in the models,
such as interest rates and volatility factors, are corroborated by readily
observable data.  Instruments in this category include
non-exchange-traded derivatives, including interest rate swaps.




Level 3 —Uses
inputs that are unobservable and are supported by little or no market activity
and reflect the use of significant management judgment.  These values
are generally determined using pricing models for which the assumptions utilize
management’s estimates of market participant assumptions.




The table
below sets forth our financial assets and liabilities that were accounted for at
fair value as of June 30, 2010 and December 31, 2009.  The table does
not include cash on hand or assets and liabilities that are measured at
historical cost or any basis other than fair value.


F-6


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




June 30, 2010
                    
                    December 31, 2009Level 1
                    
                    Level 2
                    Level 3
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3It
      Measured at fair value at date of purchase:Investment
      in WebSafety Technology
                    
                    $
                    2,700,000
                    
                    
                    
                    
                    $
                    2,700,000
                    
                    
                    $
                    -
                    
                    
                    $
                    -




Note
3. Property and Equipment




Property
and equipment consist of the following at :





June 30
                    2010
                  
                  
                  December 31,
                    2009Computer
      Equipment
                  
                  $
                  15,715
                  
                  
                  $
                  15,715Web
      Site Software
                  
                  
                  166,178
                  
                  
                  
                  150,963Accumulated
      depreciation
                  
                  
                  (40,799
                  )
                  
                  
                  (13,862
                  )Total
                  
                  $
                  141,094
                  
                  
                  $
                  152,816





The
Company has incurred website development costs as part of web site application
and infrastructure development activities. Specifically, activities include
coordination of design, engineering, initial integration and design
modifications, script writing, web site designs and revisions, application side
designs, pre-video production build/test flash prototype for oversize video
browser scaling, eCommerce engine, etc.   All of these
development costs were capitalized in accordance with FASB ASC 350-50 (Prior
authoritative literature: FASB EITF 00-2, “Accounting for Web Site Development
Costs”) (see Exhibit 00-2A section a to f within Website Application and
Infrastructure Development Stage).





The
intended write-off did not include web site development costs of
$201,523.  The Company plans to utilize the web site to launch the
WebSafety software products and expects to generate revenues in the
future.  The purchase of WebSafety assets from WQN, Inc. did not
change the recoverability of the carrying amount of the capitalized website
development cost and therefore is not considered impaired in accordance with
FASB ASC 360-10 (Prior authoritative literature: FASB Statement No. 144,
paragraph 8).  The website development costs will be amortized over
its useful life once the Websafety software products are put in use in
accordance with FASB ASC 350-30-50 (Prior authoritative literature: FASB
Statement No. 142, “Goodwill and Other Intangible Assets”).





Note
4. WebSafety Technology




On July
2, 2009, the Company entered into an agreement with WQN, Inc. to acquire the
software technology, known as “Websafety”. The Company capitalizes software
development costs when technological feasibility has been established for the
software in accordance with ASC 985-20, formerly SFAS No. 86, “Accounting for
the Costs of Computer Software to be sold, leased, or otherwise marketed.” Such
capitalized costs are amortized on a product-by-product basis over their
economic life or the ratio of current revenues to current anticipated revenues
from such software, whichever provides the greater amortization. The Company
periodically reviews the carrying value of capitalized software development
costs and impairments are recognized in the results of operations when the
expected future undiscounted operating cash flow derived from the capitalized
software is less than its carrying value. Should the Company inaccurately
determine when a product reaches technological feasibility or the economic life
of a product, results could differ materially from those reported. The Company
uses what it believes are reasonable assumptions and where applicable,
established valuation techniques in making its estimates.


F-7


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




Note
5. Intangible Asset





As a
result of the Websafety Technology asset purchase, the Company gained all rights
of ownership to the intellectual property of Websafety
Technology.  The Company invested an additional $122,815 to develop
technology to complete the project.  On October 1, 2009, the Company
deemed the technology ready to be sold and used by the general
public.  The Company recorded the Intangible Asset in the amount of
$2,822,815 and elected to amortize the asset over a 36 month
period.





June 30,
                      2010
                    
                    
                    December 31,
                      2009Intangible
      assetsWebsafety
      Technology
                    
                    $
                    2,822,815
                    
                    
                    $
                    2,822,815Total
      intangible assets before accumulated amortization
                    
                    
                    2,822,815
                    
                    
                    
                    2,822,015Less
      accumulated amortization
                    
                    
                    705,704
                    
                    
                    
                    235,235Total
      intangible assets
                    
                    
                    2,117,111
                    
                    
                    
                    2,587,580





Amortization
expense for the period ending June 30, 2010 and for fiscal 2009 was
$235,235.  Accumulated amortization at June 30, 2010 was
$705,704.





In
accordance with ASC 360-10-35 a long-lived asset shall be tested for
recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. The following are examples of such
events or changes in circumstances:




a. A significant decrease in the market price of a long-lived
asset




b. A significant adverse change in the extent or manner in
which a long-lived asset is being used or in its physical
condition




c. A significant adverse change in legal factors or in the
business climate that could affect the value of a long-lived asset, including an
adverse action or assessment by a regulator




d. An accumulation of costs significantly in excess of the
amount originally expected for the acquisition or construction of a long-lived
asset




e. A current-period operating or cash flow loss combined with
a history of operating or cash flow losses or a projection or forecast that
demonstrates continuing losses associated with the use of a long-lived
asset




f. A current expectation that, more likely than not,a long-lived asset will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life.




Management
conducted an impairment analysis which reviewed the carrying value of
capitalized software development costs and impairments against the expected
future undiscounted operating cash flows derived from the capitalized software
to determine if the cash flows were less than its carrying value of the
asset.





Management
based its analysis over a 3-year time-fame which is equal to the estimated life
of the WebSafety Technology asset.  The analysis was conducted based
on the following assumptions:





·
            The
      Company came out of development in October 2009 with a fully-marketable
      product.




·
            Revenue
      for the year-ended 2009 was approximately $33,000.  Given the
      fact that this was our first quarter as an operating company, management
      expected sales to be relatively small and gradually increase as the
      Company continued to roll-out its marketing
  plan.




·
            Our
      gross revenue assumptions were based on the projected number of
      subscribers which was based on inputs received from our direct sales
      force.  Revenues are based on our established pricing model
      times the projected number of
subscribers.




F-8


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




·
            Gross
      margin is determined primarily by established commission rates for direct
      sales along with the amortization of the WebSafety Technology
      asset.




Based on
our analysis as described above, we expect future undiscounted operating cash
flows derived from the WebSafety Technology asset  to exceed the
carrying value of the asset as of December 31, 2009 and therefore concluded that
no impairment was necessary.


Due to a
current-period operating or cash flow loss combined with a history of operating
or cash flow losses associated with the use of our WebSafety Technology for the
period ended June 30, 2010, Management deemed an impairment analysis necessary
in accordance with ASC 360-10-35.





·
            Revenue
      in the six months-ended June 30, 2010 was approximately
      $122,000.  Given the fact that this was our second quarter as an
      operating company, management expected sales to be relatively small and
      gradually increase as the Company continued to roll-out its marketing
      plan.  Revenue increased by 270% in the first six
      months of 2010, compared to the year-ended 2009.  This
      percent increase was comparable to Management’s
    expectations.




·
            Our
      gross revenue assumptions were based on the projected number of
      subscribers.  Revenues are based on our established pricing
      models multiplied times the projected number of
    subscribers.




·
            Gross
      margin is determined primarily by established commission rates for direct
      sales along with the amortization of the WebSafety Technology
      asset.




Based on
our analysis as described above, we expect future undiscounted operating cash
flows derived from the WebSafety Technology asset  to exceed the
carrying value of the asset as of June 30, 2010 and therefore concluded that no
impairment was necessary. Based on
our analysis as described above, we expect future undiscounted operating cash
flows derived from the WebSafety Technology asset  to exceed the
carrying value of the asset as of June 30, 2010 and therefore concluded that no
impairment was necessary.  However, to the extent actual results due
not match projections and expectations an impairment charge might be
necessary.





Note
6. Option to acquire and expiration





In
November 2008 the Company entered into an option agreement with Auburg Adams LLC
(AA) a Texas limited liability company to acquire certain software licensing
rights it had contracted for pursuant to a licensing agreement entered into with
Essential Security Software, Inc. the developer. The option would have allowed
the Company to secure the rights of Auburg Adams once a payment of $270,000 has
been made. Any payments made pursuant to the terms of the option to acquire were
to be credited to the overall price of the licensing had the option been
exercised. The rights that Auburg Adams has been granted are for the marketing
and sales of software that provides for total digital rights management enabling
users to exercise complete control over email transmissions and any attachments
related to those transmissions to include restriction of forwarding and timed
removal from a recipient computer.  This licensing was to be for an
initial five-year period and would be automatically renewable for periods
thereafter. The overall cost for the rights is $270,000.  The option
expired on April 1, 2009 without the final payment of $25,000 being made or the
option being renewed or extended notwithstanding the April 1, 2009 expiration
date of the original option.The accounting treatment
is in recognition of the substance of the occurrence management remains in
discussion with principals of Auberg Adams and ESS.





A principal of Auburg Adams LLC is a
minority shareholder in WebSafety, Inc.





Note
7. Stock Issuances


During
the Six-Month period ended June 30, 2010 we had the following common stock
issuances.





Date
                              
                              Number of Shares
                              
                              
                              ValueJanuary
      2010
                              
                              
                              2,028,000
                              
                              
                              $
                              128,120February
      2010
                              
                              
                              -March
      2010
                              
                              
                              7,456,333
                              
                              
                              
                              220,350April
      2010
                              
                              
                              204,122
                              
                              
                              $
                              91,855June
      2010
                              
                              
                              2,120,380
                              
                              
                              $
                              391,671Total
      Common Issuances
                              
                              
                              11,808,835
                              
                              
                              $
                              831,996


F-9


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




In
addition to the common stock issued above, during the six month period ended
June 30, 2010, we also recorded $21,250 of common stock cash receipts that at
June 30, 2010 had not been issued.  These receipts were recorded as a
current liability at June 30, 2010 and will be issued in the third quarter of
2010.   We also converted 1,000,000 preferred shares issued at
$.30 to 1.25 common shares for a total of 1,250,000 common stock
issued.  We also adjusted an issue price in the prior quarter, we
issued 100,000 common stock on January 6, 2010 at $0.50 a share for a total of
$50,000.  We adjusted the price to $0.45 and issued an additional
11,111 for total issuance of 111,111 common stock shares at $0.45 for
$50,000.





Note
8. Related party transactions





In the
aggregate, during the six month period ended June 30, 2010, the Company owed to
related parties $ for consulting, legal and marketing services as reflected
below.





Owed To
                      
                      Consulting
                      
                      
                      Legal Services
                      
                      
                      Placement
                        Fee
                      
                      
                      AccountingRowland
      W. Day II
                      
                      $
                      175,000
                      
                      
                      $
                      109,512John
      Williams
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      4,869Litchfield
      Enterprises, Inc.
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      30,000





Rowland
W. Day II is an affiliate in that he is a more than a 15% beneficial shareholder
in the Company.  Mr. Day is our CEO and a director.  John
Williams was the former contract Treasurer and CFO of the Company and
is the Chief Accounting Officer of WQN, Inc. Mr. Williams resigned May 25,
2010.





The
services that were provided are outlined below.





Legal-
Rowland Day is the Company’s legal counsel. The amount listed in the above table
for Legal Services includes $56,334 for expense reimbursement, that has not been
repaid to Mr. Day.





Accounting-
Accounting fees paid relates to the review of financial records and preparation
of all financial reporting to SEC including audits and preparation of tax
returns.





On July
2, 2009 the Company entered into an asset purchase agreement with WQN, Inc. E.
Denton Jones, who is also a director of the Company, beneficially owns 335,000
shares of common stock in WQN, Inc. Also, in connection with the transactions
contemplated by the Purchase Agreement, B. Michael Adler entered into an
employment agreement with the Company to serve as the Company’s Chairman of the
Board of Directors.  Mr. Adler still serves as the Chief Executive
Officer of WQN, Inc. In addition the Company appointed David W. Sasnett, a
director of WQN, Inc, as a director; and hired John Williams, Chief Financial
Officer of the WQN, Inc., as the contract Treasurer and Chief Financial
Officer.  Neither Mr. Sasnett nor Mr. Williams has resigned from their
positions with WQN, Inc.





Concurrent
with the asset purchase from WQN which was effective on September 14, 2009, the
Company appointed a stockholder of WQN as the Chairman of the
Board.  In connection with the appointment the Company entered into an
employment agreement whereby the appointee is to receive a salary upon the
achievement of a certain level of revenue. Additionally, he is to receive
1,500,000 shares of the Company’s common shares with 100,000 being vested upon
the effective date of the agreement, and the remaining 1,400,000 being vested
with the achievement of certain levels of revenue. The term of the agreement
ends December 31, 2010.





Note
9. Facilities





The
Company’s corporate headquarters are presently located at 2201 W Royal Lane,
Suite 200, Irving, Texas 75063.





On March
22, 2010, we entered into a five year lease agreement for 5,502 square feet of
corporate office space located in Irving, Texas.  The total lease
payment will be $472,255 over the five year period beginning May 1, 2010 and
expiring on April 30, 2015.  Total annual lease payments are $70,609
in the first year, $96,285 in the second year, $99,036 in the third year,
$101,787 in the fourth year and $104,538 in the fifth year.  We expect
this space to meet our needs for the foreseeable future.


F-10


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




Note
10. Sales and Marketing Program




In July
2010 we entered into a sales and marketing agreement with Manage
Mobility.  Manage Mobility manages Telecom services for corporations
and muncipalities and intends to market our products to their
clients.





Management
has developed direct selling, multi-level-marketing channels for the sales of
the Websafety PC and Cell safety. This channel allows the sales of our
services through a person-to-person transaction, away from a fixed retail
location. All of the individuals offering our services are independent
salespeople.





Note
11. Revenue Recognition




In August
of 2009 the Company began recognizing revenue from the sales of WebSafety
products.  WebSafety is a comprehensive software package that gives
parents the capability to monitor and protect children against potentially
dangerous emergency situations.  For the period August 2009 through
March 2010 customers purchased annual subscriptions to the WebSafety
service.  Since this revenue is earned over a 12-month period, the
company recognizes 1/12 of sales in the month of sale.  The remaining
11/12 of revenue is deferred and recognized equally over an 11-month
period.




Note
12. Newly issued pronouncements





In May
2009, the FASB issued FASB ASC 855-10 (Prior authoritative literature: Statement
No. 165, “Subsequent Events”). FASB ASC 855-10 established general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued. FASB ASC 855-10 will be effective in
the second quarter of fiscal 2009. The adoption of FASB ASC 855-10 did not have
a material effect on our financial position, cash flows, or results of
operations.


Note
13.  Off-balance sheet arrangements




At June
30, 2010, we did not have any material commitments for capital expenditures or
have any transactions, obligations or relationships that could be considered
off-balance sheet arrangements.


F-11


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




Note
14.   Legal Proceedings





On August 25, 2009, the Company
terminated its President Clifton Jolley for cause.  In June 2010, the
Company and Mr. Jolley agreed to settle the pending
arbitration.  According to the settlement the Company must issue
80,000 shares of common stock to Mr. Jolley and receive a full release from
Mr. Jolley.





Note
15-Private Placement Agreement





On
February 8, 2010 Litchfield Enterprises, Inc. signed a non-exclusive consulting
agreement with the Company to assist with a private placement of the Company’s
stock. Per this agreement, Litchfield Enterprises, Inc. will on a “best effort”
basis, seek to raise one million one hundred and twenty-five thousand dollars
($1,125,000) by selling 2,500,000 shares at $.45 per share.  Also,
under the private placement agreement, the Company grants Litchfield
Enterprises, Inc. one (1) warrant exercisible at $.80 per share for each share
sold.  These warrants will be valid for one (1) year from the date of
issuance. As of
June 30, 2010, we issued 734,192 shares of common stock to Litchfield and their
investors along with  600,000
warrants.





Note
16-Stock Based Compensation





In
November 2009, the Board of Directors and Shareholders adopted the 2008 Stock
Option Plan providing for the issuance of up to 10,000,000 shares
to Company officers, directors, employees and to independent contractors
who provide services to the Company.





Options
granted under the 2008 Stock Option Plan vest as determined by the Board of
Directors and terminate after the earliest of the following events: expiration
of the option as provided in the option agreement, 90 days subsequent to the
date of termination of the employee, or ten years from the date of grant (five
years from the date of grant for incentive options granted to an employee who
owns more than 10% of the total combined voting power of all classes stock at
the date of grant).  In some instances, granted stock options are
immediately exercisable into restricted shares of common stock, which vest in
accordance with the original terms of the related options. The Company
recognizes compensation expense ratably over the requisite service
period.





The
option price of each share of common stock shall be determined by the Board of
Directors or compensation committee (when one is established), provided that
with respect to incentive stock options, the option price per share shall in all
cases be equal to or greater than 100% of the fair value of a share of common
stock on the date of the grant, except an incentive option granted under the
2008 Stock Option Plan to a shareholder that owns more than 10% of the total
combined voting power of all classes of stock, shall have an exercise price of
not less than 110% of the fair value of a share of common stock on the date of
grant. No participant may be granted incentive stock options, which would result
in shares with an aggregate fair value of more than $10,000,000 first becoming
exercisable in one calendar year.





In
September 2009, 700,000 stock options with an exercise prices ranging from of
$0.10 to $0.35 were granted to officers of the Company which vest as
follows: 20% at the conclusion of each 12 month period from the 5 year
term.  These options carry a grant expiration date of 5 years after
issuance.  In January 2010, 1,400,000 stock options with exercise
prices of $0.025 were granted to an officer and a board member of the Company
which vest monthly over a 36 month term.  These options carry a
grant expiration date of 3 years after issuance.  As of June 30,
2010, 233,333 of the options had vested.





For the
six months ended June 30, 2010, the Company recorded compensation costs for
options and shares granted under the plan amounting to
$257,821.  There were no stock options or shares granted or
outstanding prior to September 30, 2009, therefore no compensation expense was
recorded for the three months ended June 30, 2009.  A deduction is not
allowed for income tax purposes until nonqualified options are exercised. The
amount o this deduction will be the difference between the fair value of the
Company’s common stock and the exercise price at the date of exercise. The tax
effect of the income tax deduction in excess of the financial statement expense,
if any, will be recorded as an increase to additional paid-in
capital.  No tax deduction is allowed for incentive stock options.
Accordingly no deferred tax asset is recorded for GAAP expense related to these
options.


F-12


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




Management
has valued the options at their date of grant utilizing the Black Scholes Merton
option pricing model.  The fair value of the underlying shares was
determined based on the closing price of the Company’s publicly-traded shares as
of date of the grant.   Further, the expected volatility was
calculated using the historical volatility of the Company’s
stock.





The
risk-free interest rate is based on the implied yield available on U.S. Treasury
issues with an equivalent term approximating the expected life of the options
depending on the date of the grant and expected life of the
options.  The expected life of options used was based on the
contractual life of the option granted.  The Company determined the
expected dividend rate based on the assumption and expectation that earnings
generated from operations are not expected to be adequate to allow for the
payment of dividends in the near future. The following weighted-average
assumptions were utilized in the fair value calculations for options
granted:





Six months EndedJune30,2010Expected
      dividend yield
                
                
                0
                %Expected
      stock price volatility
                
                
                418.5
                %Risk-free
      interest rate  (1)
                
                
                1.56
                %





The
Company has granted stock options to officers and employees as
follows:





Date of
                      
                      Options
                      
                      
                      Exercise
                      
                      
                      OptionsOutstanding
                      
                      Expiration
                      
                      VestingGrant
                      
                      Granted
                      
                      
                      Price
                      
                      
                      As of 6/30/2009
                      
                      Date
                      
                      Date9/10/09
                      
                      
                      100,000
                      
                      
                      $
                      0.35
                      
                      
                      
                      100,000
                      
                      9/10/2014
                      
                      9/1020109/14/09
                      
                      
                      100,000
                      
                      
                      
                      0.10
                      
                      
                      
                      100,000
                      
                      9/14/2014
                      
                      9/14/20109/14/09
                      
                      
                      500,000
                      
                      
                      
                      0.10
                      
                      
                      
                      500,000
                      
                      9/14/2014
                      
                      9/14/201001/08/10
                      
                      
                      900,000
                      
                      
                      
                      .025
                      
                      
                      
                      900,000
                      
                      01/08/13
                      
                      01/08/1301/08/10
                      
                      
                      500,000
                      
                      
                      
                      .025
                      
                      
                      
                      500,000
                      
                      01/08/13
                      
                      01/08/13Total
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      2,100,000





The
following table summarizes the status of The Company aggregate stock options
granted under the incentive stock option plan:




Number
                
                
                Weightedof Shares
                
                
                Average
                
                
                WeightedRemaining
                
                
                Intrinsic
                
                
                Average
                
                
                AggregateSubject to Exercise
                
                Options
                
                
                Price
                
                
                Life (Years)
                
                
                ValueOutstanding
      as of September, 2008
                
                
                -
                
                
                $
                -
                
                
                -
                
                
                -Granted
      – 2009
                
                
                700,000
                
                
                $
                0.214
                
                
                
                5.00
                .
                
                $
                150,000Forfeited
      – 2009
                
                
                -
                
                
                $
                
                
                
                
                -
                
                
                
                -Exercised
      – 2009
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Granted
      – 2010
                
                
                1,400,000
                
                
                $
                0.975
                
                
                
                5.00
                
                
                $
                1,365,000Forfeited
      – 2010
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Exercised
      – 2010
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Outstanding
      as of June 30, 2010
                
                
                2,100,000
                
                
                $
                0.721
                
                
                
                5.00
                
                
                $
                1,515,000Exercisable
      as of June 30, 2010
                
                
                233,333
                
                
                $
                -
                
                
                
                -
                
                
                $
                -




F-13


WEBSAFETY,
      INC.Formerly
      Known as Blindspot Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSJune
      30, 2010




The
weighted-average grant date fair value of options outstanding at June 30, 2010
was $0.062. The total intrinsic value of options exercised during the three
months ended June 30, 2010 was $0





The
following table summarizes the status of the Company aggregate non-vested shares
granted under the 2008 Stock Option Plan.





Number of
                  Non-
                  vested
                  Shares
                  Subject to
                  Options
                
                
                Weighted-
                  Average
                  Grant-
                  Date
                  Fair ValueNon-vested
      as of June 30, 2010
                
                
                -
                
                
                $Non-vested
      granted — three months ended June 30, 2010
                
                
                2,100,000
                
                
                $
                0.062Vested — three
      months ended June 30, 2010
                
                
                233,333
                
                
                $
                0.00Forfeited — three
      months ended June 30, 2010
                
                
                -
                
                
                $Non-vested
      as of June 30, 2010
                
                
                1,866,667
                
                
                $
                0.062





As of
June 30, 2010 the unrecognized compensation cost related to non-vested share
based compensation arrangements granted under the plan that was approximately
$1,370,761.  These costs are expected to be recognized on a straight
line basis from September 10, 2009 through January 08, 2015.  The
total fair value of options and shares vested during the year period ended June
30, 2010 was $137,200.





Note
17. Subsequent Events




On August
25, 2009, the Company terminated its President Clifton Jolley for
cause.  In June 2010, the Company and Mr. Jolley agreed to settled the
pending arbitration.  According to the settlement the Company must
issue 80,000 shares of common stock to Mr. Jolley and receive a full release
from Mr. Jolley.




On August
6, 2010, the Company retained Aegis Capital as an exclusive placement agent to
raise a minimum of $1,350,000 and a maximum of $5,400,000 of capital for the
Company.




F-14




Item 2. Management’s Discussion
and Analysis and Plan of Operations





The
following discussion should be read in conjunction with our unaudited condensed
financial statements as of, and for the three and six months ended June 30, 2010
and 2009, and with our annual report on Form 10-K for the year ended
December 31, 2009. Certain items have been reclassified to conform to the
current year’s presentation.





Forward-Looking
Statements





This
report contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to the financial
condition, results of operations, business strategies, operating efficiencies or
synergies, competitive positions, growth opportunities for existing products,
plans and objectives of management, markets for stock of WebSafety, Inc., and
other matters. Statements in this report that are not historical facts are
“forward-looking statements” for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues, and income of WebSafety, Inc., wherever
they occur, are necessarily estimates reflecting the best judgment of the senior
management of WebSafety, Inc. on the date on which they were made, or if no date
is stated, as of the date of this report. These forward-looking statements are
subject to risks, uncertainties and assumptions, including those described in
the “Risk Factors” described below, that may affect the operations, performance,
development, and results of our business. Because the factors discussed in this
report could cause actual results or outcomes to differ materially from
thoseexpressed in
any forward-looking statements made by us or on our behalf, you should not place
undue reliance on any such forward-looking statements. New factors emerge from
time to time, and it is not possible for us to predict which factors will arise.
In addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking
statements.




Plan
of Operation





WebSafety,
Inc., a development stage company, formerly known as BlindSpot Alert, Inc.,
commenced a corporate redirection in June 2008 with the objective of marketing
and selling through the internet a range of software applications and services
for computers and cell phones that allow parents or other caregivers to monitor
and be notified of occurrences of predator advances, cyber bullying and
pornography received on children’s computers. The cell phone application would
also restrict text messaging while driving and provide location information to
parents using GPS technology. In June 2008 we acquired for $300,000 a worldwide
non-exclusive license that permits the Company to sell the proprietary software
that identifies the threats from predators, cyber bullies and transmitters of
pornography. The license also allows for selective exclusivity within certain
markets. We acquired this license from WQN, Inc.





In
November 2008 we executed an option to acquire licensing rights to software that
provides digital rights management to email and other data transmitted over the
internet. We had intended to begin selling this proprietary software in 2009,
however, the option to acquire the rights expired on April 1, 2009 and an
expense in the amount of $245,000 was recorded as of March 31, 2009 to reflect
the substance of the expiration as of that date.





On July
2, 2009 the Company entered into an asset acquisition agreement with WQN, Inc.
Under the agreement we acquired all of the technology known as The WebSafety
Technology and Software for approximately 27,000,000 shares of our common stock.
Consequently, the Company no longer has any royalty commitments to WQN under the
June 30, 2008 license agreement


Management
believes that our products are a timely solution to the dangers that come with
the unprecedented access to information and people that the internet and cell
phones provide.





From June
2008 through September 30, 2009 we have refined our website and we commenced
revenue activity in the third quarter of 2009.  We also intend to
market our products and services through relationships developed with “trusted”
sources consisting child protection advocacy groups including church, school and
civic organizations. We intend to also explore opportunities to enter into
strategic revenue sharing partnerships with companies having synergy with our
products.  These partners may include auto insurers and cell phone
manufacturers.





Cumulatively
through June 30, 2010 we have raised $2,434,691 through the sale of common and
preferred stock the proceeds of which are being used to implement WebSafety’s
plan of operations. This funding has been utilized in the furtherance of our
plan of operations. Future funding is intended to be used in the
commercialization process.


4




Results
of Operations




Three
Months Ended June 30, 2010 compared to Three Months Ended June 30,
2009





Revenue





Revenues
were $76,712 during the three months ended June 30, 2010.  We did not
record any revenues for the three months ended June 30, 2009.





Cost
of Revenue





Cost of
revenue was $26,785 during the three months ended June 30, 2010.  We
did not record any cost of revenues for the three months ended June 30,
2009.





Operating
Expenses, Other Income and Expenses and Loss from Operations





For the
three months ended June 30, 2010 we sustained a net operating loss of $856,139
compared to a net operating loss of $156,764 for the three months ended June 30,
2009.  The $699,375 net operating loss increase was mainly due
to  higher general and administrative expense, which increased
primarily due to an expansion in marketing and sales expenses.  Also,
an increase in depreciation and amortization expense of $248,338 for the three
months ended June 30, 2010.





Six
Months Ended June 30, 2010 compared to Six Months Ended June 30,
2009





Revenue





Revenues
were $122,490 during the six months ended June 30, 2010.  We did not
record any revenues for the three months ended June 30, 2009.





Cost
of Revenue





Cost of
revenue was $58,142 during the six months ended June 30, 2010.  We did
not record any cost of revenues for the six months ended June 30,
2009.





Operating
Expenses, Other Income and Expenses and Loss from Operations





For the
six months ended June 30, 2010 we sustained a net operating loss of $1,705,743
compared to a net operating loss of $574,550 for the six months ended June 30,
2009.  The $1,131,193 net operating loss increase was mainly due to
higher general and administrative expense, which increased primarily due to an
expansion in marketing and sales expenses.  Also, an increase in
depreciation and amortization expense of $497,406 for the six months ended June
30, 2010 was offset by a $245,000 decrease in option to acquire expense for the
six months ended June 30, 2009.




Financial
Condition




Cash on
hand at June 30, 2010 was $55,823 and working capital (the excess of current
assets over current liabilities) was a negative $576,278 compared
with  $442,542 at  December 31, 2009. The decrease in
working capital was primarily attributable to increased disbursements in 2010
for payroll, marketing, legal, professional and other costs relating to the
implementation of the operating plan.





Other
assets decreased to $2,123,931 at June 30, 2010 from $2,594,400 at December 31,
2009.  The decrease in other assets was a result of $235,235 of
amortization related to the WebSafety Technology asset.   Total
current liabilities increase to $632,101 at June 30, 2010 from
$465,461.  The increase was due to increased payables for marketing,
legal, professional and other costs relating to the implementation of the
operating plan


5





Stockholders’
equity was $1,688,748 at June 30, 2010 compared to $2,304,674 at December 31,
2009.  The $615,927 decrease was due to the issuance of $831,996 worth
of common shares and $128,910 of additional paid-in capital related to the
compensation expense for stock options off-set by net operating losses of
$1,705,743 for the six months ended June 30, 2010.




Liquidity




Cumulatively,
through June 30, 2010, the Company had raised $2,434,691 in new equity including
$359,741 being raised in Second Quarter 2010 to support planned operations. In
light of recent operating results and negative cash flows, additional capital
will be required to fund the Company’s operations. On February 8, 2010, the
Company signed a non-exclusive consulting agreement Litchfield Enterprises, Inc.
(LEI).  Through this agreement, LEI will assist with a private
placement of the Company’s stock.  Per this agreement, LEI will on a
“best effort” basis, seek to raise one million one hundred and twenty-five
thousand dollars ($1,125,000) by selling 2,500,000 shares at $.45 per share.
(See “Note 15-Private Placement Agreement” for further
discussion).  If successful, the LEI private placement should generate
sufficient capital needed to fund the Company through the fourth quarter of
2010; at which time Management expects operations to be generating positive cash
flows.




There is
no assurance that the Company will be successful with the LEI private placement
or with the placement agent.  On August 6, 2010, the Company entered
into a placement agreement with Aegis Capital (“Aegis”).  Aegis will
act as the Company’s exclusive placement agent on a best efforts basis to raise
a minimum of $1,350,000 and up to a maximum of $5,400,000.  It is
management’s intent to continue fund raising efforts to generate the capital
required to support expanding operations.  There can be no assurance
that we will be able to raise any more additional capital on terms that are
beneficial to us.




Critical
Accounting Policies and Estimates




The
discussion and analysis of our financial condition and results of operations is
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United
States.  Generally accepted accounting principles require management
to make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities.  We base our estimates on experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that may not be readily apparent
from other sources.  Our actual results may differ from those
estimates.




Off-balance
sheet arrangements




At June
30, 2010, we did not have any material commitments for capital expenditures or
have any transactions, obligations or relationships that could be considered
off-balance sheet arrangements.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We have
not entered into, and do not expect to enter into, financial instruments for
trading or hedging purposes.




ITEM
4. CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures





Our
management evaluated, with the participation of our Chief Executive
Officer/Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Form 10-Q. Based
on this evaluation, our Chief Executive Officer/ Chief Financial Officer has
concluded that our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)), as of the end of such period, are ineffective to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.


6





There
have been no significant changes in our internal controls over financial
reporting during the third quarter ended June 30, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.





This
Quarterly Report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this Quarterly Report.




Management
Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Exchange Act. Those rules define internal control over
financial reporting as a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      company;


·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and the receipts and expenditures of the company
      are being made only in accordance with authorizations of management and
      directors of the Company; and


·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisitions, use or disposition of the company’s assets that
      could have a material effect on the financial
  statements.





Because
of its inherent limitations, internal controls over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.


Management
assessed the effectiveness of our internal control over financial reporting as
of June 30, 2010. In making this assessment, our management used the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).




Changes
in Internal Control





There
have been no changes in our internal control over financial reporting, as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, during our
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect our internal control over financial
reporting.




PART II - OTHER INFORMATION




Item 1. Legal Proceedings




On August
25, 2009, the Company terminated its President Clifton Jolley for
cause.  In June 2010 we agreed to settle the arbitration with Mr.
Jolley.  According to the settlement the Company must issue 80,000
shares of common stock and received a full release.




Item
1.A. Risk Factors





The
Company was organized during 2006 and is at an early stage of operation and has
no substantial revenue. The Company devotes its full resources toward marketing,
selling and distributing the software products. The Company began receiving
revenue from sales of software products during the fourth quarter of 2009. The
Company will need to generate significant revenues to overcome an accumulated
deficit and obtain profitability. The Company may never achieve profitability.
If revenues grow more slowly than anticipated, or if operating expenses exceed
expectations the Company’s business, results of operations, and financial
condition could be materially adversely affected.


7





RISKS
RELATING TO OUR BUSINESS





THE
COMPANY HAS A LIMITED OPERATING HISTORY AND FACES SIGNIFICANT RISKS AND
CHALLENGES IN BUILDING THE BUSINESS





As a
result of the Company’s limited operating history, to achieve profitability, the
Company must successfully and timely market and sell its software
products.  Although the Company has very concrete and specific
marketing and sales programs to be implemented, the Company cannot guarantee the
success of such programs and alternately, more expensive marketing and sales
programs may need to be implemented. Additionally, although the Company believes
that a strong market exists for the software products, the Company has conducted
no scientific, reliable market surveys but has only performed its own research
and due diligence to ascertain the security concerns of parents and others
responsible for the safety of children. A more scientific analysis could prove
that no market exists for the software products that the Company intends to
market and sell; or, if the market exists, the Company may not be able to reach
the market with the Company’s limited financial resources and marketing budget.
There can be no assurance that the Company will be able to successfully generate
revenues. The Company has no significant historical basis to assess how it might
respond to competitive, economic, regulatory, or technological challenges. The
Company’s business must be considered in light of the risks and uncertainties
frequently encountered by companies in the very early stages of operations,
particularly companies that operate in new and rapidly developing industries and
marketplaces. The Company’s failure to adequately address these risks and
uncertainties and rapidly respond to adverse developments as they occur could
materially impact the Company’s ability to achieve profitability and, if
profitability is achieved, to sustain a level of operations that will cause
profitability to be sustained. Although the Company intends to hire numerous
people to implement the business of the Company, there is no assurance that the
Company will hire the right people or that future changes will not have to be
made to find the right people to implement the Company’s business strategy.
There is no assurance that the Company’s business strategy or marketing plans
will achieve success.





THE
COMPANY’S RELIANCE ON THE CAPABILITIES OF THE SOFTWARE PRODUCTS





The
Company is heavily dependent upon the capabilities of the software products. The
failure of the software to accomplish the objectives as represented will damper
if not destroy the Company’s marketing.





COMPANY’S
RELIANCE UPON EXECUTIVES AND CONSULTANTS


The
Company’s success is highly dependent upon executive officers and key
consultants identified in this report for critical management decisions and to
implement and pursue the Company’s business and marketing plan.  A
loss of any of the executives or consultants through incapacity or for any other
reason could materially adversely impact the ability of the Company to complete
its business and marketing plan and would require the Company to seek the
assistance of other qualified personnel who may not be available.





CHALLENGES
FROM COMPETITION





Although
the Company is unaware of an available product that contains all the
characteristics, features and capabilities of the WEBSAFETY software, in the
dynamic, ever changing field of technology, many companies of all sizes and
capabilities are constantly engaged in software development.  With the
notoriety given to child molesters, pedophiles and others causing harm and
sometimes death to children, a reasonable assumption is that many companies are
currently engaged in software development activities that will possess many of
the characteristics and capabilities possessed by WEBSAFETY
software.  In the event another company successfully develops and
markets a competitive product before the Company can establish a significant
presence in its target markets; the Company may never be able to achieve a level
of revenue to sustain the Company’s operations





RISKS
RELATED TO OUR COMMON STOCK





IF
MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, OUR STOCKHOLDERS MAY BE UNABLE TO
SELL THEIR SHARES.





There is
currently a limited market for our common stock and we can provide no assurance
that a more liquid market will develop. If a liquid market does not develop for
our shares, it will be difficult for stockholders to sell their
stock.  In such a case, stockholders may find that they are unable to
achieve benefits from their investment.


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IF
A MARKET FOR OUR COMMON STOCK DEVELOPS, OUR STOCK PRICE MAY BE
VOLATILE.





If a
market for our common stock develops, the price at which our common stock will
trade may be highly volatile and may fluctuate as a result of a number of
factors, including the number of shares available for sale in the market,
quarterly variations in our operating results, actual or anticipated
announcements of new data, studies, products or services by us or competitors,
regulatory investigations or determinations, acquisitions or strategic alliances
by us or our competitors, recruitment or departures of key personnel, the gain
or loss of significant customers, changes in the estimates of our operating
performance, market conditions in our industry and the economy as a
whole.





APPROXIMATELY
41% OF OUR COMMON STOCK IS CONTROLLED BY A SINGLE STOCKHOLDER WHO HAS THE
ABILITY TO SUBSTANTIALLY INFLUENCE THE ELECTION OF DIRECTORS AND THE OUTCOME OF
MATTERS SUBMITTED TO STOCKHOLDERS.





As of
August 9, 2010, WQN, Inc. directly owns 27,000,000 shares, which represents
approximately 41% of our 66,876,744 shares of outstanding common
stock.  As a result, WQN presently and is expected to continue to have
the ability to determine the outcome of issues submitted to our
stockholders.  The interests of this stockholder may not always
coincide with our interests or the interests of other stockholders, and it may
act in a manner that advances its best interests and not necessarily those of
other stockholders.  One consequence of this substantial stockholder’s
interest is that it may be difficult for investors to remove management of the
Company.  It could also deter unsolicited takeovers, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices.





INVESTORS’
INTERESTS IN OUR COMPANY WILL BE DILUTED AND INVESTORS MAY SUFFER DILUTION IN
THEIR NET BOOK VALUE PER SHARE IF WE ISSUE ADDITIONAL SHARES OR RAISE FUNDS
THROUGH THE SALE OF EQUITY SECURITIES.





In the
event that we are required to issue any additional shares or enter into private
placements to raise financing through the sale of equity securities, investors’
interests in our Company will be diluted and investors may suffer dilution in
their net book value per share depending on the price at which such securities
are sold.  If we issue any such additional shares, such issuances also
will cause a reduction in the proportionate ownership and voting power of all
other stockholders.  Further, any such issuance may result in a change
in our control.




WE
HAVE NEVER PAID CASH DIVIDENDS AND DO NOT INTEND TO DO SO.





We have
never declared or paid cash dividends on our common stock.  We
currently plan to retain any earnings to finance the growth of our business
rather than to pay cash dividends.  Payments of any cash dividends in
the future will depend on our financial condition, results of operations and
capital requirements, as well as other factors deemed relevant by our board of
directors.




WE
WILL NEED ADDITIONAL FINANCING.





We will
need additional financing to maintain and expand its business, and such
financing may not be available on favorable terms, if at all.  We
intend to finance our business through the private placement and public offering
of equity and debt securities.  Additional financing may not be
available on favorable terms, if at all.  If we need funds and cannot
raise them on acceptable terms, we may not be able to execute our business plan,
and our shareholders may lose substantially all of their
investment.





TERRORIST
ATTACKS, CONTINUED WAR OR OTHER CIVIL DISTURBANCES COULD LEAD TO FURTHER
ECONOMIC INSTABILITY AND ADVERSELY AFFECT OUR BUSINESS





On
September 11, 2001, the United States was the target of terrorist attacks of
unprecedented scope.  The United States is currently engaged in war
with Iraq and Afghanistan.  These attacks and these wars have caused
instability in the marketplace and contributed to a downturn in the global
economy.  In the future, there may be armed hostilities, continued
wars, further acts of terrorism and civil disturbances in the United States or
elsewhere, which may further contribute to economic instability in the United
States. Such disturbances could have a material adverse effect on our business,
financial condition and operating results.


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Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





For the
period ending June 30, 2010, the Company sold 397,223shares of its unregistered
common stock to various accredited investors for proceeds of
$178,750.  The sales were exempt from registration pursuant to the
Securities Act of 1933.  The proceeds were used for working
capital.




Item 6. Exhibits




No.
            Description
      of Exhibit




31.1
            Rule
      13a-14(a) Certification of Chief Executive
  Officer




31.2
            Rule
      13e-14(a) Certification of Chief Financial
  Officer




32.1
            Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant
      to Section 906 of the Sarbanes-Oxley Act of
2002




32.2
            Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant
      to Section 906 of the Sarbanes-Oxley Act of
2002




10




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.




WEBSAFETY, INC.




Date:
            August
      18, 2010
            By:
            /s/ Rowland W. Day IIRowland
      W. Day II,Principal
      Executive Officer




11