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
      1934For
      the quarterly period ended:  September 30,
  2009Or ̈
                      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 ororganization)
              20-5150818
                (I.R.S.
      Employer Identification No.)





1
      Hampshire Court, Newport Beach, California 92660
                  (Address
      of Principal Executive Offices)
                  
                  (949) 642-7816
                  (Issuer’s
      telephone number)BLINDSPOT
      ALERT, INC.
                  (Former
      name, former address and former fiscal year, if changed since last
      report)




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 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  ̈Nox




State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 15, 2009:




Class
            
            Outstanding
      shares as of November 15, 2009Common
      Stock, $0.001 par value
            
            54,895,714







INDEX
                                        
                                        PagePART 1-FINANCIAL
INFORMATION
                                        
                                        3Item 1.  Financial
      Statements
                                        
                                        3Balance
      Sheets as of September 30, 2009 (unaudited) and December 31,
      2008
                                        
                                        F-1Statements
      of Operations (unaudited) for the three and Nine Months ended September
      30, 2009 and September 30, 2008 and the period from inception (July 3,
      2006) to September 30, 2009.
                                        
                                        F-2Statements
      of Cash Flows (unaudited) for the Nine  months ended September
      30, 2009 and September 30, 2008 and the period from inception (July 3,
      2006) to September 30, 2009
                                        
                                        F-3Statement
      of Stockholders Equity (Deficit) from inception (July 3, 2006) to
      September 30, 2009
                                        
                                        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 11-OTHER INFORMATION
                                        
                                        7Item 1.  Legal
      Proceedings
                                        
                                        7Item 1A.  Risk
      Factors
                                        
                                        7Item 2.  Unregistered Sales of Equity
      Securities and Use of Proceeds
                                        
                                        9Item 6.  Exhibits
                                        
                                        9SIGNATURES
                                        
                                        11


2




PART
I - FINANCIAL INFORMATION




Item
1. Financial Statements


FINANCIAL
STATEMENTS





Table
of Contents





PAGEBALANCE
      SHEETS
              
              F-1INTERIM
      STATEMENTS OF OPERATIONS
              
              F-2STATEMENTS
      OF CASH FLOWS
              
              F-3STATEMENTS
      OF STOCKHOLDERS’ EQUITY (DEFICIT)
              
              F-4FOOTNOTES
      TO FINANCIAL STATEMENTS
              
              F-5


3




WEBSAFETY,
Inc.


Formerly
Known as BlindSpot Alert, Inc.


A
Development Stage Company


CONDENSED
BALANCE SHEETS




UnauditedSeptember 30,
                              
                              
                              December 31,2009
                              
                              
                              2008ASSETSCurrent
      assets:Cash
                              
                              $
                              120,346
                              
                              
                              $
                              224,269Accounts
      receivable
                              
                              
                              4,625
                              
                              
                              
                              -Prepaid
      expense
                              
                              
                              -
                              
                              
                              
                              7,137Total
      current assets
                              
                              
                              124,971
                              
                              
                              
                              231,406Property
      and EquipmentComputer
      equipment and computer software
                              
                              
                              11,125
                              
                              
                              
                              -Software
      license and website development
                              
                              
                              273,778
                              
                              
                              
                              450,963Total
      property and equipment
                              
                              
                              284,903
                              
                              
                              
                              450,963Other
      AssetsDeposits
                              
                              
                              2,297
                              
                              
                              
                              -Investment
      in WebSafety Technology
                              
                              
                              2,700,000
                              
                              
                              
                              -Option
      to acquire
                              
                              
                              -
                              
                              
                              
                              95,000Total
      other assets
                              
                              
                              2,702,297
                              
                              
                              
                              95,000$
                              3,112,171
                              
                              
                              $
                              777,369LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Advance
      from shareholder
                              
                              $
                              -
                              
                              
                              $
                              1,104Accounts
      payable
                              
                              
                              75,754
                              
                              
                              
                              37,116Accrued
      expense
                              
                              
                              13,874
                              
                              
                              
                              57Deferred
      revenue
                              
                              
                              41,371
                              
                              
                              
                              -Liability
      to issue shares
                              
                              
                              190,000
                              
                              
                              
                              -Total
      current liabilities
                              
                              
                              320,999
                              
                              
                              
                              38,277Stockholders'
      equity:Preferred
      stock; $.001 par value, 25,000,000 sharesauthorized,
      4,230,002 and 3,833,335  shares issued andoutstanding
      respectively
                              
                              
                              4,230
                              
                              
                              
                              3,832Common
      stock; $.001 par value, 300,000,000 sharesauthorized,
      54,352,857 and 22,300,000  shares issued andoutstanding,
      respectively
                              
                              
                              54,353
                              
                              
                              
                              22,300Subscription
      receivable
                              
                              
                              -
                              
                              
                              
                              (200
                              )Additional
      paid in capital
                              
                              
                              4,616,100
                              
                              
                              
                              1,357,968Deficit
      accumulated during development stage
                              
                              
                              (1,883,511
                              )
                              
                              
                              (644,808
                              )Total
      stockholders' equity
                              
                              
                              2,791,172
                              
                              
                              
                              739,092$
                              3,112,171
                              
                              
                              $
                              777,369




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


F-1




WebSafety,
Inc.


Formerly
Known as BlindSpot Alert, Inc.


A
Development Stage Company


CONDENSED
STATEMENTS OF OPERATIONS


For
the three and nine months ended September 30, 2009, 2008 and the
period


from
inception July 3, 2006 to September 30, 2009




July
      3, 2006Unaudited
                        
                        
                        Unaudited
                        
                        
                        (Date of inception)For The Three Months Ended Sept 30
                        
                        
                        For The Nine Months Ended Sept 30
                        
                        
                        to2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        9/30/2009Revenue
                        
                        $
                        4,788
                        
                        
                        $
                        -
                        
                        
                        $
                        4,788
                        
                        
                        $
                        -
                        
                        
                        $
                        236,324Operating
      expenses:Cost
      of Operations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        5,757
                        
                        
                        
                        127,977General
      and administrative expenses
                        
                        
                        364,271
                        
                        
                        
                        128,431
                        
                        
                        
                        693,820
                        
                        
                        
                        204,968
                        
                        
                        
                        1,434,200Impairment
      loss
                        
                        
                        300,000
                        
                        
                        
                        
                        
                        
                        
                        300,000
                        
                        
                        
                        
                        
                        
                        
                        300,000Stock
      Compensation Expense
                        
                        
                        4,083
                        
                        
                        
                        -
                        
                        
                        
                        4,083
                        
                        
                        
                        -
                        
                        
                        
                        4,083Depreciation
      and amortization expense
                        
                        
                        588
                        
                        
                        
                        -
                        
                        
                        
                        588
                        
                        
                        
                        -
                        
                        
                        
                        4,066Total
      operating expenses
                        
                        
                        668,942
                        
                        
                        
                        128,431
                        
                        
                        
                        998,491
                        
                        
                        
                        210,725
                        
                        
                        
                        1,870,326(Loss)
      from operations
                        
                        
                        (664,154
                        )
                        
                        
                        (128,431
                        )
                        
                        
                        (993,703
                        )
                        
                        
                        (210,725
                        )
                        
                        
                        (1,634,002
                        )Other
      income (expense):Interest
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        109Loss
      on option acquire
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (245,000
                        )
                        
                        
                        -
                        
                        
                        
                        (245,000
                        )Loss
      on sale of equipment
                        
                        
                        -
                        
                        
                        
                        (1,305
                        )
                        
                        
                        -
                        
                        
                        
                        (5,216
                        )
                        
                        
                        (5,216
                        )Other
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        6,000
                        
                        
                        
                        6,000Interest
      expense
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (21
                        )
                        
                        
                        (5,402
                        )Total
      other income (expense)
                        
                        
                        -
                        
                        
                        
                        (1,305
                        )
                        
                        
                        (245,000
                        )
                        
                        
                        763
                        
                        
                        
                        (249,509
                        )(Loss)
      before provision for income taxes
                        
                        
                        (664,154
                        )
                        
                        
                        (129,736
                        )
                        
                        
                        (1,238,703
                        )
                        
                        
                        (209,962
                        )
                        
                        
                        (1,883,511
                        )Provision
      for income taxes
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      (loss)
                        
                        $
                        (664,154
                        )
                        
                        $
                        (129,736
                        )
                        
                        $
                        (1,238,703
                        )
                        
                        $
                        (209,962
                        )
                        
                        $
                        (1,883,511
                        )Basic
      and diluted loss per share
                        
                        
                        (0.022
                        )
                        
                        
                        (0.006
                        )
                        
                        
                        (0.050
                        )
                        
                        
                        (0.007
                        )
                        
                        
                        (0.073
                        )Basic
      and diluted weighted averagecommon
      shares outstanding
                        
                        
                        30,065,714
                        
                        
                        
                        20,753,261
                        
                        
                        
                        24,917,017
                        
                        
                        
                        30,779,487
                        
                        
                        
                        25,684,341




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


F-2


Websafety,
Inc.


Formerly
Known as BlindSpot Alert, Inc.


A
Development Stage Company


CONDENSED
STATEMENTS OF CASH FLOWS


For
the Three Months  Ended September 30, 2009, 2008 and the period
from


inception,
July 3, 2006 to September 30, 2009





July
      3, 2006Unaudited
                      
                      
                      (Date
      of inception)Nine
      Months Ended September 30,
                      
                      
                      to2009
                      
                      
                      2008
                      
                      
                      September 30, 2009Operating
      activities:Net
      loss
                      
                      $
                      (1,238,703
                      )
                      
                      $
                      (209,962
                      )
                      
                      $
                      (1,883,511
                      )Adjustments
      to reconcile net loss toNet
      cash used in operating activities:Depreciation
      expense
                      
                      
                      588
                      
                      
                      
                      -
                      
                      
                      
                      4,066Stock
      Compensation Expense
                      
                      
                      4,083
                      
                      
                      
                      
                      
                      
                      
                      4,083Stock
      issued for services
                      
                      
                      32,500
                      
                      
                      
                      2,400
                      
                      
                      
                      34,900Impairment
      charge for WQN License
                      
                      
                      300,000
                      
                      
                      
                      -
                      
                      
                      
                      300,000Loss
      on option expiration
                      
                      
                      245,000
                      
                      
                      
                      -
                      
                      
                      
                      245,000Loss
      on sale of equipment
                      
                      
                      -
                      
                      
                      
                      5,216
                      
                      
                      
                      5,216Changes
      in operating assets and liabilities:Decrease
      (Increase) in accounts receivable
                      
                      
                      (4,625
                      )
                      
                      
                      -
                      
                      
                      
                      (4,625
                      )Decrease  in
      prepaid expense
                      
                      
                      7,137
                      
                      
                      
                      -
                      
                      
                      
                      -Decrease
      in subscriptions receivable
                      
                      
                      200
                      
                      
                      
                      -
                      
                      
                      
                      200Decrease
      in advance to shareholder
                      
                      
                      -
                      
                      
                      
                      1,593
                      
                      
                      
                      -Increase
      in Deposit
                      
                      
                      (2,297
                      )
                      
                      
                      -
                      
                      
                      
                      (2,297
                      )Increase(decrease)
      in advance from shareholder
                      
                      
                      (1,104
                      )
                      
                      
                      -
                      
                      
                      
                      -Increase  in
      accounts payable
                      
                      
                      38,636
                      
                      
                      
                      16,485
                      
                      
                      
                      75,753Decrease
      in short-term borrowing
                      
                      
                      -
                      
                      
                      
                      3,009
                      
                      
                      
                      -(Decrease)
      in lease payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Increase  in
      Deferred revenue
                      
                      
                      41,372
                      
                      
                      
                      -
                      
                      
                      
                      41,372Increase
      in accrued expense
                      
                      
                      13,818
                      
                      
                      
                      (6,904
                      )
                      
                      
                      13,874Net
      cash (used in) operating activities
                      
                      
                      (563,395
                      )
                      
                      
                      (188,163
                      )
                      
                      
                      (1,165,969
                      )Investing
      activities:Purchase
      of long term assets- net
                      
                      
                      (134,528
                      )
                      
                      
                      (363,811
                      )
                      
                      
                      (689,185
                      )Increase(decrease)
      investment in option to acquire
                      
                      
                      (150,000
                      )
                      
                      
                      -
                      
                      
                      
                      (150,000
                      )Net
      cash (used in) investing activities
                      
                      
                      (284,528
                      )
                      
                      
                      (363,811
                      )
                      
                      
                      (839,185
                      )Financing
      activities:Proceeds
      from borrowing
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      20,000Proceeds
      from sale of equipment
                      
                      
                      -
                      
                      
                      
                      5,026
                      
                      
                      
                      5,026Proceeds
      from cancellation of advance from shareholder
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Proceeds
      from stock sales
                      
                      
                      744,000
                      
                      
                      
                      839,600
                      
                      
                      
                      2,075,474Net
      cash provided by financing activities
                      
                      
                      744,000
                      
                      
                      
                      844,626
                      
                      
                      
                      2,125,500Net
      changes in cash
                      
                      
                      (103,923
                      )
                      
                      
                      292,652
                      
                      
                      
                      120,346Cash,
      beginning of period
                      
                      
                      224,269
                      
                      
                      
                      314
                      
                      
                      
                      -Cash,
      end of period
                      
                      $
                      120,346
                      
                      
                      $
                      292,966
                      
                      
                      $
                      120,346Interest
      paid
                      
                      
                      90
                      
                      
                      
                      5,022
                      
                      
                      
                      10,380Tax
      paid
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Non
      Cash Investing and Financing Activities:Issuance
      of common stock for services
                      
                      $
                      32,500
                      
                      
                      $
                      2,400
                      
                      
                      $
                      34,900Common
      stock issued for equipment
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      9,800Common
      stock issued for software/technology
                      
                      $
                      2,700,000
                      
                      
                      $
                      -
                      
                      
                      $
                      2,700,000





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


F-3





WEBSAFETY,
INC.


Formerly
Known as BlindSpot Alert, Inc.


A
Development Stage Company


CONDENSED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)


For
the period from July 3, 2006 (inception) through September 30, 2009





Accumulated(Deficit)Additional
                                            
                                            
                                            during
                                            
                                            
                                            TotalPreferred
      Stock
                                            
                                            
                                            Common
      Stock
                                            
                                            
                                            Subscription
                                            
                                            
                                            Paid-in
                                            
                                            
                                            development
                                            
                                            
                                            Stockholders'Shares
                                            
                                            
                                            Amount
                                            
                                            
                                            Shares
                                            
                                            
                                            Amount
                                            
                                            
                                            Receivable
                                            
                                            
                                            Capital
                                            
                                            
                                            stage
                                            
                                            
                                            Equity
      (Deficit)Balance
      at July 3, 2006(Date
      of Inception)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shares
      issued in connection with the recapitalization
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            14,700,000
                                            
                                            
                                            $
                                            14,700
                                            
                                            
                                            
                                            
                                            
                                            $
                                            173,600
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            188,300Net
      loss for the period ended December 31, 2006
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (19,057
                                            )
                                            
                                            
                                            (19,057
                                            )Balances
      December 31, 2006
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            14,700,000
                                            
                                            
                                            
                                            14,700
                                            
                                            
                                            
                                            
                                            
                                            
                                            173,600
                                            
                                            
                                            
                                            (19,057
                                            )
                                            
                                            
                                            169,243Net
      loss for the period ended December 31, 2007
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (188,094
                                            )
                                            
                                            
                                            (188,094
                                            )Balances  December
      31, 2007
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            14,700,000
                                            
                                            
                                            
                                            14,700
                                            
                                            
                                            
                                            
                                            
                                            
                                            173,600
                                            
                                            
                                            
                                            (207,151
                                            )
                                            
                                            
                                            (18,851
                                            )Issuance
      of preferred stock for cashJune
      20, 2008 six issuances at $0.30
                                            
                                            
                                            2,083,336
                                            
                                            
                                            
                                            2,083
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            622,917
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            625,000July
      2, 2008 one issuance at $0.30
                                            
                                            
                                            666,667
                                            
                                            
                                            
                                            667
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            199,333
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            200,000November
      6, 2008 one issuance at $0.30
                                            
                                            
                                            333,333
                                            
                                            
                                            
                                            333
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            99,667
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            100,000November
      13, 2008 one issuance at $0.30
                                            
                                            
                                            83,333
                                            
                                            
                                            
                                            83
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            24,917
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            25,000December
      17, 2008 two issuances at $0.30
                                            
                                            
                                            666,666
                                            
                                            
                                            
                                            666
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            199,334
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            200,000Issuance
      of common stock for cash
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -May
      1, 2008 six issuances at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,525,000
                                            
                                            
                                            
                                            2,525
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,525June
      30, 2008 two issuances at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,175,000
                                            
                                            
                                            
                                            1,175
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,175Acquisition
      of Cash in Connection with Recapitalization
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            13,200
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            13,200July
      11, 2008 one issuance at $0.001 for services
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,400,000
                                            
                                            
                                            
                                            2,400
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,400July
      15, 2008 one issuance at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            100,000
                                            
                                            
                                            
                                            100
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            100September
      18, 2008 two issuances at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,200,000
                                            
                                            
                                            
                                            1,200
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,200December
      5, 2008 one issuance at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            200,000
                                            
                                            
                                            
                                            200
                                            
                                            
                                            
                                            (200
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -Voluntary
      conversion of shareholder advance to paid in capital
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            25,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            25,000Net
      loss for the period ended December 31, 2008
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (437,657
                                            )
                                            
                                            
                                            (437,657
                                            )Balances  December
      31, 2008
                                            
                                            
                                            3,833,335
                                            
                                            
                                            $
                                            3,832
                                            
                                            
                                            
                                            22,300,000
                                            
                                            
                                            $
                                            22,300
                                            
                                            
                                            $
                                            (200
                                            )
                                            
                                            $
                                            1,357,968
                                            
                                            
                                            $
                                            (644,808
                                            )
                                            
                                            $
                                            739,092Subscription
      receivable paid
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            200
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            200Net
      loss for the period ended March 31, 2009
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (417,785
                                            )
                                            
                                            
                                            (417,785
                                            )Balances  March
      31, 2009
                                            
                                            
                                            3,833,335
                                            
                                            
                                            $
                                            3,832
                                            
                                            
                                            
                                            22,300,000
                                            
                                            
                                            $
                                            22,300
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            1,357,968
                                            
                                            
                                            $
                                            (1,062,593
                                            )
                                            
                                            $
                                            321,507Subscription
      receivable paid
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -Issuance
      of preferred stock for cashMay
      8, 2009 one issuance at $0.30
                                            
                                            
                                            133,334
                                            
                                            
                                            
                                            134
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            39,866
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            40,000May
      11, 2009 one issuance at $0.30
                                            
                                            
                                            56,667
                                            
                                            
                                            
                                            57
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            16,943
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            17,000June
      4, 2009 four issuances at $0.30
                                            
                                            
                                            40,000
                                            
                                            
                                            
                                            40
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            11,960
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            12,000-Net
      loss for the period ended June 30, 2009
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (156,764
                                            )
                                            
                                            
                                            (156,764
                                            )Balances  June
      30, 2009
                                            
                                            
                                            4,063,336
                                            
                                            
                                            $
                                            4,063
                                            
                                            
                                            
                                            22,300,000
                                            
                                            
                                            $
                                            22,300
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            1,426,737
                                            
                                            
                                            $
                                            (1,219,357
                                            )
                                            
                                            $
                                            233,743-
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -Issuance
      of preferred stock for cashSeptember
      14, 2009 one issuance at $0.30
                                            
                                            
                                            166,666
                                            
                                            
                                            
                                            167
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            49,833
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            50,000Issuance
      of common stock for servicesJuly
      9, 2009 one issuance at $0.01
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,800,000
                                            
                                            
                                            $
                                            1,800
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            16,200
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            18,000July
      9, 2009 one issuance at $0.01
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,000,000
                                            
                                            
                                            $
                                            1,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            9,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            10,000September
      14, 2009 one issuance at $0.001
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,000,000
                                            
                                            
                                            $
                                            1,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,000September
      14, 2009 one issuance at $0.10
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            27,000,000
                                            
                                            
                                            $
                                            27,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,673,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2,700,000September
      14, 2009 one issuance at $0.35
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            10,000
                                            
                                            
                                            $
                                            10
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            3,490
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            3,500Issuance
      of common stock for cashAugust
      31, 2009 one issuance at $0.35
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,000,000
                                            
                                            
                                            $
                                            1,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            349,000
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            350,000September
      14, 2009 one issuance at $0.35
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            100,000
                                            
                                            
                                            $
                                            100
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            34,900
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            35,000September
      14, 2009 one issuance at $0.35
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            142,857
                                            
                                            
                                            $
                                            143
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            49,857
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            50,000Stock
      Compensation Expense
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            4,083
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            4,083Net
      loss for the period ended September 30, 2009
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (664,154
                                            )
                                            
                                            
                                            (664,154
                                            )Balances  September
      30, 2009
                                            
                                            
                                            4,230,002
                                            
                                            
                                            $
                                            4,230
                                            
                                            
                                            
                                            54,352,857
                                            
                                            
                                            $
                                            54,353
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            4,616,100
                                            
                                            
                                            $
                                            (1,883,511
                                            )
                                            
                                            $
                                            2,791,172





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


F-4


WEBSAFETY,
INC.


Formerly Known as BlindSpot Alert,
Inc.


(A
Development Stage Company)


NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009







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 September 30, 2009, 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,
2008 audited financial statements.  The results of operations for the three
months ended and the nine months ended September 30, 2009 are not necessarily
indicative of the operating results that can be anticipated for a complete
operating period.




In
connection with preparation of the condensed financial statements and in
accordance with the recently issued FASB ASC 855-10 (Prior authoritative
literature: FASB Statement No. 165, “Subsequent Events”), management has
evaluated subsequent events through November 14, 2009 (the financial statement
issue date).




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 $1,883,511 from the
period of July 3, 2006 (Inception) through September 30, 2009 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 2009 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 to be the same, as the impact of
potential common shares is anti-dilutive. September 30, 2009, there were 700,000
stock options issued and outstanding that could dilute future
earnings.


F-5


WEBSAFETY,
INC.
 Formerly Known as BlindSpot Alert,
Inc.
 (A
Development Stage Company)
 NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009




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, which ever 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 September 30, 2009 and December 31, 2008,
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.


F-6




WEBSAFETY,
INC.
 Formerly Known as BlindSpot Alert,
Inc.
 (A
Development Stage Company)
 NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009


The table
below sets forth our financial assets and liabilities that were accounted for at
fair value as of September 30, 2009 and December 31, 2008. 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.




September 30, 2009
                  
                  
                  December 31, 2008Level
      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
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -




Note
3. Property and Equipment




Property
and equipment consist of the following at September 30, 2009:





Computer
      Equipment
                  
                  $
                  11,125Web
      Site Development
                  
                  
                  273,778Total
                  
                  $
                  284,903





In July
of 2009 we expensed the  $300,000 license fee paid to WQN in June 30,
2008 to license the WebSafety Technology.  The license would have
entitled WebSafety, Inc to receive license revenue from WQN, Inc for potential
sales of WebSafety Technolgy by WQN, Inc.  On July 2, 2009 the Company
closed on an asset acquisition agreement with WQN, Inc. Under the agreement we
acquired all of the technology known as The WebSafety Technology and Software
for 27,000,000 shares of our common stock.  The Company no longer has
any future royalty revenues due from WQN under the June 30, 2008 license
agreement.  Currently, all revenue (less commissions paid to direct
sales agents) from the sale of WebSafety software is the property of WebSafety,
Inc.  Consequently, we recorded a $300,000 license fee write-off in
operating expenses as an impairment charge for the period ended September 30,
2009 in accordance with FASB ASC 360-10 (Prior authoritative literature: FASB
Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets).





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 does not include web site development costs of $273,778. 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. 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.


F-7


WEBSAFETY,
INC.


Formerly Known as BlindSpot Alert,
Inc.


(A
Development Stage Company)


NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009





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
5. Ownership change





On June
20, 2008, The Company issued 13,200,000 shares of its common stock to Texas
Atlantic Capital Partners, LLC. (“Texas Atlantic”). The issuance of these shares
represented approximately 62% of the then outstanding stock. The issuance
resulted in a change of control and meets the definition of a business
combination under paragraph 9, of Statement of Financial Accounting Standards No
141, Business Combinations (FAS 141).  Concurrent with the issuance of
the shares to Texas Atlantic, the shareholders elected to cancel certain shares
in order to effect the desired post change in control ownership
ratio.





The
business combination was accounted for under the purchase method of accounting
followed by a recapitalization of the company. The issuance of the 13,200,000
shares and the cancellation of the 35,500,000 shares of common stock will be
retroactively presented in the statement of stockholders equity as if
the  transaction with Texas Atlantic had occurred as of the earliest
period presented.




Note
6. Stock Issuances




During
the Nine-Month period ended September 30, 2009 we had the following preferred
stock issuances.





Preferred
      Stock-All issuance were for cash at $.30 per shareDate
                  
                  Number of Shares
                  
                  
                  ValueMay
      2009
                  
                  
                  190,001
                  
                  
                  $
                  57,000June
      2009
                  
                  
                  40,000
                  
                  
                  $
                  12,000September
      2009
                  
                  
                  166,666
                  
                  
                  $
                  50,000Total
      Preferred Issuances
                  
                  
                  396,667
                  
                  
                  $
                  119,000





In
addition to the preferred stock issued above, during the Nine-Month period ended
September 30, 2009 we also recorded $190,000 of common stock cash receipts that
at September 30, 2009 had not been issued.  These receipts are
recorded as a current liability at September 30, 2009 and will be issued in the
fourth quarter of 2009.  Also, in the Nine-Month period ended
September 30, 2009 we committed to issue $28,000 (2,800,000 shares) of common
stock for services.  These shares were issued on July 9,
2009.





Note
7. Related party transactions





In the
aggregate, during the Nine Month period ended September 30, 2009, the Company
paid to related parties $284,472 for consulting, legal and marketing services as
reflected below.





Paid To
                  
                  Consulting
                  
                  
                  Legal Services
                  
                  
                  Marketing
                  
                  
                  AccountingTexas
      Atlantic Capital Partners LLC
                  
                  $
                  65,000Rowland
      W. Day II
                  
                  $
                  18,000
                  
                  
                  $
                  151,223Robertson
      Schwartz Agency
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  30,000Robert
      J Salluzzo
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  15,000John
      Williams
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  5,249




F-8


WEBSAFETY,
INC.


Formerly Known as BlindSpot Alert,
Inc.


(A
Development Stage Company)


NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009





Texas
Atlantic Capital Partners LLC (Texas Atlantic) and Rowland W. Day II and Rusty
Robertson are affiliates in that Texas Atlantic is a more than 10% shareholder
in the Company, Mr. Day is our CEO and a director; and Rusty Robertson is a
director and a principal in Robertson Schwartz Agency.  Robert J
Salluzzo is a shareholder in the Company and the former CFO.  John
Williams is the contract Treasurer and CFO of the Company and is the Chief
Accounting Officer of WQN, Inc.


The
services that were provided are outlined below.





Consulting- Consulting
services consisted of the coordination of web design and marketing efforts aimed
at product launch to include the evaluation of the appropriate merchant service
agencies to be used as well as working with management relating to general
corporate matters associated with business plan implementation.





Legal- Rowland Day is the
Company’s legal counsel. The amount listed in the above table for Legal Services
includes $28,786 for expense reimbursement.





Marketing- Marketing fees
paid relate to the development of a comprehensive marketing plan whose objective
is to build brand and product awareness through planned media and other
exposures.





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 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
8. Facilities





The Company’s corporate headquarters
are presently located in Newport Beach, California and the Company has opened an
office in Dallas, Texas.





Note
9. WebSafety Asset Purchase





On July
2, 2009, The Company entered into an agreement with WQN, Inc. to acquire the
software technology, known as “WebSafety”. Pursuant to the terms of the Purchase
Agreement, the Company acquired all of WQN, Inc’s rights, title and interest in
the Assets.  The acquisition was an arms-length purchase with an
unrelated party.  The closing of the asset acquisition was contingent
upon WQN, delivering the technology as well as satisfying certain other
conditions pursuant to the agreement. WQN shall deliver to the Company a fully
executed Asset Purchase Agreement, a fully executed Bill of Sale, fully executed
third party consents and/or approvals, and Title to and possession of the
purchased assets. The acquisition was limited to the intellectual property
surrounding this asset. On September 14, 2009, all conditions of the acquisition
were satisfied and accordingly, the Company paid the consideration of 27,000,000
shares of its common stock and gained all rights of ownership to the WebSafety
software technology. The acquisition was recorded as a purchase of an asset in
the financial statements as of September 30, 2009.


F-9





WEBSAFETY,
INC.


Formerly Known as BlindSpot Alert,
Inc.


(A
Development Stage Company)


NOTES
TO THE FINANCIAL STATEMENTS
 September
30, 2009





The
Company also entered into employment agreements with the Chief Operating Officer
and its Chief Technology Officer, effective on September 14, 2009. The
agreements grant the employees the right to receive salaries as well as being
granted 600,000 stock options each having a 5-year term in which the options
vest at the end of each 12 month period.





On
September 10, 2009 the Board of Directors, resolved to issue 478,000 shares of
its common stock to non-employee consultants. Additionally, the Board of
Directors granted 100,000 stock options to the Chief Financial Officer . The
term of the options are for a 5 year period in which the options vest at the end
of each 12 month period.





Note
10. Sales and Marketing Program




Management
has developed direct selling multi-level-marketing channels for the sales of the
WebSafety PC and Cellular products. 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.  Customers purchase annual subscriber
memberships to the WebSafety service.  Customers may request a full
refund (within 30 days from the date of purchase) for the service if they are
not satisfied.  Since 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 June
2009, the FASB issued FASB ASC 105-10 (Prior authoritative literature: Statement
No. 168, “The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles—a replacement of FASB Statement No.
162”), to formally establish the FASB Accounting Standards Codification as the
single source of authoritative, nongovernmental U.S. GAAP, in addition to
guidance issued by the SEC. On the effective date, the Codification will
supersede existing non-SEC accounting and reporting standards. All other
nongrandfathered non-SEC accounting literature not included in the Codification
becomes nonauthoritative. Therefore, from the effective date of the
Codification, there will no longer be levels of authoritative GAAP, rather there
will only be authoritative and nonauthoritative GAAP. All content within the
Codification carries the same level of authority. The Statement makes the
Codification effective for interim and annual periods ending after September 15,
2009.  The Company does not expect the impact of FASB ASC 105-10 to
have a material effect on its financial statements.





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
September 30, 2009, 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.





Note
14.   Legal Proceedings





On August
25, 2009, the Company terminated its President Clifton Jolley for
cause.  In late October 2009, the Company and Mr. Jolley agreed to go
to arbitration which the Company believes should occur by the end of the First
Quarter of 2010.




F-10





Note
15-Stock Based Compensation





In
November , 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 set up to act as a compensation committee of 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
2009 Stock Option Plan to a shareholder that owns more than 10% of the total
combined voting power of all classes of Optex Systems Holdings 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 an 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.  As of September 30, 2009 11,669 of the stock
options had vested.





For the
three months and nine months ended September 30, 2009, the Company recorded
compensation costs for options and shares granted under the plan amounting to
$4,083.  There were no stock options or shares granted or outstanding
prior to September 30, 2008, therefore no compensation expense was recorded in
2008.  A deduction is not allowed for income tax purposes until
nonqualified options are exercised. The amount of 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.





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 a 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:





Nine months EndedSeptember
      30, 2009Expected
      dividend yield
                
                
                0
                %Expected
      stock price volatility
                
                
                330
                %Risk-free
      interest rate  (1)
                
                
                2.37
                %




F-11




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





Date of
                      
                      Shares
                      
                      
                      Exercise
                      
                      
                      Shares Outstanding
                      
                      
                      Expiration
                      
                      
                      VestingGrant
                      
                      Granted
                      
                      
                      Price
                      
                      
                      As of 9/30/09
                      
                      
                      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
                      
                      
                      9/14/2010Total
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      700,000





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
                                                
                                                
                                                $
                                                0.21
                                                
                                                
                                                
                                                5.00
                                                
                                                
                                                $
                                                150,000Forfeited
      – 2009
                                                
                                                
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Exercised
      – 2009
                                                
                                                
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Outstanding
      as of September 30, 2009
                                                
                                                
                                                700,000
                                                
                                                
                                                $
                                                0.21
                                                
                                                
                                                
                                                5.00
                                                
                                                
                                                $
                                                150,000Exercisable
      as of September 30,2009
                                                
                                                
                                                0
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                $
                                                -





The
weighted-average grant date fair value of options granted during the nine months
ended September 30, 2009 was $034. The total intrinsic value of options
exercised during the nine months September 30, 2009 was $ 0.0





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 September 30, 2009
                                              
                                              
                                              -
                                              
                                              
                                              $Non-vested
      granted — nine months ended September 30, 2009
                                              
                                              
                                              700,000
                                              
                                              
                                              $
                                              0.354Vested — nine
      months ended September 30, 2009
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              0.00Forfeited — nine
      months ended September 30, 2009
                                              
                                              
                                              -
                                              
                                              
                                              $Non-vested
      as of September 30, 2009
                                              
                                              
                                              700,000
                                              
                                              
                                              $
                                              0.35





As of
September 30, 2009, the unrecognized compensation cost related to non-vested
share based compensation arrangements granted under the plan that was
approximately $695,917.  These costs are expected to be recognized on
a straight line basis from September 10, 2009 through September 14,
2014. The total fair value of options and shares vested during the year
period ended September 30, 2009 was $0.0.


F-12





Note
16. Subsequent Events




In
connection with the preparation of the condensed financial statements and in
accordance with the recently issued Financial Accounting Standards Board
(“FASB”) ASC 855-10 (Prior authoritative literature: FASB Statement No. 165,
“Subsequent Events”, management has evaluated subsequent events through November
20, 2009 (the financial statement issue date).




The
Company has no subsequent events following the end of current period, September
30, 2009


F-13


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




The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes, and
the other financial information included in this report.




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 closed on 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 September 30, 2009 we have raised $1,724,600 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
month period ended September 30, 2009 compared to September 30,
2008





Revenues
were $4,788 during the three months ended September 30, 2009. We did not record
any revenues for the three months ended September 30, 2008. For the three months
ended September 30, 2009 we sustained a net operating loss of $664,154 compared
to a net operating loss of $129,736 for the three months ended September 30,
2008. The $534,418 net operating loss increase was mainly due to higher general
and administrative expenses and impairment loss of $300,000. General
and administrative expenses totaled $364,271 for the quarter ended September 30,
2009 as compared to $128,431 for the same quarter in 2008 reflecting increased
disbursements in 2009 for marketing, legal, professional and other costs
relating to the implementation of the operating plan.   Also,
$300,000 of the increase in operating expenses was attributable to a one-time
impairment charge for a license fee paid to WQN in June 30, 2008 to license the
WebSafety Technology.


We intend
to become fully operational in late 2009.




Nine
Month period ended September 30, 2009 compared to September 30,
2008





Revenues
were $4,788 during the nine months ended September 30, 2009. We did not record
any revenues for the nine months ended September 30, 2008. For the Nine Months
ended September 30, 2009we sustained a net
operating loss of$1,238,703 compared to a
net operating loss of $209,962 for the nine months ended September 30,
2008.  The $1,028,741 net operating loss increase was mainly due to
higher general and administrative expense, an impairment loss of $300,000 (see
Note 5. “Property and Equipment”), along with an “other expense” $250,000 loss
on option to acquire (see Note 6 Option to acquire and
expiration”).





Operating
expenses totaled $994,491 for the nine months ended September 30, 2009 as
compared to $210,725 for the same period in 2008.  As noted above,
operating expenses included a one-time impairment loss of $300,000 (see Note 5.
“Property and Equipment”).  The remaining $487,766 increase in
operating expenses was attributable to increased disbursements in 2009 for
marketing, legal, professional and other costs relating to the implementation of
the operating plan.





We intend to become fully operational
in late 2009.




Financial
Condition




Cash on
hand at September 30, 2009 was $120,346 and working capital (the excess of
current assets over current liabilities) was a negative $196,028 compared with
$224,269 and $193,130, respectively, at December 31, 2008. The decrease in cash
on hand and working capital is primarily attributable to increased disbursements
in 2009 for marketing, legal, professional and other costs relating to the
implementation of the operating plan.





Other
assets increased to $2,702,000 at September 30, 2009 from $95,000 at December
31, 2008.  The increase in other asset was a result of the $2,700,000
purchase of WebSafety Technology less the $95,000 write-of the option to
acquire.


Total
current liabilities increase to $320,999 at September 30, 2009 from
$38,276.  The increase was due to a $190,000 liability to issue share
at September 30, 2009 along with increased payables for marketing, legal,
professional and other costs relating to the implementation of the operating
plan





Stockholders’
equity was $2,791,172 at September 30, 2009 compared to $739,093 at December 31,
2008.  The $2,052,079 increase was due to the issuance of $2,700,000
of common shares to WQN, Inc for the purchase of the WebSafety Technology, plus
and additional $586,699 of sales and issuance of common and preferred shares for
cash and services, less net operating  losses of $1,238,703 for the
nine months ended September 30, 2009.




Liquidity




Through
September 30, 2009 the Company had raised $1,724,600 in new equity to support
planned operations in 2009 and beyond; additional capital will be required. In
that regard 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.


5




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
September 30, 2009, 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 and
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 and Chief Financial Officer have
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 effective 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.





There
have been no significant changes in our internal controls over financial
reporting during the third quarter ended September 30, 2009 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


6





·
            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 September 30, 2009. 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 late October 2009, the Company and Mr. Jolley agreed to go
to arbitration which the Company believes should occur by the end of the First
Quarter of 2010.




Item
1.A. Risk Factors




RISK
FACTORS





The
Company was organized during 2006, is at an early stage of operation and has no
substantial revenue.  The Company has recently ceased its operations
in order to devote its full resources toward marketing, selling and distributing
the licensed software products.  The earliest date the Company
anticipates receiving revenue from sales of the licensed software is during the
second half 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.





RISKS
RELATING TO OUR BUSINESS





THE
COMPANY HAS A LIMITED OPERATING HISTORY AND FACE 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 the CYBERSAFETY software.
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 CYBERSAFETY software, 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 CYBERSAFETY software that the Company
intends to market and sell; or, if the market exits, 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 development, 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.





7




THE
COMPANY’S RELIANCE ON THE CAPABILITIES OF THE CYBERSAFETY/WEBSAFETY
SOFTWARE





The
Company is heavily dependent upon the capabilities of the CYBERSAFETY/WEBSAFETY
SOFTWARE (see Note 11. “WebSafety Asset Purchase”) and its ability to provide
technical and other support of the software.  The failure of the
software to accomplish the objectives as represented will hamper if not destroy
the Company’s marketing efforts as well as any inability to capably provide
technical support for the software.




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.




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.


8





APPROXIMATELY
49% 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
November 15, 2009, WQN, Inc. directly owns 27,000,000 shares, which represents
approximately 49% of our 54,895,714 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.  These attacks and this war have caused instability in the
marketplace and contributed to a downturn in the global economy.  In
the future, there may be armed hostilities, continued war, further acts of
terrorism and civil disturbances in the United States or elsewhere, which may
further contribute to economic instability in the United States. Additionally,
such disturbances could have a material adverse effect on our business,
financial condition and operating results.





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





For the
period ending September 30, 2009, the Company sold 785,714 shares of its
unregistered common stock to various accredited investors for proceeds of
$275,000.  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


9




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:
                November
      23, 2009
                By:
                /s/ Rowland W. Day IIRowland
      W. Day II,Principal
      Executive Officer




11