UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
One)




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




For the
quarterly period ended:  March 31, 2010




Or




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





Commission
File No. 333-140378





WEBSAFETY,
INC.


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





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




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


(Address
of Principal Executive Offices)




(214)
716-6909


(Issuer’s
telephone number)




BLINDSPOT
ALERT, INC.


(1
Hampshire Court, Newport Beach, CA 92660)





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





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





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




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




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


Yes  ̈     No
x




State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of May 17, 2010:




Class
            
            Outstanding
      shares as of May 14, 2010Common
      Stock, $0.001 par value
            
            64,584,169







INDEX
                                      
                                      PagePART 1-FINANCIAL
INFORMATION
                                      
                                      2Item 1.  Financial
      Statements
                                      
                                      2Balance Sheets as of March 31,
      2010 (unaudited) and December 31, 2009
                                      
                                      F-1Statements of Operations
      (unaudited) for the three months ended March 31, 2010 and March 31,
      2009.
                                      
                                      F-2Statements of Cash Flows
      (unaudited) for the three months ended March 31, 2010 and March 31,
      2009.
                                      
                                      F-3Notes
      to Financial Statements
                                      
                                      F-4Item 2.  Management’s Discussion and Analysis
      of Financial Condition and Results of Operations
                                      
                                      4Item 3.  Quantitative and Qualitative
      Disclosures about Market Risk
                                      
                                      6Item 4.  Control and
      Procedures
                                      
                                      6PART II-OTHER INFORMATION
                                      
                                      7Item 1.  Legal
    Proceedings
                                      
                                      7Item 1A.  Risk Factors
                                      
                                      7Item 2.  Unregistered Sales of Equity
      Securities and Use of Proceeds
                                      
                                      9Item 6.  Exhibits
                                      
                                      9SIGNATURES
                                      
                                      10




PART
I - FINANCIAL INFORMATION




Item
1. Financial Statements


2


INTERIM
FINANCIAL STATEMENTS


(UNAUDITED)





Table
of Contents





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


3




WEBSAFETY,
INC.


BALANCE SHEETS


MARCH
31, 2010


(Unaudited)




As ofMarch 31, 2010
                    
                    
                    December
      31, 2009(Unaudited)ASSETSCurrent
      assets:Cash
                    
                    $
                    36,190
                    
                    
                    $
                    5,748Accounts
      receivable
                    
                    
                    21,736
                    
                    
                    
                    17,171Total
      current assets
                    
                    
                    57,926
                    
                    
                    
                    22,919Property
      and Equipment:Computer
      equipment, computer software and furniture, net
                    
                    
                    13,230
                    
                    
                    
                    14,433Software
      license and website development, net
                    
                    
                    129,553
                    
                    
                    
                    138,383Total
      property and equipment
                    
                    
                    142,783
                    
                    
                    
                    152,816Other
      Assets:Deposits
                    
                    
                    6,820
                    
                    
                    
                    6,820WebSafety
      Technology, net
                    
                    
                    2,352,345
                    
                    
                    
                    2,587,580Option
      to acquire
                    
                    
                    -
                    
                    
                    
                    -Total
      other assets
                    
                    
                    2,359,165
                    
                    
                    
                    2,594,400$
                    2,559,874
                    
                    
                    $
                    2,770,135LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                    
                    $
                    308,890
                    
                    
                    $
                    233,733Accrued
      expense
                    
                    
                    13,631
                    
                    
                    
                    13,868Deferred
      revenue
                    
                    
                    123,048
                    
                    
                    
                    114,740Liability
      to issue shares
                    
                    
                    176,855
                    
                    
                    
                    103,120Total
      current liabilities
                    
                    
                    622,424
                    
                    
                    
                    465,461Stockholders'
      equity:Preferred
      stock; $.001 par value, 25,000,000 shares authorized, 4,230,002 and
      3,833,335  shares issued and outstanding
      respectively
                    
                    
                    4,230
                    
                    
                    
                    4,230Common
      stock; $.001 par value, 300,000,000 shares authorized, 64,380,047 and
      54,895,714  shares issued and outstanding,
      respectively
                    
                    
                    64,380
                    
                    
                    
                    54,896Additional
      paid in capital
                    
                    
                    5,290,701
                    
                    
                    
                    4,817,805Deficit
      accumulated
                    
                    
                    (3,421,861
                    )
                    
                    
                    (2,572,257
                    )Total
      stockholders' equity
                    
                    
                    1,937,450
                    
                    
                    
                    2,304,674$
                    2,559,874
                    
                    
                    $
                    2,770,135





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


F-1




WEBSAFETY,
INC.


STATEMENTS OF OPERATIONS


MARCH
31, 2010


(Unaudited)




(Unaudited)Three
      Months Ended March 31,2010
                                    
                                    
                                    2009Revenue
                                    
                                    $
                                    45,778
                                    
                                    
                                    $
                                    -Cost
      of goods sold
                                    
                                    
                                    (31,357
                                    )Gross
      margin
                                    
                                    
                                    14,421
                                    
                                    
                                    
                                    -Operating
      expenses:General
      and administrative expenses
                                    
                                    
                                    612,507
                                    
                                    
                                    
                                    172,786Research
      & Development
                                    
                                    
                                    2,500
                                    
                                    
                                    
                                    -Loss
      on option acquire
                                    
                                    
                                    -
                                    
                                    
                                    
                                    245,000Depreciation
      and amortization expense
                                    
                                    
                                    249,018
                                    
                                    
                                    
                                    -Total
      operating expenses
                                    
                                    
                                    864,025
                                    
                                    
                                    
                                    417,786(Loss)
      from operations
                                    
                                    
                                    (849,604
                                    )
                                    
                                    
                                    (417,786
                                    )(Loss)
      before provision for income taxes
                                    
                                    
                                    (849,604
                                    )
                                    
                                    
                                    (417,786
                                    )Provision
      for income taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      (loss)
                                    
                                    $
                                    (849,604
                                    )
                                    
                                    $
                                    (417,786
                                    )Basic
      and diluted loss per share
                                    
                                    $
                                    (0.015
                                    )
                                    
                                    $
                                    (0.019
                                    )Basic
      and diluted weighted average common shares outstanding
                                    
                                    
                                    57,615,618
                                    
                                    
                                    
                                    22,300,000





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


F-2




WEBSAFETY,
INC.


STATEMENTS OF CASH FLOW


March
31, 2010


(Unaudited)




(Unaudited)Three Months Ended March 31,2010
                
                
                2009Operating
      activities:Net
      loss
                
                $
                (849,604
                )
                
                $
                (417,786
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization expense
                
                
                249,018
                
                
                
                -Stock
      compensation expense
                
                
                128,910Stock
      issued for services
                
                
                188,120
                
                
                
                -Impairment
      charge for WQN License
                
                
                -
                
                
                
                -Loss
      on option expiration
                
                
                -
                
                
                
                -Loss
      on sale of equipment
                
                
                -
                
                
                
                -Changes
      in operating assets and liabilities:Decrease
      (increase) in accounts receivable
                
                
                (4,565
                )
                
                
                -Decrease  in
      prepaid expense
                
                
                -
                
                
                
                7,137Decrease
      in subscriptions receivable
                
                
                -
                
                
                
                200Decrease
      in advance to shareholder
                
                
                -
                
                
                
                1,431Increase
      in deposit
                
                
                -
                
                
                
                -Increase
      (decrease) in advance from shareholder
                
                
                -
                
                
                
                -Increase  in
      accounts payable
                
                
                75,157
                
                
                
                22,131Decrease
      in short-term borrowing
                
                
                -
                
                
                
                -Decrease
      in lease payable
                
                
                -
                
                
                
                -Increase  in
      deferred revenue
                
                
                8,308
                
                
                
                -Increase
      in accrued expense
                
                
                73,498
                
                
                
                1,919Net cash
      (used in) operatingactivities
                
                
                (131,158
                )
                
                
                (384,968
                )Investing
      activities:Purchase
      of long term assets
                
                
                (3,750
                )
                
                
                (50,560
                )Increase
      (decrease) investment in option to acquire
                
                
                -
                
                
                
                95,000Net
      cash (used in) investing activities
                
                
                (3,750
                )
                
                
                44,440Financing
      activities:Proceeds
      from borrowing
                
                
                -
                
                
                
                -Proceeds
      from sale of equipment
                
                
                -
                
                
                
                -Repayment
      of advances from shareholders
                
                
                -
                
                
                
                -Proceeds
      from stock sales
                
                
                165,350
                
                
                
                119,001Net
      cash provided by financing activities
                
                
                165,350
                
                
                
                119,001Net
      changes in cash
                
                
                30,442
                
                
                
                (221,527
                )Cash,
      beginning of year
                
                
                5,748
                
                
                
                224,269Cash,
      end of period
                
                $
                36,190
                
                
                $
                (2,743
                )Cash
      paid during the period for:Interest
      paid
                
                
                -
                
                
                
                -Tax
      paid
                
                
                -
                
                
                
                -Non
      Cash Investing and Financing Activities:Issuance
      of common stock for services
                
                $
                188,120
                
                
                $
                -Voluntary
      conversion of shareholders advance to pain in Capital
                
                $
                -
                
                
                $
                -Common
      stock issued for equipment
                
                $
                -
                
                
                $
                -





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


F-3




WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010




Note
1.  Condensed Financial Statement




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





Note
2. Significant Accounting Policies




Going
Concern




The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.  The
Company has incurred cumulative net losses of approximately $3,421,861 from the
period of July 3, 2006 (Inception) through March 31, 2010 and has used
significant cash in support of its operating activities raising substantial
doubt about the Company’s ability to continue as a going concern.  The
Company in 2010 has raised additional capital and will seek additional sources
of capital through the issuance of debt or equity financing, but there can be no
assurance the Company will be successful in accomplishing its
objectives.




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




Use
of Estimates




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




Earnings per
Share:





Basic
earnings per common share is computed by dividing net earnings by the weighted
average number of common shares outstanding during each year presented. Diluted
earnings per common share give the effect to the assumed exercise of stock
options when dilutive. In a loss year, the calculation for basic and diluted
earnings per share is considered to be the same, as the impact of potential
common shares is anti-dilutive. At March 31, 2010, there were 2,100,000 stock
options issued and outstanding that could dilute future
earnings.


F-4




WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010




Stock-Based
Compensation:





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





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




Fair
Value of Financial Instruments





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





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




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




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




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




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




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




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


F-5





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





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





Note 3. Property and
Equipment




Property
and equipment consist of the following at :





March 312010
                    
                    
                    December 31,2009Computer
      Equipment
                    
                    $
                    15,715
                    
                    
                    $
                    15,715Web
      Site Software
                    
                    
                    154,713
                    
                    
                    
                    150,963Accumulated
      depreciation
                    
                    
                    (27,645
                    )
                    
                    
                    (13,862
                    )Total
                    
                    $
                    142,783
                    
                    
                    $
                    152,816





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




Note
4. WebSafety Technology




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





Note
5. Intangible Asset





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


F-6





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





March 31,
                      2010
                    
                    
                    December 31,
                      2009Intangible
      assetsWebsafety
      Technology
                    
                    $
                    2,822,815
                    
                    
                    $
                    2,822,815Total
      intangible assets before accumulated amortization
                    
                    
                    2,822,815
                    
                    
                    
                    2,822,015Less
      accumulated amortization
                    
                    
                    470,470
                    
                    
                    
                    235,235Total
      intangible assets
                    
                    $
                    2,352,345
                    
                    
                    
                    2,587,580





Amortization
expense for the period ending March 31, 2010 and for fiscal 2009 was
$235,235.  Accumulated amortization at March 31, 2010 was
$470,470.





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




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




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




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




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




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




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




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





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





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


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


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


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




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


F-7





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





Due to
similar operating results between December 31, 2009 and March 31, 2010,
Management deemed an impairment analysis necessary in accordance with ASC
360-10-35.





·
            Revenue
      in the quarter-ended March 31, 2010 was approximately $46,000.  Given
      the fact that this was our second quarter as an operating company,
      management expected sales to be relatively small and gradually increase as
      the Company continued to roll-out its marketing plan.  Revenue
      increased by 39% in the first quarter of 2010, compared to the year-ended
      2009.  This percent increase was comparable to Management’s
      expectations.


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


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




Based on
our analysis as described above, we expect future undiscounted operating cash
flows derived from the WebSafety Technology asset  to exceed the
carrying value of the asset as of March 31, 2010 and therefore concluded that no
impairment was necessary.





Note
6. Option to acquire and expiration





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





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





Note
7. Stock Issuances


During
the Three-Month period ended March 31, 2010 we had the following common stock
issuances.





Number
                                      of Shares
                                    
                                    
                                    Value
                                      Cash
                                    
                                    
                                    Value
                                      ServicesJanuary
      2010
                                    
                                    
                                    1,700,000
                                    
                                    
                                    $
                                    120,000January
      2010
                                    
                                    
                                    328,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    13,120February
      2010March
      2010
                                    
                                    
                                    456,333
                                    
                                    
                                    $
                                    45,350March
      2010
                                    
                                    
                                    7,000,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    175,000Total
                                    
                                    
                                    9,484,333
                                    
                                    
                                    $
                                    165,350
                                    
                                    
                                    $
                                    188,120





In
addition to the common stock issued above, during the three month period ended
March 31, 2010, we also recorded $91,855 of common stock cash receipts that at
March 31, 2010 had not been issued.  These receipts were recorded as a
current liability at March 31, 2010 and will be issued in the second quarter of
2010.





Note
8. Related party transactions





In the
aggregate, during the three month period ended March 31, 2010, the Company owed
to related parties $255,551 for consulting, legal and marketing services as
reflected below.


F-8





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





Owed To
                  
                  Consulting
                  
                  
                  Legal Services
                  
                  
                  Placement
                    Fee
                  
                  
                  AccountingRowland
      W. Day II
                  
                  $
                  175,000
                  
                  
                  $
                  45,682Litchfield
      Enterprises, Inc.
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  30,000John
      Williams
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  4,869





Rowland
W. Day II is an affiliate in that he is a more than a 15% beneficial shareholder
in the Company.  Mr. Day is our CEO and a director.  Litchfield
Enterprises, Inc. is an investor relations firm.  On February 8, 2010,
Litchfield Enterprises, Inc. signed a non-exclusive consulting agreement with
the Company to assist with a private placement of the Company’s stock. 
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.





Legal-
Rowland Day is the Company’s legal counsel. The amount listed in the above table
for Legal Services includes $30,932 for expenses that Mr. Day has paid on behalf
of the Company.





Placement-
Placement fees paid relate to the sale of the Company’s stock in a private
placement offering.





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





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





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





Note
9. Facilities




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





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





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.


F-9





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





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.  For the period ending March
31, 2010, gross revenue and deferred revenue were as follows.




Gross
      revenue
                  
                  $
                  54,087Deferred
      revenue
                  
                  $
                  8,309Net
      revenue
                  
                  $
                  45,778





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 March
31, 2010, we did not have any material commitments for capital expenditures or
have any transactions, obligations or relationships that could be considered
off-balance sheet arrangements.




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 Third Quarter of
2010.





Note
15-Private Placement Agreement





On
February 8, 2010 Litchfield Enterprises, Inc. signed a non-exclusive consulting
agreement with the Company to assist with a private placement of the Company’s
stock. Per this agreement, Litchfield Enterprises, Inc. will on a “best effort”
basis, seek to raise one million one hundred and twenty-five thousand dollars
($1,125,000) by selling 2,500,000 shares at $.45 per share.  The per share
price of $.45 per share is good for 45 days from the commencement of the
execution of the private placement agreement.  Also, under the private
placement agreement, the Company grants Litchfield Enterprises, Inc. one (1)
warrant exercisible at $.80 per share for each share of their private placement
placed.  These warrants will be valid for one (1) year from the date of
issuance.


F-10





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





Note
16-Stock Based Compensation





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





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





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





In
September 2009, 700,000 stock options with an exercise prices ranging from of
$0.10 to $0.35 were granted to 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.  In January 2010, 1,400,000 stock options with exercise prices of
$0.025 were granted to an officer and a board member of the Company
which vest monthly over a 36 month term.  These options carry a grant
expiration date of 3
years after issuance.  As of March 31, 2010, 198,333 of the stock
options had vested.





For the
three months ended March 31, 2010, the Company recorded compensation costs for
options and shares granted under the plan amounting to $128,910.  There
were no stock options or shares granted or outstanding prior to September 30,
2009, therefore no compensation expense was recorded for the three months ended
March 31, 2009.  A deduction is not allowed for income tax purposes until
nonqualified options are exercised. The amount o this deduction will be the
difference between the fair value of the Company’s common stock and the exercise
price at the date of exercise. The tax effect of the income tax deduction in
excess of the financial statement expense, if any, will be recorded as an
increase to additional paid-in capital.  No tax deduction is allowed for
incentive stock options. Accordingly no deferred tax asset is recorded for GAAP
expense related to these options.





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





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





Three months EndedMarch31,2010Expected
      dividend yield
                
                
                0
                %Expected
      stock price volatility
                
                
                418.5
                %Risk-free
      interest rate  (1)
                
                
                1.56
                %


F-11





WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010





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





Date of
                          
                          Shares
                          
                          
                          Exercise
                          
                          
                          Shares Outstanding
                          
                          Expiration
                          
                          VestingGrant
                          
                          Granted
                          
                          
                          Price
                          
                          
                          As of 3/31/2009
                          
                          Date
                          
                          Date9/10/09
                          
                          
                          100,000
                          
                          
                          $
                          0.35
                          
                          
                          
                          100,000
                          
                          9/10/2014
                          
                          9/1020109/14/09
                          
                          
                          100,000
                          
                          
                          
                          0.10
                          
                          
                          
                          100,000
                          
                          9/14/2014
                          
                          9/14/20109/14/09
                          
                          
                          500,000
                          
                          
                          
                          0.10
                          
                          
                          
                          500,000
                          
                          9/14/2014
                          
                          9/14/201001/08/10
                          
                          
                          900,000
                          
                          
                          
                          .025
                          
                          
                          
                          900,000
                          
                          01/08/13
                          
                          01/08/1301/08/10
                          
                          
                          500,000
                          
                          
                          
                          .025
                          
                          
                          
                          500,000
                          
                          01/08/13
                          
                          01/08/13Total
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,100,000





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




Number
                          
                          
                          Weightedof Shares
                          
                          
                          Average
                          
                          
                          WeightedRemaining
                          
                          
                          Intrinsic
                          
                          
                          Average
                          
                          AggregateSubject to Exercise
                          
                          Options
                          
                          
                          Price
                          
                          
                          Life (Years)
                          
                          ValueOutstanding
      as of September, 2008
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          -Granted
      – 2009
                          
                          
                          700,000
                          
                          
                          $
                          0.214
                          
                          
                          
                          5.00
                          
                          $
                          150,000Forfeited
      – 2009
                          
                          
                          -
                          
                          
                          $
                          
                          
                          
                          
                          -
                          
                          
                          -Exercised
      – 2009
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          -Granted
      – 2010
                          
                          
                          1,400,000
                          
                          
                          $
                          0.975
                          
                          
                          
                          5.00
                          
                          $
                          1,365,000Forfeited
      – 2010
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          -Exercised
      – 2010
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          -Outstanding
      as of March 31, 2010
                          
                          
                          2,100,000
                          
                          
                          $
                          0.721
                          
                          
                          
                          5.00
                          
                          $
                          1,515,000Exercisable
      as of March 31, 2010
                          
                          
                          198,000
                          
                          
                          $
                          .214
                          
                          
                          
                          -
                          
                          $
                          -





The
weighted-average grant date fair value of options outstanding at March 31, 2009
was $0.062. The total intrinsic value of options exercised during the three
months ended March 31, 2010 was $0





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




F-12


WEBSAFETY,
      INC.Formerly Known as BlindSpot
      Alert, Inc.NOTES
      TO THE FINANCIAL STATEMENTSMarch 31,
2010


Number of
                          Non-
                          vested
                          Shares
                          Subject to
                          Options
                        
                        
                        Weighted-
                          Average
                          Grant-
                          Date
                          Fair ValueNon-vested
      as of March 31, 2010
                        
                        
                        -
                        
                        
                        $Non-vested
      granted — three months ended March 31, 2010
                        
                        
                        2,100,000
                        
                        
                        $
                        0.062Vested — three
      months ended March 31, 2010
                        
                        
                        -
                        
                        
                        $
                        0.00Forfeited — three
      months ended March 31, 2010
                        
                        
                        -
                        
                        
                        $Non-vested
      as of March 31, 2010
                        
                        
                        2,100,000
                        
                        
                        $
                        0.062





As of
March 31, 2010 the unrecognized compensation cost related to non-vested share
based compensation arrangements granted under the plan that was approximately
$1,499,672.  These costs are expected to be recognized on a straight line
basis from September 10, 2009 through January 08, 2015.  The total fair
value of options and shares vested during the year period ended March 31, 2010
was $116,662.


Note
18. 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 May 17,
2010 (the financial statement issue date).




On May 7,
2010, the Company terminated its relationship with Russell Spiesser, the former
Chief Technology Officer. Mr. Spiesser’s termination as an Officer was not the
result of any disagreement with the Company on any matter relating to the
Company's operations, policies or practices.




F-13




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





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





Forward-Looking
Statements





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




Plan
of Operation





Websafety,
Inc. has 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 also restricts text messaging while
driving and provides location information to parents through the use of GPS
technology. In June 2008 the Company 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.
 
 On July
2, 2009 the Company entered into an asset acquisition agreement with WQN, Inc.
Under the agreement we acquired all of the technology known as Websafety
Technology 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.
 
 Since our
inception on July 3, 2006 through the end of the forth quarter of 2009,
we generated a minimal amount of revenue.  During the fourth
quarter of 2009,  management determined that sufficient revenues have
been reached to bring us out of the Development Stage.  As such, 2010
was our first fiscal year that the Company was fully operational.  We
also intend to market the products and services by developing relationships with
“trusted” sources consisting of 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 March 31, 2010 we have raised $2,254,605 through the sale of common and
preferred stock the proceeds of which are being used to implement WebSafety’s
plan of operations. This funding has been utilized in the furtherance of our
plan of operations. Future funding is intended to be used in the
commercialization process.


4




Results
of Operations




Three
Months Ended March 31, 2010 compared to Three Months Ended March 31
2009





Revenue





Revenues
were $45,788 during the three months ended March 31, 2010.  We did not
record any revenues for the three months ended March 31, 2009.





Cost
of Revenue





Cost of
revenue was $31,357 during the three months ended March 31, 2010.  We did
not record any cost of revenues for the three months ended March 31,
2009.





Operating
Expenses, Other Income and Expenses and Loss from Operations





For the
three months ended March 31, 2010 we sustained a net operating loss of $849,604
compared to a net operating loss of $417,786 for the three months ended March
31, 2009.  The $431,818 net operating loss increase was mainly due to
higher general and administrative expense.  Also, an increase in
depreciation and amortization expense of $249,018 for the three months ended
March 31, 2010 was offset by a $245,000 decrease in option to acquire expense
for the three months ended March 31, 2009.




Financial
Condition




Cash on
hand at March 31, 2010 was $36,190 and working capital (the excess of current
assets over current liabilities) was a negative $564,497 compared with $5,748
and $442,542, respectively, at December 31, 2009. The decrease in working
capital was primarily attributable to increased disbursements in 2010 for
payroll, marketing, legal, professional and other costs relating to the
implementation of the operating plan.





Other
assets decreased to $2,359,165 at March 31, 2010 from $2,594,400 at December 31,
2009.  The decrease in other assets was a result of $235,235 of
amortization related to the WebSafety Technology asset.  Total current
liabilities increase to $622,424 at March 31, 2010 from $465,461.  The
increase was due to increased payables for marketing, legal, professional and
other costs relating to the implementation of the operating plan





Stockholders’
equity was $1,937,451 at March 31, 2010 compared to $2,304,675 at December 31,
2009.  The $367,224 decrease was due to the issuance of $353,470 worth of
common shares and $128,910 of additional paid-in capital related to the
compensation expense for stock options off-set by net operating losses of
$849,604 for the three months ended March 31, 2010.




Liquidity




Cumulatively,
through March 31, 2010, the Company had raised $2,254,105 in new equity
including $221,763 being raised in First Quarter 2010 to support planned
operations. In light of recent operating results and negative cash flows,
additional capital will be required to fund the Company’s operations. On
February 8, 2010, the Company signed a non-exclusive consulting agreement
Litchfield Enterprises, Inc. (LEI).  Through this agreement, LEI will
assist with a private placement of the Company’s stock.  Per this
agreement, LEI will on a “best effort” basis, seek to raise one million one
hundred and twenty-five thousand dollars ($1,125,000) by selling 2,500,000
shares at $.45 per share. (See “Note 15-Private Placement Agreement” for further
discussion). In the most recent quarter ending March 31, 2010 the Company’s cash
usage was approximately $221,763. Management expects the remaining 2010 cash
requirements to be consistent with the first quarter.  If successful, the
LEI private placement would generate sufficient capital needed to fund the
Company through the fourth quarter of 2010; at which time Management expects
operations to be generating positive cash flows.


5


There is
no assurance that the Company will be successful with the LEI private placement.
It is management’s intent to continue fund raising efforts to generate the
capital required to support expanding operations.  There can be no
assurance that we will be able to raise any more additional capital on terms
that are beneficial to us.




Critical
Accounting Policies and Estimates




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




Off-balance
sheet arrangements




At March
31, 2010, we did not have any material commitments for capital expenditures or
have any transactions, obligations or relationships that could be considered
off-balance sheet arrangements.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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




ITEM
4. CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures





Our
management evaluated, with the participation of our Chief Executive Officer 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 quarter ended March 31, 2010 that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.





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




Management
Report on Internal Control over Financial Reporting




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





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


6


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


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





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


Management
assessed the effectiveness of our internal control over financial reporting as
of March 31, 2010. In making this assessment, our management used the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).




Changes
in Internal Control





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




PART II - OTHER INFORMATION




Item 1. Legal Proceedings




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




Item
1.A. Risk Factors





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





RISKS
RELATING TO OUR BUSINESS





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





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


7





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





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





COMPANY’S
RELIANCE UPON EXECUTIVES AND CONSULTANTS




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




CHALLENGES
FROM COMPETITION





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




RISKS
RELATED TO OUR COMMON STOCK





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





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




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





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





APPROXIMATELY
42% 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 May
17, 2010, WQN, Inc. directly owns 27,000,000 shares, which represents
approximately 42% of our 64,380,047 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.


8





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





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




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





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




WE
WILL NEED ADDITIONAL FINANCING.





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





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





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





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





For the
period ending March 31, 2010, the Company sold 1,449,344 shares of its
unregistered common stock to various accredited investors for proceeds of
$252,205.  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 Exhibit31.1
              Rule
      13a-14(a) Certification of Chief Executive Officer31.2
              Rule
      13e-14(a) Certification of Chief Financial Officer32.1
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 200232.2
              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


9




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:
                May
      17, 2010
                By:
                /s/ Rowland W. Day IIRowland
      W. Day II,Principal
      Executive Officer


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