ONEI 10-Q Quarterly Report March 31, 2011 | Alphaminr
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ONEI 10-Q Quarter ended March 31, 2011

Balance Sheet
Cash Flow
Income Statement
10-Q 1 v222465_10q.htm QUARTERLY REPORT Unassociated Document
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, 2011
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)
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 9, 2011:

Class
Outstanding shares as of May 9, 2011
Common Stock, $0.001 par value
73,791,578
INDEX
Page
PART 1-FINANCIAL INFORMATION
3
Item 1.  Financial Statements
F-2
Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
F-2
Statements of Operations (unaudited) for the three months ended March 31, 2011 and March 31, 2010.
F-3
Statements of Cash Flows (unaudited) for the three months ended March 31, 2011 and March 31, 2010.
F-4
Statement of Stockholder’s Equity (Deficit) for the year ended December 31, 2010 and the three months ended March 31, 2011 (unaudited)
F-5
Notes to Financial Statements
F-6
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
5
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
7
Item 4.  Control and Procedures
7
PART II-OTHER INFORMATION
8
Item 1.  Legal Proceedings
8
Item 1A.  Risk Factors
8
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
10
Item 6.  Exhibits
10
SIGNATURES
11
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
3

INTERIM FINANCIAL STATEMENTS
(UNAUDITED)

Table of Contents

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

WEBSAFETY, INC.
BALANCE SHEETS
As of March 31, 2011 (unaudited) and December 31, 2010
As of
March 31, 2011
December 31, 2010
(Unaudited)
ASSETS
Current assets:
Cash
$ - $ 26,168
Accounts receivable
150 150
Total current assets
150 26,318
Property and Equipment:
Computer equipment, computer software and furniture, net
11,685 12,429
Software license and website development, net
87,196 101,139
Total property and equipment
98,881 113,568
Other Assets:
Deposits
19,756 19,756
Total other assets
19,756 19,756
$ 118,787 $ 159,642
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash Overdraft
$ 25,339 $ -
Accounts payable
313,231 297,730
Accrued expense
10,744 24,010
Deferred revenue
- 3,587
Due to Shareholders
626,785 508,249
Loan Payable
179,624 110,833
Liability to issue shares
270,475 53,000
Total current liabilities
1,426,198 997,409
Stockholders' equity:
Preferred stock; $.001 par value, 25,000,000 shares
authorized, 2,863,335 shares issued and
outstanding respectively
2,863 2,863
Common stock; $.001 par value, 300,000,000 shares
authorized, 72,143,828 and 70,313,828  shares issued and
outstanding, respectively
72,144 70,314
Additional paid in capital
7,540,303 7,104,986
Deficit accumulated
(8,922,721 ) (8,015,930 )
Total stockholders' equity
(1,307,411 ) (837,767 )
$ 118,787 $ 159,642

The accompanying notes are an integral part of these financial statements.
F-1

WEBSAFETY, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)

(Unaudited)
Three Months Ended March 31,
2011
2010
Revenue
$ 36,517 $ 45,778
Cost of goods sold
(26,015 ) (31,357 )
Gross margin
10,502 14,421
Operating expenses:
General and administrative expenses
803,815 612,507
Research & Development
- 2,500
Depreciation and amortization expense
14,688 249,018
Total operating expenses
818,503 864,025
(Loss) from operations -
(808,001 ) (849,604 )
Other income (expense):
Interest expense
(98,790 ) -
Total other income (expense)
(98,790 ) -
(Loss) before provision for income taxes
(906,791 ) (849,604 )
Provision for income taxes
-
Net (loss)
$ (906,791 ) $ (849,604 )
Basic and diluted loss per share
$ (0.013 ) $ (0.015 )
Basic and diluted weighted average common shares outstanding
71,004,161 57,615,618

The accompanying notes are an integral part of these financial statements.
F-2

WEBSAFETY, INC.
STATEMENTS OF CASH FLOWS
March 31, 2011
(Unaudited)
(Unaudited)
Three Months Ended March 31,
2011
2010
Operating activities:
Net loss
$ (906,791 ) $ (849,604 )
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation
14,689 249,018
Amortization of beneficial conversion
98,790 -
Stock compensation expense
172,146 128,910
Stock issued for services - Non-cash
120,000 188,120
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
- (4,565 )
Increase in cash overdraft
25,339 -
Increase  in accounts payable
15,501 75,157
Decrease  in deferred revenue
(3,587 ) 8,308
Increase in accrued expense
(13,266 ) 73,498
Net cash (used in) operating activities
(477,179 ) (131,158 )
Investing activities:
Purchase of long term assets
- (3,750 )
Financing activities:
Increase in liability to issue shares
217,475 -
Proceeds from borrowing
42,500 -
Proceeds of advances from shareholders
118,536 -
Proceeds from sale of common stock
102,500 165,350
Payment of borrowings
(30,000 ) -
Net cash provided by financing activities
451,011 165,350
Net changes in cash
(26,168 ) 30,442
Cash, beginning of year
26,168 5,748
Cash, end of period
$ - $ 36,190
Cash paid during the period for:
Interest paid
- -
Tax paid
- -
Non Cash Investing and Financing Activities:
Issuance of common stock for services
$ 120,000 $ 188,120
Voluntary conversion of shareholders advance to paid in Capital
$ - $ -
Common stock issued for equipment
$ - $ -
Common stock issued for software/technology
$ - $ -
The accompanying notes are an integral part of these financial statements.
F-3

WEBSAFETY, INC.
STATEMENTS OF STOCKHOLDERS EQUITY
For the Year Ended December 31, 2010 and the Three Months Ended March 31, 2011
(Unaudited)

Additional
Subscription
Paid-in
Shares
Amount
Shares
Receivable
(Deficit)
Balances December 31, 2009
4,230,002 $ 4,230 54,895,714 $ 54,896 $ - $ 4,817,805 $ (2,572,257 ) $ 2,304,674
Issuance of common stock for cash
January 6, 2010 one issuance at $0.45
100,000 $ 100 44,900 45,000
January 27, 2010 one issuance at $0.043
1,600,000 $ 1,600 68,400 70,000
March 9, 2010 one issuance at $0.05
400,000 $ 400 19,600 20,000
March 9, 2010 one issuance at $0.045
33,333 $ 33 14,967 15,000
March 9, 2010 one issuance at $0.045
23,000 $ 23 10,327 10,350
-
Issuance of common stock for services
-
January 6, 2010 one issuance at $0.04
100,000 $ 100 3,900 4,000
January 6, 2010 one issuance at $0.04
200,000 $ 200 7,800 8,000
January 6, 2010 one issuance at $0.04
28,000 $ 28 1,092 1,120
March 17, 2010 one issuance at $0.025
7,000,000 $ 7,000 168,000 175,000
-
Stock Compensation Expense
128,911 128,911
Net loss for the period ended March 31, 2010
(849,604 ) (849,604 )
Balances  March 31, 2010
4,230,002 $ 4,230 64,380,047 $ 64,380 $ - $ 5,285,702 $ (3,421,861 ) $ 1,932,451
Issuance of common stock for cash
April 5, 2010 one issuance at $0.45
26,500 $ 27 11,898 11,925
April 5, 2010 one issuance at $0.45
155,400 $ 155 69,775 69,930
April 5, 2010 one issuance at $0.45
22,222 $ 22 9,978 10,000
June 2, 2010 one issuance at $0.45
50,000 $ 50 22,450 22,500
June 18, 2010 one issuance at $0.45
534,192 $ 534 239,852 240,386
-
Issuance of common stock for services
-
June 2, 2010 one issuance at $0.45
15,000 $ 15 6,735 6,750
June 2, 2010 one issuance at $0.45
4,522 $ 5 2,030 2,035
June 2, 2010 one issuance at $0.45
55,555 $ 56 24,944 25,000
June 18, 2010 one issuance at $0.45
200,000 $ 200 89,800 90,000
-
Conversion of preferred shares to common shares at 1.25 to 1
(1,000,000 ) (1,000 ) 1,250,000 $ 1,250 (250 ) -
Issuance of common stock to adjust issue price
11,111 $ 11 4,989 5,000
Stock Compensation Expense
128,910 128,910
Net loss for the period ended June 30, 2010
(856,139 ) (856,139 )
Balances  June 30, 2010
3,230,002 $ 3,230 66,704,549 $ 66,705 $ - $ 5,896,813 $ (4,278,000 ) $ 1,688,748
Issuance of common stock for cash
August 6, 2010 one issuance at $0.45
47,223 $ 47 21,203 21,250
September 7, 2010 one issuance at $0.25
124,446 $ 124 30,987 31,112
September 15, 2010 one issuance at $0.25
100,000 $ 100 24,900 25,000
September 22, 2010 one issuance at $0.45
55,740 $ 56 25,027 25,083
-
Issuance of common stock for services
-
August 6, 2010 one issuance at $0.45
25,000 $ 25 975 1,000
August 6, 2010 one issuance at $0.45
100,000 $ 100 44,900 45,000
September 15, 2010 one issuance at $0.25
135,000 $ 135 33,615 33,750
September 15, 2010 one issuance at $0.40
125,000 $ 125 49,875 50,000
September 15, 2010 one issuance at $0.45
42,500 $ 43 19,083 19,125
September 22, 2010 one issuance at $0.45
10,068 $ 10 4,521 4,531
September 22, 2010 one issuance at $0.25
550,000 $ 550 136,950 137,500
-
Conversion of preferred shares to common shares at 1.25 to 1
(366,667 ) (367 ) 458,334 $ 458 (92 ) -
Stock Compensation Expense
128,910 128,910
Beneficial Conversion Feature of Promissory Note
100,000 100,000
Net loss for the period ended September 30, 2010
(1,159,287 ) (1,159,287 )
Balances  September 30, 2010
2,863,335 $ 2,863 68,477,860 $ 68,478 $ - $ 6,517,667 $ (5,437,287 ) $ 1,151,722
Issuance of common stock for cash
October 27, 2010 one issuance at $0.20
100,000 $ 100 19,900 20,000
October 29, 2010 one issuance at $0.25
50,000 $ 50 12,450 12,500
November 16, 2010 two issuances at $0.25
100,000 $ 100 24,900 25,000
December 28, 2010 Debt Conversion at $0.18
421,414 $ 421 75,433 75,855
December 28, 2010 Debt Conversion at $0.10
545,000 $ 545 53,955 54,500
Issuance of common stock for services
-
October 27, 2010 three issuances at $0.25
340,000 $ 340 84,660 85,000
October 1, 2010 three issuances at $0.25
100,000 $ 100 24,900 25,000
Issuance of common stock to adjust issue price
179,554 $ 180 44,709 44,889
Stock Compensation Expense
128,910 128,910
Beneficial Conversion Feature of Promissory Note
117,500 117,500
Net loss for the period ended December 31, 2010
(2,578,643 ) (2,578,643 )
Balances December 31, 2010
2,863,335 $ 2,863 70,313,828 $ 70,314 $ - $ 7,104,986 $ (8,015,930 ) $ (837,767 )
Issuance of common stock for cash
March 4, 2011 six issuances at $0.10
1,025,000 $ 1,025 101,475 102,500
Issuance of common stock for services
January 13, 2011 one issuance at $0.25
40,000 $ 40 9,960 10,000
January 31, 2011 one issuance at $0.25
200,000 $ 200 49,800 50,000
February 11, 2011 one issuance at $0.25
200,000 $ 200 49,800 50,000
March 1, 2011 one issuance at $0.25
40,000 $ 40 9,960 10,000
Issuance of common stock to adjust issue price
325,000 $ 325 (325 ) -
Stock Compensation Expense
172,147 172,147
Beneficial Conversion Feature of Promissory Note
42,500 42,500
Net loss for the period ended March 31, 2011
(906,791 ) (906,791 )
Balances March 31, 2011
2,863,335 $ 2,863 72,143,828 $ 72,144 $ - $ 7,540,303 $ (8,922,721 ) $ (1,307,411 )

The accompanying notes are an integral part of these financial statements.
F-4

WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
Note 1.  Condensed Financial Statement
The accompanying financial statements have been prepared by Websafety ( the Company) without audit.  In the opinion of management, all adjustments (which include only normal and recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2011, 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, 2010 audited financial statements.  The results of operations for the three months ended March 31, 2011 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 $8,922,721 from the period of July 3, 2006 (Inception) through March 31, 2011 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 2011 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 financial 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, 2011, there were 3,990,000 stock options and 7,340,223 stock warrants issued and outstanding that could dilute future earnings.

Beneficial Conversion Feature
Costs incurred with parties who are providing financing, which include the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount.  These discounts are generally amortized over the life of the related debt.  In certain circumstances, the intrinsic value of the beneficial conversion feature may be greater than the proceeds associated to the convertible instrument.  In such situations, the amount of the discount assigned to the beneficial conversion feature is limited to the amount of the proceeds allocated to the convertible instrument.
F-5
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
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 in accordance with FASB ASC 820. The Company’s principal financial instruments are cash, accounts receivable and accounts payable. At March 31, 2011, cash, accounts receivable, and accounts payable, due to their short maturities, and liquidity, are carried at amounts which reasonably approximate fair value.

Stock Based Compensation
We follow the provisions of FASB ASC 718. FASB ASC 718 requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). FASB ASC 718 also requires measurement of the cost of employee services received in exchange for an equity award based upon the grant-date fair value of the award.

We account for non-employee share-based awards in accordance with FASB ASC 505-50.

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505-50.  Accordingly, the measurement date for the fair value of the equity instruments issued is determined at earliest 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.

In accordance with FASB ASC 505-50, each transaction involving the issuance of stock in exchange for goods or services is analyzed to determine whether the value of the stock given as consideration on the value of the goods on services received are the more representation of the value of the underlying transactions.

Note 3. Concentration of Credit Risk

For the quarters ended March 31, 2011 and 2010 the Company had $36,517 and $45,778 in revenues, respectively.  A concentration of credit risks exist due to the fact that the Company has a limited number of both customers and vendors.  If a number of customers or vendors decided to take their business elsewhere, the Company’s losses could increase significantly.  As of March 31, 2011, no credit has been extended to “on account” customers.  Because all sales have been booked via credit card, management does not deem it necessary to record a receivable allowance at March 31, 2011.

Note 4.  Property and Equipment

Property and equipment consist of the following at March 31, 2011 and December 31, 2010:
March 31,
December 31,
2011
2010
Property and Equipment
Equipment
$ 16,689 $ 16,689
Software
167,910 167,910
Total property and equipment before accumulated depreciation
184,599 184,599
Less accumulated depreciation
(85,718 ) (71,031 )
Total property and equipment
$ 98,881 $ 113,568

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.
F-6
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
Note 5. Note Payable

Debt consisted of the following at March 31:
·
$100,000 loan received September 22, 2010 due March 22, 2011 including interest at 5%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to $0.10 per share.
·
$80,000 loan received October 8, 2010 due July 11, 2011 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price.
·
$37,500 loan received November 29, 2010 due September 1, 2011 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price.
·
$42,500 loan received February 9, 2011 due November 11, 2011 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price.

Four loans above have a right to convert to common stock.  Based on the intrinsic value of the conversion feature, the Company determined that there was a beneficial conversion feature on all four promissory notes.  As a result of the beneficial conversion feature exceeding the proceeds received from the promissory notes, management discounted the notes 100% and will amortize this discount over the life of the note.

As of March 31, 2011, $179,624 of the debt discount has been amortized as interest expense and the remainder will be amortized straight line over the remaining life of the corresponding note. During the three months ended March 31, 2011 and 2010,  amortization of the beneficial conversion feature, recorded as interest expense, was $98,790 and $0, respectively.

Note 6.  Stock Issuances

During the three month period ended March 31, 2011 we had the following common stock issuances.

Date
Number of
Shares
Value
January 2011
240,000 $ 60,000
February 2011
200,000 50,000
March 2011
1,390,000 112,500
Total Common Issuances
1,830,000 $ 222,500

In addition to the common stock issued above we also recorded $270,475 of common stock cash receipts that at March 31, 2011 had not been issued.  These receipts were recorded as a current liability at March 31, 2011 and will be issued in the second quarter of 2011.
F-7
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
In March 2011 we adjusted an issue price from the fourth quarter 2010. We issued 150,000 shares of common stock at $0.25 a share and 100,000 shares of common stock at $0.20 for a total of $57,500 in the fourth quarter 2010.  We adjusted the price to $0.10 and issued an additional 325,000 for total issuance of 575,000 common stock shares at $0.10 for $57,500.  The cash received for this issuance was accounted for in the fourth quarter of fiscal 2010 and the additional shares issued in the Company’s first quarter of fiscal 2011 was accounted for as a stock dividend.

In connection with the Company’s subscription agreement, subscribers also receive warrants to purchase additional shares of the Company’s common stock at the established exercise price. The warrants  vest on the date of grant and expire one year after the warrants are issued. The following table displays warrants issued in connection with subscriptions during the three month period ended March 31, 2011:

Date of Grant
Warrants
Granted
Exercise
Price
Warrants
Outstanding
as of 3/31/2011
Expiration
Dates
December 2010
2,222,789 $ 0.20-0.80 1,465,223
May 2011-December 2011
January 2011
4,050,000 $ 0.15-0.21 4,050,000
January 2012
February 2011
1,350,000 $ 0.20 1,350,000
February 2012
March 2011
475,000 $ 0.20 475,000
March 2012
Total
8,097,789 7,340,223

Note 7.  Related Party Transactions

In the aggregate, during the three month period ended March 31, 2011, the Company owed to related parties $626,785 for consulting, legal and marketing services as reflected below.

Owed To
Consulting,
legal and
administrative
Loan
Accounting
Services
Rowland W. Day II
$ 410,133 $ 208,363
John R. Williams
$ 8,289

Rowland W. Day II is our CEO, CFO and Director.  John Williams was the former contract Treasurer and CFO of the Company and is the Chief Accounting Officer of WQN, Inc.

The services that were provided are outlined below.

Accounting Services- Services consisted of financial consulting and preparation of the 10Q for the period March 31, 2010.

Administrative, Financial and Legal Services- These services consist of management oversight of the operations of the Company; review of financial operations, capital raising and meetings with investors, potential investors preparation of the Company’s legal requirements and documents for the Company’s operations.

Note 8. Facilities

The Company’s corporate headquarters are presently located at 2201 W Royal Lane, Suite 200, Irving, Texas 75063.
F-8
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
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.

For the three month period ended March 31, 2011 and 2010, actual lease expense was $26,411 and $0, respectively.

Note 9. Sales and Marketing Program
In July 2010 we entered into a sales and marketing agreement with Manage Mobility.  Manage Mobility manages Telecom services for corporations and municipalities and intends to market our products to their clients.

In October 2010 we entered into an agreement with AAA of Northwest Ohio.  AAA of Northwest Ohio offers auto related products and services to their members.  AAA of Northwest Ohio has recently marketing of our software to its members.

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

Note 10. Recent Pronouncements

Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Note 11. Private Placement Agreement

On February 8, 2010 Litchfield Enterprises, Inc. signed a non-exclusive consulting agreement with the Company to assist with a private placement of the Company’s stock. Per this agreement, Litchfield Enterprises, Inc. will on a “best effort” basis, seek to raise one million one hundred and twenty-five thousand dollars ($1,125,000) by selling 2,500,000 shares at $.45 per share.  Also, under the private placement agreement, the Company granted Litchfield Enterprises, Inc. one (1) warrant exercisable 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.  As of March 31, 2011, we issued 900,000 shares of common stock to Litchfield and their investors along with 700,000 warrants.

On September 11, 2010 Wakabayashi Fund, LLC signed a non-exclusive consulting agreement with the Company to act as a capital consultant for a six month period.  Under the private placement agreement, the Company agrees to pay Wakabayashi a success fee of seven percent (7%), inclusive of all fees, in cash of the amount of capital raised as a result of contact by Wakabayashi.  There has been no measurable activity undertaken by Wakabayashi Fund, LLC to raise capital for the Company.

On August 6, 2010, the Company retained Aegis Capital as an exclusive placement agent to raise a minimum of $1,350,000 and a maximum of $5,400,000 of capital for the Company; on September 20, 2010 the Company and Aegis Capital agreed to mutually terminate the exclusive placement agent.

Note 12. 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.
F-9
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
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 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.  In February 2011, 2,000,000 stock options with exercise price of $.10 were granted to an officer of the Company which vest monthly over a 12 month term.  These options carry a grant expiration date of 1 year after issuance.  In February 2011, 330,000 stock options with exercise price of $0.10 were granted to employees of the Company which vest monthly over a 48 month term.  These options carry a grant expiration date of 4 years after issuance. As of March 31, 2011 approximately 1,043,631 stock options had vested and 440,000 options had been forfeit.

For the three month period ended March 31, 2011 and 2010, the Company recorded compensation costs for options and shares granted under the plan amounting to $172,146 and $128,910, respectively.  A deduction is not allowed for income tax purposes until nonqualified options are exercised. The amount of this deduction will be the difference between the fair value of the Company’s common stock and the exercise price at the date of exercise. The tax effect of the income tax deduction in excess of the financial statement expense, if any, will be recorded as an increase to additional paid-in capital.  No tax deduction is allowed for incentive stock options. Accordingly no deferred tax asset is recorded for GAAP expense related to these options.

Management has valued the options at their date of grant utilizing the Black Scholes Merton option pricing model.  The fair value of the underlying shares was determined based on the closing price of the Company’s publicly-traded shares as of date of the grant.   Further, the expected volatility was calculated using the historical volatility of 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 in fiscal 2011:

Three Months Ended
March 31, 2011
March 31, 2010
Exercise Price
$ 0.10 $0.35 - $0.10
Expected dividend yield
0 % 0 %
Expected stock price volatility
185 % 418.5 %
Risk-free interest rate
0.30 % 1.56 %

The Company has granted stock options to officers and employees as follows:
F-10
WEBSAFETY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2011
The following table summarizes the status of the Company’s aggregate stock options granted under the incentive stock option plan:

Number
Weighted
of Shares
Average
Weighted
Remaining
Exercise
Average
Aggregate
Subject to Exercise
Options
Price
Life (Years)
Value
Outstanding as of January 1, 2010
700,000 $ 0.14 5.00 $ 150,000
Granted – 2010
1,400,000 $ 0.025 5.00 $ 1,365,000
Forfeited – 2010
- $ - -
Exercised – 2010
- $ - - -
Outstanding as of December 31, 2010
2,100,000 .06 5.00 $ 1,515,000
Granted – 2011
2,330,000 $ .10 1.28 $ 429,420
Forfeited – 2011
(440,000 ) $ .01 5.00 (24,056 )
Exercised – 2011
- $ - - -
Outstanding as of March 31, 2011
3,990,000 $ .08 3.04 $ 1,920,364
Exercisable as of March 31, 2011
997,298 $ .675 - $ 704,127

The weighted-average grant date fair value of options outstanding at March 31, 2011 was $0.438.  There were no options exercised as of March 31, 2011 and 440,000 options were forfeit. Options issued and outstanding have exercise price ranging from .10 to .35.
The following table summarizes the status of the Company’s aggregate non-vested shares granted under the 2008 Stock Option Plan.

Number of
Non-
vested
Shares
Subject to
Options
Weighted-
Average
Grant-
Date
Fair Value
Non-vested as of December 31, 2010
1,493,000
$
0.721
Non-vested granted —period ended March 31, 2011
2,330,000
$
0.18
Vested — quarter ended March 31, 2011
(390,298)
$
0.438
Forfeited — quarter ended March 31, 2011
(440,000)
$
(.05)
Non-vested as of March 31, 2011
2,992,702
$
0.48

As of March 31, 2011 the unrecognized compensation cost related to non-vested share based compensation arrangements granted under the plan was approximately $1,440,387. Costs related to non-vested stock will be recognized over a weighted average period of 3.04 years.
F-11
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, 2011 and 2010, and with our annual report on Form 10-K for the year ended December 31, 2010. 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 those expressed 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 first quarter of 2011, we have 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 the first first fiscal year 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.

For the quarter ended March 31, 2011 we have raised $372,975 through the sale of common and corresponding liability to issue common 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.
5
Results of Operations

Revenue

Revenues remained consistent during the first quarter of 2011 totaling $36,517 compared to revenues of $45,778 for the three months ended March 31, 2010.

Cost of Revenue

Cost of revenue represented 71.2% of sales or $26,015 during the three months ended March 31, 2011 which was consistent when compared to the corresponding period of 2010 which showed cost of revenue as 68.5% or $31,357.

Operating Expenses, Other Income and Expenses and Loss from Operations

For the three months ended March 31, 2011 we sustained a net operating loss of $808,001 compared to a increase in general and administrative expenses operating of a net loss of $849,604 for the three months ended March 31, 2010.  The $41,603 net operating loss decrease was mainly due to a reduction of depreciation and amortization expense and increase in general and administrative expenses.  Depreciation and amortization for the three months ended March 31, 2011 was $14,688 compared to $249,018 for the three months ended March 31, 2010. The decrease was due to the impairment write off of the intangible asset during the Company’s fourth quarter of fiscal 2010.
Financial Condition
Cash overdraft at March 31, 2011 was $(25,339) and working capital (the excess of current assets over current liabilities) was a negative $1,426,048 compared with a negative $971,091 at December 31, 2010. The decrease in working capital was primarily attributable to increased disbursements in 2011 for payroll, marketing, legal, professional and other costs relating to the implementation of the operating plan.

Other assets remained the same at $19,756 at March 31, 2011 compared to December 31, 2010.  Total current liabilities increased to $1,426,198 at March 31, 2011 from $997,409 at December 31, 2010.  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 $(1,307,411) at March 31, 2011 compared to $(837,767) at December 31, 2010.  The increase in deficit was primarily due to the net loss from operations which was partially offset by issuances of shares for cash and services in excess of the par value of common stock.
Liquidity
Cumulatively, through March 31, 2011, the Company had raised $4,233,282 in new equity including $372,975 being raised in the First Quarter 2011 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.

To support planned operations through 2011 and beyond, additional capital will be required. In that regard it is management’s intent to continue fund raising efforts to generate the capital required to support expanding operations.

There can be no assurance that we will be able to raise any more additional capital on terms that are beneficial to us.
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.
6
Off-balance sheet arrangements
At March 31, 2011, we did not have any material commitments for capital expenditures or have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.
Item 4. Controls And Procedures
Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer/Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our Chief Executive Officer/ Chief Financial Officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of such period, are ineffective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Management Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act).  Internal control over financial reporting is 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 accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed our internal control over financial reporting as of March 31, 2011. Management based its assessment on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this assessment, management has concluded that as of March 31, 2011, our internal control over financial reporting was ineffective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. We noted that there is a lack of segregation of certain duties at the Company due to the small number of employees with responsibility for general administrative and financial matters. This constitutes a deficiency in financial reporting. We therefore conclude that our internal control over financial reporting were ineffective as of and for the quarter ended March 31, 2011.  At this time, management has decided that considering the employees involved and the control procedures in place, the risks associated with such lack of segregation of duties are insignificant and the potential benefits of adding additional employees to clearly segregate duties do not justify the additional expenses associated with such increases. Management will periodically reevaluate this situation. If the volume of business increases and sufficient capital is secured, it is the Company’s intention to further increase staffing to mitigate the current lack of segregation of duties within the general, administrative and financial functions.
7

This quarterly report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to final rulings of the SEC that permit us to provide only management’s report in this annual report.
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 November 2010, the Company and Mr. Jolley settled the pending arbitration and litigation without any loss to the Company.

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.
8

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 36.6% 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 9, 2011, WQN, Inc. directly owns 27,000,000 shares, which represents approximately 36.6% of our 73,791,578 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.
9

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, 2011, the Company sold 3,075,000 shares of its unregistered common stock to various accredited investors for proceeds of $372,975 .  The sales were exempt from registration pursuant to the Securities Act of 1933.  The proceeds were used for working capital.
Item 6. Exhibits
No.
Description of Exhibit
31.1
Rule 13a-14(a) Certification of Chief Executive Officer
31.2
Rule 13e-14(a) Certification of Chief Financial Officer
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
WEBSAFETY, INC .
Date:
May 13, 2011
By:
/s/ Rowland W. Day II
Rowland W. Day II,
Principal Executive Officer
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TABLE OF CONTENTS