WEBSAFETY, INC. – 10-Q – Management’s Discussion and Analysis and Plan of Operations

The following discussion should be read in conjunction with our unaudited interim financial statements as of, and for the six months ended June 30, 2012 and 2011, and with our annual report on Form 10-K for the year ended December 31, 2011.

   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 cell phones that allow parents or other caregivers to monitor and be notified of occurrences of predator advances, cyber bullying and pornography received on cell phones. The cell phone application also restricts text messaging while driving and provides location information to parents through the use of GPS technology.

Since our inception on July 3, 2006 through the end of the December 31, 2011, we have generated a minimal amount of revenue. We 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.

In 2011, we raised $420,000 in new equity funding through the sale of common stock and preferred stock, the proceeds were used in 2011 to fund our operations through August of 2011. We suspended our operations in September of 2011 due to lack of working capital.

Our CEO, Rowland W. Day II moved the administration of the business to his law office located in California which is the new address of the Company.

Mr. Day has continued to meet with prospective investors to fund the operations of the Company. To date very little money has been raised or loaned to the Company. There is no assurance that enough money can be raised for the Company to become operational at any time in the future.

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  Results of Operations   Revenue  

Revenues for the three and nine month periods ended September 30, 2012 totaled $0 and $0, as compared to $7,479 and $64,894, respectively. Management attributes the decline in revenue to the current economic environment and a delay in the execution of sales contracts which has required a substantial investment of management's time and marketing efforts of the Company. The ultimate outcome of such contracts remains unknown at September 30, 2012; however, communication and on-going negotiations continue. We suspended our operations in September of 2011 due to lack of working capital.

Cost of Revenue

Cost of revenue represented 0% of sales or $0 during the three and nine months ended September 30, 2012 which was worsened when compared to the corresponding periods of 2011 which showed cost of revenue as $9,546 and $55,848. The decrease in cost of revenues experienced in the three and nine month period ending September 30, 2012 when compared to the corresponding period of 2011 was primarily due to the Company's lack of investment of capital to strengthen sales channels which has yet to show a return.

Operating Expenses, Other Income and Expenses and Loss from Operations

For the nine months ended September 30, 2012 we sustained a net operating loss of $1,174,985 compared to a net operating loss of $1,869,592 for the nine months ended September 30, 2011. The overall net operating loss decrease was mainly due to a reduction in general and administrative expenses and a reversal in the loss contingency.

   Financial Condition   

Cash at September 30, 2012 was $52,869 and working capital (the excess of current assets over current liabilities) was a negative $1,315,950 compared with a negative $1,826,132 at December 31, 2011. The increase in working capital was primarily attributable to a decrease in current liabilities after the conversion of notes to common stock during the nine months ended September 30, 2012.

Total current liabilities decreased to $1,368,819 at September 30, 2012 from $1,826,132 at December 31, 2011. As noted above, the decrease was due to decrease in loans payable after conversion to common stock.

Stockholders' equity was $(1,305,132) at September 30, 2012 compared to $(1,771,255)December 31, 2011. The decrease in deficit was due to the issuances of shares for cash and services in excess of the par value of common stock.

   Liquidity  

For the nine months ended September 30, 2012, the Company had not raised any in new equity. 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 2012 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.

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   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 $12,853,583 from the period of July 3, 2006 (Inception) through September 30, 2012 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 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.

Off-balance sheet arrangements

At September 30, 2012, 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.