UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q





x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended September 30, 2009





OR





o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934




Commission File No.: 000-53705COPSYNC, INC.(Exact name of registrant as specified in its charter)Delaware

98-0513637(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)2010 FM 2673, Canyon Lake, Texas 78133(Address of principal executive offices)(Zip code)(830) 964-3838( Registrant's telephone number, including area code)






Indicate by check whether the registrant (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 xNo o





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 (Sec.323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant
was required to submit and post such files).  Yes o   No o









Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.




Large accelerated filer  ̈                                                                                                        Accelerated
filer  ̈




Non-accelerated filer    ̈ (Do not check is a smaller reporting company)Smaller
reporting company x







Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes x   No o





The number of shares outstanding of each of the issuer's classes of common stock, as of October 28, 2009, was 124,479,667 shares of Common Stock, $0.0001 par value.























COPSYNC, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2009INDEXPagePART I -FINANCIAL INFORMATION
3Item 1.
Financial Statements
3Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
14Item 3.
Quantitative and Qualitative Disclosures About Market Risks
16Item 4.
Controls and Procedures
16PART II -OTHER INFORMATION
17Item 1.
Legal Proceedings
17Item 1A.
Risk Factors
17Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
17Item 3.
Defaults on Senior Securities
18Item 4.
Submission of Matters to a Vote of Security Holders
18Item 5.
Other Information
18Item 6.
Exhibits
18SIGNATURES
19



















2




PART I - FINANCIAL INFORMATION







Item 1. Financial Statements





COPSYNC, INC.Consolidated Balance SheetsASSETSSeptember 30,


December 31,2009


2008(Unaudited)CURRENT ASSETSCash and cash equivalents

$
11,880


$
209,378Accounts receivable, net


38,316



-Deferred costs on licensing contracts


398,821



-Total Current Assets


449,017



209,378PROPERTY AND EQUIPMENTComputer hardware


43,232



43,232Computer software


16,669



16,669Fleet vehicles


77,209



51,393Furniture and fixtures


45,832



45,132Total Property and Equipment


182,942



156,426Less: Accumulated Depreciation


(90,797
)


(67,402
)Net Property and Equipment


92,145



89,024OTHER ASSETSSoftware development costs, net


2,309,763



2,127,296Debt issuance costs, net


19,833



-Lease security deposit


750



750Total Other Assets


2,330,346



2,128,046TOTAL ASSETS

$
2,871,508


$
2,426,448











The accompanying notes are an integral part of these financial statements.
 3





COPSYNC, INC.Consolidated Balance Sheets (Continued)LIABILITIES AND STOCKHOLDERS' EQUITYSeptember 30,


December 31,2009


2008(Unaudited)CURRENT LIABILITIESAccounts payable and accrued expenses

$
389,341


$
77,633Deferred revenues on licensing contracts


533,481



-Convertible notes payable - related parties, net of notediscount of $173,617 and $-0-, respectively


608,383



420,000Notes payable, current portion


12,287



7,453Total Current Liabilities


1,543,492



505,086LONG-TERM LIABILITIESNotes payable


37,339



24,592Total Liabilities


1,580,831



529,678COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' EQUITYSeries A Preferred stock, par value $0.0001 per share,1,000,000 shares authorized; 100,000 shares issuedand outstanding


10



10Common stock, par value $0.0001 per share,500,000,000 shares authorized; 124,046,335 and120,273,001 shares issued and outstanding,respectively


12,405



12,027Common stock to be issued, 130,885 shares


19,633



-Additional paid-in-capital


4,319,013



3,527,549Deficit accumulated during the development stage


(3,060,384
)


(1,642,816
)Total Stockholders' Equity


1,290,677



1,896,770TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
2,871,508


$
2,426,448














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


COPSYNC, INC.Consolidated Statements of Operations(Unaudited)For the Three Months Ended


For the Nine Months EndedSeptember 30,


September 30,2009


2008


2009


2008LICENSE FEE REVENUES, net of costs

$
7,683


$
-


$
14,639


$
-OPERATING EXPENSESDepreciation and amortization


48,545



52,183



138,476



63,615Professional fees


80,487



32,124



452,555



66,122Salaries and wages


193,759



190,310



398,014



512,199Rent


7,200



-



23,300



-Consulting


44,966



-



44,966



-Other general and administrative


114,107



7,002



240,847



137,471Total Operating Expenses


489,064



281,619



1,298,158



779,407LOSS BEFORE OTHER INCOME (EXPENSE)


(481,381
)


(281,619
)


(1,283,519
)


(779,407
)OTHER INCOME (EXPENSE)Interest income


14



-



627



-Interest expense


(97,718
)


-



(134,676
)


(1,390
)Total Other Income (Expense)


(97,704
)


-



(134,049
)


(1,390
)NET LOSS

$
(579,085
)

$
(281,619
)

$
(1,417,568
)

$
(780,797
)LOSS PER COMMON SHARE - BASIC & DILUTED

$
(0.00
)

$
(0.01
)

$
(0.01
)

$
(0.02
)WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING


120,842,856



44,124,547



120,475,113



35,844,167


The accompanying notes are an integral part of these financial statements.
5


COPSYNC, INC.Consolidated Statements of Cash Flows(Unaudited)For the Nine Months EndedSeptember 30,2009


2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(1,417,568
)

$
(780,797
)Adjustments to reconcile net loss to net cash usedin operating activities:Depreciation and amortization


138,476



63,615Beneficial conversion feature


86,383



-Additional expense for granting of warrants


288,384



-Issuance of common stock for services rendered


29,000



-Write-off of patent costs


-



15,560Change in operating assets and liabilities:Accounts receivable


(38,316
)


(6,950
)Debt issuance costs


(19,833
)


-Deferred costs


(398,821
)


-Deferred revenues


533,481



-Accounts payable and accrued expenses


111,708



(6,125
)Net Cash Used in Operating Activities


(687,106
)


(714,697
)CASH FLOWS FROM INVESTING ACTIVITIES-Software development costs


(297,548
)


-Purchases of property and equipment


(2,016
)


(817
)Net Cash Used in Investing Activities


(299,564
)


(817
)CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock for cash, net of offering costs


414,458



607,345Payments on notes payable


(6,919
)


(5,809
)Payments on notes from related parties -directors and stockholders


-



(15,000
)Proceeds received on notes and convertible notes


362,000



672,088Proceeds from common stock to be issued


19,633



-Net Cash Provided by Financing Activities


789,172



1,258,624NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS


(197,498
)


543,110CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


209,378



2,772CASH AND CASH EQUIVALENTS, END OF PERIOD

$
11,880


$
545,882
    The accompanying notes are an integral part of these financial statements.
 6
   COPSYNC, INC.Consolidated Statements of Cash Flows (Continued)(Unaudited)For the Nine Months EndedSeptember 30,2009



2008SUPPLEMENTAL DISCLOSURES:Cash paid for interest

$
2,796


$
-Cash paid for taxes

$
-


$
-NON-CASH INVESTING AND FINANCING ACTIVITIES:Purchase of fleet vehicles financed by notes payable

$
24,500


$
-Contribution of services - capitalized to softwaredevelopment costs

$
-


$
-Common stock issued in lieu of notes payable

$
-


$
270,088

























The accompanying notes are an integral part of these financial statements.
 7


NOTE 1 -   BASIS OF FINANCIAL STATEMENT PRESENTATION





The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Operating results for the three months and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December
31, 2009.





COPsync, Inc. (“the Company”) operates as a software provider that not only enhances productivity and quality of work, but creates a safer work environment for the public safety community by developing the first real-time, nationwide public safety information sharing network.





On April 17, 2008, the Company amended its Certificate of Incorporation to increase its authorized shares from 50,000,000 to 500,000,000, implement a 15-for-1 forward stock split, and authorize 1,000,000 Series A Preferred Stock, par value $0.0001. The accompanying consolidated financial statements and related notes thereto have been adjusted
accordingly to reflect this forward stock split.  On September 2, 2009, the Certificate of Incorporation was amended and restated to authorize a total of 1,000,000 shares of preferred stock, with a total of 100,000 of these 1,000,000 shares designated as Series A Preferred Stock.





Effective April 25, 2008, the Company entered into a share exchange agreement with PostInk Technology, LP and RSIV, LLC (collectively “PostInk”) for 100% of the interests in PostInk.  On the closing date, the Company issued 25,000,005 shares (post forward stock split) of its common stock, 100,000 shares of its Series
A Preferred Shares, and warrants to purchase 74,423,069 shares (post forward stock split) of common stock, in exchange for 100% of PostInk.  The Company also cancelled 27,013,750 shares held by its existing stockholders.





The shares issued in the acquisition resulted in the owners of PostInk having operating control of the Company immediately following the acquisition, as PostInk exercises control over a majority of the Company’s shares.  Therefore, this acquisition has been accounted for in the accompanying consolidated financial statements
as a reverse acquisition, with PostInk becoming a wholly-owned subsidiary of the Company.  These consolidated financial statements represent a continuation of PostInk, not COPsync, Inc. (formerly, Global Advance Corporation), the legal parent company.  PostInk is treated as the parent company for accounting purposes and COPsync, Inc. is the parent company for legal purposes. The historical financial statements presented are those of PostInk rather than COPsync, Inc.





NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES





On July 1, 2009, the FASB issued the FASB Accounting Standards Codification (the “Codification”). The Codification became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”)
and related literature. The Codification eliminates the previous US GAAP hierarchy and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. However, rules and interpretive releases of the Securities Exchange Commission (“SEC”) issued under the authority of federal securities laws will continue to be sources of authoritative GAAP for SEC registrants. The Codification was effective for interim and annual periods ending after September 15, 2009. The Company
adopted the Codification for the quarter ending September 30, 2009.  There was no impact to the financial results as this change is disclosure-only in nature.





Revenue Recognition





The Company applies the revenue recognition provisions of the SEC, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC.  The guidance outlines the basic criteria that must be met to recognize the revenue and provides guidance for disclosure related to revenue
recognition policies.  In general, the Company recognizes revenue related to licensing fees on a monthly basis, over the life of the licensing agreement, and when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured.





Per the terms of the licensing agreements, generally the entire license fee is received by the Company at the beginning of the contract, which funds are then used to purchase the related hardware and software needed.  Accordingly, at September 30, 2009, the Company had received a total of $594,609 of which only $61,128 has been
recorded as earned revenue.  The remaining amount of $533,481 has been recorded as deferred revenue on licensing agreements, which will be recognized as revenue over the remaining term of the licensing agreements, as earned.





8


NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES (Continued)





In addition, the Company had incurred hardware and software costs related to these licensing agreements, totaling $448,029 as of September 30, 2009, of which only $49,208 has been recorded as cost of revenues (recorded as a net cost against licensing revenues).  The remaining amount of $398,821 has been recorded as deferred costs
on licensing agreements, which will be recognized as cost of revenue over the remaining term of the licensing agreements, in conjunction with the earned revenues.





Loss Per Share





The computations of basic and fully diluted loss per share of common stock are based on the weighted average number of common shares outstanding during the period of the consolidated financial statements, plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding during the period, or the
exercise of convertible debentures. Common stock equivalents, totaling 10,720,000 shares pursuant to the convertible debentures, 16,139,800 shares pursuant to outstanding warrants, and 100,000 shares pursuant to the conversion of preferred shares as of September 30, 2009, have not been included because they are anti-dilutive.





Following is a reconciliation of the loss per share for the three months and nine months ended September 30, 2009 and 2008:






For the Three Months Ended
September 30,2009


2008Net (loss) available to common shareholders

$
(579,085
)

$
(281,619
)Weighted average shares


120,842,856



44,124,547Basic and fully diluted loss per share (based on weighted average shares)

$
(0.00
)

$
(0.01
)






For the Nine Months Ended
September 30,2009


2008Net (loss) available to common shareholders

$
(1,471,568
)

$
(780,797
)Weighted average shares


120,475,113



35,844,167Basic and fully diluted loss per share (based on weighted average shares)

$
(0.01
)

$
(0.02
)




Income Taxes





The Company accounts for income taxes pursuant to Accounting Standards Codification 740, Income Taxes (ASC 740).  Under this accounting standard, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The
deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.  The Company maintains a valuation allowance with respect to deferred tax assets.





The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable
income within the carryforward period under the Federal tax laws.





Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.




9


NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES (Continued)





Software Development Costs





The Company capitalizes software development costs in accordance with Accounting Standards Codification 985, Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed (ASC 985) (formerly SFAS No. 86) under which certain software development costs incurred subsequent to the establishment of technological feasibility
may be capitalized and amortized over the estimated lives of the related products.  The Company determines technological feasibility to be established upon completion of (1) product design, (2) detail program design, (3) consistency between product and program design and (4) review of detail program design to ensure that high risk development issues have been resolved.  Upon the general release of the product to customers, development costs for that product are amortized over periods not exceeding
three years, based on the estimated economic life of the product.  Capitalized software development costs, net of accumulated amortization, amounted to $2,309,763 and $2,127,296 at September 30, 2009 and December 31, 2008, respectively.





NOTE 3 -       CONVERTIBLE NOTES PAYABLE





During the year ended December 31, 2008, the Company received a total of $420,000 from a related individual pursuant to a convertible note payable. The note bears interest at 9% per annum, is due on demand, and is convertible into common stock at $0.05 per share.  Accrued interest on this note payable at September 30, 2009 and December
31, 2008 totaled $50,902 and $22,552, respectively.





During the nine months ended September 30, 2009, the Company received a total of $362,000 from unrelated individuals pursuant to convertible notes payable.  These notes bear interest at rates between 2.5% and 10% per annum, are due between March 31, 2011 and July 23, 2011, with one due on demand, and are convertible into common
stock at either $0.10 or $0.20 per share.  Accrued interest on these notes payable at September 30, 2009 totaled $12,403.





The convertible notes have been accounted for pursuant to ASC 470, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio (formerly EITF Issue No. 98-5), and ASC 470, Application of EITF Issue No. 98-5 to Certain Convertible
Instruments (formerly EITF Issue No. 00-27).  Pursuant to the terms of the convertible note received in 2008, no beneficial conversion feature was recorded for the year ended December 31, 2008.  However, pursuant to the terms of the new convertible notes received during the nine months ended September 30, 2009, a beneficial conversion feature was recorded for the nine months ended September 30, 2009, totaling $260,000, which is being
amortized over the term of the notes, or two years, except for one note where the entire discount was recorded as interest expense on the date of the note because the note has no determined maturity date.





NOTE 4 -      PREFERRED STOCK





Pursuant to the share exchange agreement previously discussed in Note 1, the Company issued a total of 100,000 shares of Series A preferred stock.  Each share of preferred stock is convertible into one share of common stock, and includes voting rights on a basis of 750 to 1.





NOTE 5 -        OUTSTANDING WARRANTS





As previously discussed, the Company granted 15,000,000 warrants to an individual, pursuant to the share exchange agreement, which warrants are exercisable at $0.05 per share, and expire on April 1, 2012.  In addition, pursuant to certain private placements at $0.40 per share, the Company also granted a total of 264,800 warrants
to the investors, exercisable at $0.60 per share, which expire on March 1, 2010.  The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model pursuant to ASC 718, Compensation – Stock Compensation (ASC 718), (formerly SFAS No. 123R), which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and
the weighted average expected life of the warrants.  Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero.  Under the provisions of ASC 718, no value was assigned to the warrants granted, thus no additional expense was recorded under the Black-Scholes option pricing model.  During 2008, the Company estimated the fair value of the stock warrants based on the following weighted average assumptions:









Risk-free interest rate
1.78%Expected life
18 monthsExpected volatility
25%Dividend yield
0.0%







10


NOTE 5 -
OUTSTANDING WARRANTS (Continued)





During the nine months ended September 30, 2009, pursuant to certain advisory agreements as discussed in Note 6, the Company granted a total of 875,000 warrants to two separate advisory firms, exercisable at either $0.10 or $0.20 per share, which expire between June 17, 2012 and June 5, 2014.  As previously discussed, the Company
estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model pursuant to ASC 718, which model requires the use of exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate, and the weighted average expected life of the warrants.  Because the Company does not pay dividends, the dividend rate variable in the Black-Scholes model is zero.  Under
the provisions of ASC 718, values between $0.30 and $0.60 were assigned to the warrants granted, thus an additional expense of $288,384 was recorded under the Black-Scholes option pricing model for the nine months ended September 30, 2009.





During 2009, the Company estimated the fair value of the stock warrants based on the following weighted average assumptions:




Risk-free interest rate
1.76% - 2.85%Expected life
36 months - 18 monthsExpected volatility
232% - 244%Dividend yield
0.0%




A summary of the status of the Company’s outstanding warrants as of September 30, 2009 and the changes during the nine months then ended is presented below:




Weighted AverageShares


Exercise PriceOutstanding, December 31, 2008


15,264,800


$
0.06Granted


875,000



0.19Exercised / Expired / Cancelled


-



n/aOutstanding, September 30, 2009


16,139,800


$
0.07Exercisable, September 30, 2009


16,139,800


$
0.07
  As of September 30, 2009, the following warrants were outstanding:





Warrants


Exercise Price

Termination Dates15,000,000


$
0.05

April 1, 2012264,800


$
0.60

March 1, 2010425,000


$
0.20

March 2, 2014400,000


$
0.20

June 17, 201250,000


$
0.10

June 5, 201416,139,800


NOTE 6 -        ADVISORY AGREEMENTS








During the nine months ended September 30, 2009, the Company entered into an agreement with an advisory firm to assist the Company in raising additional capital.  Per the terms of the agreement, the advisory firm will receive a finder’s fee of $100,000 for the first phase of financing (up to $1,000,000), and $200,000 for the second phase of financing (up
to $2,000,000).  In addition, the advisory firm is to receive cashless warrants to purchase up to 5,000,000 shares of common stock (done in tranches, based upon capital raised) at $0.20 per share for a five-year period, with anti-dilution protection.





11


NOTE 6 -
ADVISORY AGREEMENTS (Continued)





Pursuant to this advisory firm agreement, the Company has paid a total of $25,000 of the $100,000 finder’s fee through September 30, 2009, as the advisory firm has raised $250,000 in convertible debt out of the maximum of $1,000,000 first phase, or 25%.  No additional finder’s fees are owed until additional financing is obtained.  In addition,
the Company granted 425,000 of the 5,000,000 warrants to the advisory firm during the nine months ended September 30, 2009, based upon the amount of capital raised.  No additional warrants are owed pursuant to this agreement as of September 30, 2009, until additional financing is obtained.  Also during the nine months ended September 30, 2009, the Company granted the same advisory firm, pursuant to a separate agreement, a total of 400,000 warrants to purchase 2,000,000 shares of common stock
at $0.20 per share, for a three year period, for advisory services.  The warrants granted were valued at $151,549, or approximately $0.38 per warrant.





Also during the nine months ended September 30, 2009, the Company entered into a twelve-month agreement with a separate advisory firm to assist the Company in corporate planning, structure and capital resources.  Per the terms of the agreement, the advisory firm will receive a consulting fee of $5,000 per month with $5,000 payable on the execution of the agreement
and $55,000 being deferred until such time as the Company feels it can afford to pay the monthly retainer, or the Company raises $1,500,000 or more in debt or equity during the term of this agreement, or the Company received $500,000 in revenue, but no later than on the date of termination or cancellation of the agreement.  $15,000 has been accrued by the Company as of September 30, 2009 pursuant to this agreement.  In addition, the advisory firm received 75,000 restricted shares of its common
stock valued at $45,000, or $0.60 per share, which amount will be expensed over the twelve-month contract at $3,750 per month.  In addition, the advisory firm received 50,000 cashless warrants to purchase 50,000 shares of common stock at $0.10 per share for a five-year period.  These warrants were valued at $29,898 or $0.60 per warrant.  This expense will also be recognized over the twelve month contract at $2,491 per month.  The advisory firm will also receive $50,000
if the Company receives $1,500,000 in revenue or raises $1,500,000 in debt or equity during the term of the agreement.  Also pursuant to the agreement, the advisory firm will also receive 1,250,000 cashless warrants to purchase 1,250,000 shares of common stock at $0.10 per share for a seven-year period subject to the advisory firm satisfying certain criteria.





NOTE 7 -        STOCK TRANSACTIONS





During the nine months ended September 30, 2009, the Company entered into a separate agreement with a consulting firm to assist the Company with its investor and public relations.  Per the terms of the agreement, the consulting firm received 50,000 shares of common stock during the nine months ended September 30, 2009, valued at $29,000 or $0.58 per share, the
market value of the shares on the date the shares were issued.





During the nine months ended September 30, 2009, the Company issued 3,723,334 shares of common stock at prices ranging from $0.10 to $0.15 per share, for total proceeds of $420,500.  Stock offering costs of $6,042 were paid in conjunction with this fundraising effort.




Also during the nine months ended September 30, 2009, the Company received a total of $19,633 pursuant to two separate subscription agreements for shares to be issued at $0.15 per share.  The shares are expected to be issued during the quarter ended December 31, 2009.





NOTE 8 -       CONTINGENCY





In October 2009, Rocket City Enterprises, Inc. (“RCTY”) filed a demand against the Company in the American Arbitration Association in San Antonio, Texas.  The demand alleges breach of contract and seeks repayment of a purported loan in the amount of $200,000 plus interest at 9% per annum.  At the time of this
filing, RCTY has not paid the administrative fee required to proceed with the arbitration, and the Company has not yet answered the demand.  However, if RCTY takes steps to proceed with the action, the Company intends to defend themselves vigorously.  Specifically, the Company intends to deny that RCTY has alleged a valid debt of the Company based on RCTY’s representations to the Company that the $200,000 was only to be repaid upon the fulfillment of certain conditions that never occurred.  The
Company intends to assert affirmative defenses for, inter alia, fraudulent inducement.





NOTE 9 -       SUBSEQUENT EVENTS





On October 14, 2009, the Company completed a private placement of its equity securities in which the Company raised approximately $1.5 million in gross proceeds.  Pursuant to this private placement, the Company issued 375,000 shares of the Company’s newly designated Series B Convertible Preferred Stock, which Series B Preferred Stock is convertible into a total of 15,000,000 shares of the Company’s
common stock.  In addition, as part of the private placement, the Company granted warrants to purchase an aggregate of 3,000,000 shares of common stock.  The Series B stock and the warrants were sold as a unit, with each investor receiving eight warrants to purchase one share of common stock for every share of Series B stock purchased.  The purchase price for each unit was $4.00 per share of Series B stock purchased.






12




NOTE 9 -
SUBSEQUENT EVENTS (Continued)





The warrants have an exercise price of $0.20 per share and expire on October 14, 2011. The exercise price and the number of shares of common stock purchasable upon exercise of the warrants are subject to adjustment upon the occurrence of certain events, including, but not limited to: (i) stock dividends, stock splits or reverse stock splits;
(ii) the payment of dividends on the common stock payable in shares of common stock or securities convertible into common stock; (iii) a recapitalization, reorganization or reclassification involving the common stock, or a consolidation or merger of the Company; or (iv) a liquidation or dissolution of the Company.





Also in connection with this private placement, the Company agreed to use it best efforts to effect a registration statement with the Securities and Exchange Commission of the resale of the shares of common stock issuable upon conversion of the Series B Preferred Stock and upon exercise of the warrants, upon the request of the holders of
a majority of those shares after the second anniversary of the date of the private placement closing.  It also provides for the investors to have “piggyback” registration rights to include their shares in future registrations with the SEC by the Company of the issuance or sale of its securities.  The investor’s right to request a registration or inclusion in a registration terminates on the date that such investor may immediately sell all of the shares of common stock issuable
upon conversion of the Series B Preferred Stock and upon exercise of the warrants under Rule 144 or Rule 145 promulgated under the Securities Act.  The agreement also grants to the investors a right of first refusal to purchase all, but not less than all, of certain new securities the Company may, from time to time, propose to sell after the date of the private placement agreement, and also contains certain covenants relating to the Company’s Board of Directors and requiring the Company to retain
patent counsel.





The newly designated Series B Preferred Stock issued in this private placement will (i) accrue dividends at a rate of 7.0% per annum, payable in preference to the common stock or any other capital stock of the Company, (ii) will have a preference in liquidation, or deemed liquidation, to receive the initial investment in the Series B Stock,
plus accrued and unpaid dividends, (iii) is convertible into 40 shares of common stock, subject to adjustments for issuances by the Company of common stock less than $0.10 per share, and (iv) has the right to elect the Series B Director.








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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations





This report contains “forward-looking statements.”  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including:  any projections of earnings, revenues or other financial items; any statements of the plans,
strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.  Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan”
or “anticipate” and other similar words.





Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties,
such as those disclosed in this report.  We do not intend, and undertake no obligation, to update any forward-looking statement.





You should read the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes to those financial statements, included elsewhere in this report.




The information contained below is subject to the “Risk Factors” and other risks detailed in our Annual Report on Form 10-K for our fiscal year ending December 31, 2008 and our other reports filed with the Securities and Exchange Commission.





Overview




Since January 2005, when our predecessor, PostInk Technology, LP, a Texas limited partnership, was formed, we have primarily been a provider of software designed to enhance productivity and quality of work of the public safety community.  Effective April 25, 2008, we completed a share exchange with our predecessor.  In
the share exchange, the owners of our predecessor acquired beneficial ownership of approximately 87 percent of our outstanding common stock.  In addition, in connection with the share exchange, we changed our name from Global Advance Corp. to COPsync, Inc.  As a result of the share exchange, for financial accounting purposes, we treated the share exchange as a purchase of our company by our predecessor.  Therefore, we have presented the historical financial statements of our predecessor,
for comparison purposes, for all of our reporting periods prior to the share exchange presented in this report.





We were incorporated in Delaware on October 23, 2006.  Prior to the share exchange, our business plan was to develop a commercial application of a new type of computer mouse.  We discontinued this business plan as of April 25, 2008.  We began to focus on the business of our predecessor to develop software that
would not only enhance productivity and quality of work, but creates a safer work environment, for the public safety community by developing the first real-time, nationwide public safety information sharing network.





We believe that we have developed the first integrated software product, COPsync, which provides a real-time, nationwide information sharing network for all law enforcement officers.  We also believe that we are the only law enforcement software provider to have full information sharing networking available to all subscribing agencies
at the point of incident via a laptop computer or handheld devices.  It is our mission that, in the future, all law enforcement officers will have access to, in real time, the critical information necessary to protect the public and themselves.  We currently have law enforcement agencies with over over 3900 police officers utilizing, or committed to utilizing, our product.  We began generating license fee revenue from our product in the fourth quarter of 2008.





As of September 30, 2009, our product had successfully submitted, processed and relayed over 114,649 officer initiated information requests.  On average, our product is returning results to mobile users in less than five seconds, well within the 32 second average set forth by the NCIC 2000 standards for mobile clients.  We
continue to garner support from law enforcement agencies.  By September 30, 2009, over 285 agencies had expressed interest in our product, and had indicated that they would purchase our product, subject to necessary approvals.





Law enforcement agencies and associations at the federal, state and local levels are pushing information sharing initiatives.  Global Justice XML standards were developed and have been published by the United States federal government since 1997.  To date, interoperability between law enforcement agencies in the United
States does not appear to exist.  We believe that this failure is directly related to software vendors that have remained focused on their existing methods of doing business, including proprietary development, which does not focus on global information sharing.  We strive to fulfill the interoperability role through the deployment of our product, which is an overlay product to existing technologies that can be deployed without jeopardizing existing vendor relationships.  Our method
of data integration will bring existing vendors into compliance with federal mandates established after 9/11.





We need to obtain additional funding to fully implement our business plan.  We need additional cash resources to support the award of grants that have been submitted by a numerous law enforcement agencies for the implementation and use of our technology and for customer support of a larger customer base.  In October 2009,
we completed a private placement of our new Series B Convertible Preferred Stock, in which we received approximately $1.5 million in gross proceeds and commitments.  As a result of that transaction, our independent accountant has updated its report relating to our financial statements for the fiscal year ended December 31, 2008 to remove the explanatory paragraph with respect to our ability to continue as a going concern.  We believe that the removal of that explanatory paragraph will result
in the award of grants and other approvals required for additional agencies to purchase our product.  We still need additional cash to support significant growth in our customer base.





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Basis of Presentation, Critical Accounting Policies and Estimates




We prepare our financial statements in conformity with accounting principles generally accepted in the United States.  The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities.  We base our estimates on historical experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  These estimates and assumptions are routinely evaluated.  Actual results may differ from these estimates.




Our management believes that there has been no significant changes during the quarter ended September 30, 2009 to the items we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December
31, 2008.




Results of Operations





For the three month periods ended September 30, 2009 and 2008




Revenue.  For the three month period ended September 30, 2009, our revenues were $7,683, compared to $0 for the three month period ended September 30, 2008.  This increase was due to license fee revenues realized on our product, which we released
for licensing in the fourth quarter of 2008.




Operating Expenses.  For the three month periods ended September 30, 2009 and 2008, our total operating expenses were $489,064 and $281,619, respectively.  This $207,445 increase was due primarily to a $73,270 increase in professional fees and
consulting expenses, as a result of our becoming a publicly reporting company in April of 2008, a$107,105 increase in other general and administrative expenses, primarily as a result of increased marketing and insurance expenses, and an increase of $7,200 in rent for our corporate headquarters.




Other Income (Expense).  For the three month periods ended September 30, 2009 and 2008, other expense totaled $97,704 and $0, respectively.  Other expense consists of interest income on cash and cash equivalents of $14 and $0, respectively; offset
by interest expense on notes payable of $97,718 and $0, respectively.




For the nine month periods ended September 30, 2009 and 2008




Revenue.  For the nine month period ended September 30, 2009, our revenues were $14,639, compared to $0 for the nine month period ended September 30, 2008.  This increase was due to license fee revenues realized on our product, which we released
for licensing in the fourth quarter of 2008.




Operating Expenses.  For the nine month periods ended September 30, 2009 and 2008, our total operating expenses were $1,298,158 and $779,407, respectively.  This $504,112 increase was due primarily to a$74,861 increase in depreciation and amortization,
primarily because of an increase in capitalized software development costs, a $431,399 increase in professional fees and consulting expenses, as a result of our becoming a publicly reporting company in April of 2008, a $103,376 increase in other general and administrative expenses, as a result of , primarily as a result of increased marketing and insurance expenses in the third quarter of 2009, and a $23,300 increase in rent for our corporate headquarters, which was partially offset by a $114,185 decrease in
salaries and wages.




Other Income (Expense).  For the nine month periods ended September 30, 2009 and 2008, other expense totaled $134,049 and $1,390, respectively.  Other expense consists of interest income on cash and cash equivalents of $627 and $0, respectively;
offset by interest expense on notes payable of $134,676 and $1,390, respectively.




Liquidity and Capital Resources





Since the formation of our predecessor, we have funded our operations primarily through the Sale of equity and debt securities.  As of September 30, 2009, we had $11,880 in cash and cash equivalents, compared to $209,378 as of December 31, 2008.  The decrease was due primarily to $687,106 in cash used in operating activities
and $299,564 used in investing activities, which was partially offset by $362,000 in proceeds received from the issuance of convertible notes and $414,458 from the issuance of our common stock.  On September 30, 2009, we had a working capital deficiency of $1,094,475, compared to a deficit of $295,708 on December 31, 2008.  The increase in the deficiency was due primarily to an increase of $311,708 in accounts payable and accrued expenses, an increase of $533,481 in deferred revenues, an increase
of $188,383 in convertible notes payable, and a decrease of $197,498 in cash, which was partially offset by an increase in deferred costs of $398,821 and an increase in accounts payable of $38,316.





15


Plan of Operation for the Next Twelve Months.




Our primary business activities includes the development and sale of software that enhances productivity and quality of work, and creates a safer work environment, for the public safety community by developing what we believe is the first real-time, nationwide public safety information sharing network.  In the nine months ending
September 30, 2009, we received $594,609 from licensing our software product, versus $448,029 in software and hardware costs related to those receipts.  In October 2009, we completed a private placement of our new Series B Convertible Preferred Stock, in which we received approximately $1.5 million in gross proceeds and commitments.  We believe that, with the proceeds from that private placement, we will be able generate sufficient cash flow from our core business activities to meet operating
and capital needs, with moderate growth, for the next twelve months.  However, we will need to seek additional financings if the timing of sales and cash requirements necessitates such financings to fund any significant growth.





Item 3.  Quantitative and Qualitative Disclosures About Market Risk





We do not use derivative financial instruments to hedge interest rate and foreign currency exposure.  We do not believe that we have any material exposure to interest rate risk.  We did not experience a material impact from interest rate risk during fiscal 2008.





Currently, we do not have any significant investments in financial instruments for trading or other speculative purposes, or to manage our interest rate exposure.





Item 4.  Controls and Procedures





Evaluation of Disclosure Controls and Procedures





We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based upon that evaluation, our
principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.





Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.  To address the material weaknesses, we performed additional analysis and other
post-closing procedures in an effort to ensure our consolidated financial statements included in this report have been prepared in accordance with generally accepted accounting principles.  Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.





Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2008, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.





Changes in Internal Control Over Financial Reporting





No change in our internal control over financial reporting occurred during the quarter ended September 30, 2009 that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting.





Limitations on the Effectiveness of Internal Controls





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.




16


PART II - OTHER INFORMATION





Item 1.  Legal Proceedings





On September 30, 2009, Rocket City Enterprises, Inc. filed a Demand for Arbitration with the American Arbitration Association regarding a claim against us and our predecessor for breach of contract and failure to repay a purported loan.  In the Demand for Arbitration, the claimant alleges that we owe $200,000 plus interest
at the rate of 9.0% per annum pursuant to a Release of Acquisition and “Spin Off” Agreement.  The claimant has 90 days from September 30, 2009 to remit a filing fee of $1,000 in order for the arbitration to proceed.  If the claimant pays that fee on a timely basis, we intend to contest the underlying claim vigorously.





Item 1A.  Risk Factors





Not applicable.





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





On July 23, 2009, we completed a private placement of a convertible promissory note, with a principal amount of $50,000, which was issued to an individual investor.  The note is convertible into 500,000 shares of our common stock.  We received $50,000 in cash for the note.  The note, and the shares of our common
stock issuable upon conversion of the note, was offered and sold to one private individual that we reasonably believe is an “accredited investors,” as such term is defined in Rule 501 under the Securities Act.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable
state laws.  No general solicitation or general advertising was used in connection with the offering of the note.  We disclosed to the investor that the note and the common stock underlying the note could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available, and the note included, and the certificates representing the common stock to be issued upon conversion of the note will include, a legend to that effect.





On August 14, 2009, we completed a private placement of a convertible promissory note, in a principal amount of $52,000, which was issued to an affiliated entity.  The note is convertible into 520,000 shares of our common stock.  We received $52,000 in cash for the note.  The note, and the shares of our common
stock issuable upon conversion of the note, was offered and sold to one affiliated entity that we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act.  The offers and sales were made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under
applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the note.  We disclosed to the investor that the note and the common stock underlying the note could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available, and the note included, and the certificates representing the common stock to be issued upon conversion of the note will include, a legend to that effect.





Between July 2 and August 6, 2009, we completed a private placement of 533,334 shares of our common stock, for a purchase price of $0.15 per share.  We received $80,000 in cash for the stock.  The shares of our common stock were offered and sold to three individuals, each of whom we reasonably believe is an “accredited
investors,” as such term is defined in Rule 501 under the Securities Act.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We
disclosed to the investors that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available, and the certificates representing the common stock include a legend to that effect.





On September 3, 2009, we completed a private placement of 125,000 shares of our common stock, for a purchase price of $0.20 per share.  We received $25,000 in cash for the stock.  The shares of our common stock were offered and sold to an entity that we reasonably believe is an “accredited investor,” as such
term is defined in Rule 501 under the Securities Act.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the investor
that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available, and the certificates representing the common stock include a legend to that effect.





Between July 13, 2009 and September 30, 2009, we completed a private placement of 2,907,000 shares of our common stock, for a purchase price of $0.10 per share.  We received $209,700 in cash for the stock.  We offered shares of our common stock to our existing stockholders who we reasonably believed are “accredited
investors,” as such term is defined in Rule 501 under the Securities Act.  We sold shares of our common stock to twelve existing stockholders who were offered shares, or their affiliates who were also accredited investors.  The offers and sales were made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar
exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the investors that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available, and the certificates representing the common stock include a legend to that effect.





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Item 3.  Defaults Upon Senior Securities





None.





Item 4.  Submission of Matters to a Vote of Securityholders





Our stockholders voted on three matters at our annual meeting of stockholders held on July 27, 2009.  Our stockholders approved the reelection of Russell D. Chaney and J. Shane Rapp to our board of directors.  Our stockholders also adopted our 2009 Long-Term Incentive Plan and approved our Amended and Restated Certificate
of Incorporation. Voting tabulations for the election of the above directors were as follows:






Name

Votes For


Votes WithheldRussell D. Chaney


92,559,601



7,746,902J. Shane Rapp


92,559,601



7,746,902







The voting tabulation for the adoption of our 2009 Long-Term Incentive Plan was as follows:




Votes For


Votes Against


Absentions


Unvoted85,767,466



4,875,861



2,912,971



0







The voting tabulation for the approval of our Amended and Restated Certificate of Incorporation was as follows:




Votes For


Votes Against


Absentions


Unvoted92,559,601



4,833,931



2,912,971



0




Reference is made to our Schedule 14A, dated June 26, 2009, containing a definitive Proxy Statement, which we distributed to our stockholders of record as of June 12, 2009.





Item 5.  Other Information





None.





Item 6.  Exhibits





Exhibit No.
INDEX TO EXHIBITS3.4
Amended and Restated Certificate of Incorporation dated September 2, 2009.10.1
Amended and Restated Executive Employment Agreement, dated April 29, 2009, by and between Russell D. Chaney and COPsync, Inc.10.2
Amended and Restated Executive Employment Agreement, dated April 29, 2009, by and between J. Shane Rapp and COPsync, Inc.31.1
Certification of COPsync, Inc. Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of COPsync, Inc. Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





18


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 thereunto duly authorized.




COPsync, Inc.Date: November 20, 2009
By:
/s/ Russell ChaneyRussell ChaneyChief Executive Officer
(Principal Executive Officer)











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