##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2009
 Commission File Number 000-28539
 DRI CORPORATION
 Exact name of Registrant as specified in its Charter)
 North Carolina
    
    56-1362926(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 13760 Noel Road, Suite 830
Dallas, Texas 75240  (Address of principal executive offices, Zip Code)
 (214) 378-8992
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
  Common Stock, par value $.10 per share
    
    11,487,130(Class of Common Stock)
    
    Number of Shares




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##### 



DRI CORPORATION AND SUBSIDIARIES
 INDEX
 Page No.PART I  FINANCIAL INFORMATIONItem 1.   Financial StatementsConsolidated Balance Sheets  March 31, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations  Three Months Ended March 31, 2009 and 2008
(Unaudited)
    
    
    4Consolidated Statements of Cash Flows  Three Months Ended March 31, 2009 and 2008
(Unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 4T. Controls and Procedures
    
    
    21PART II  OTHER INFORMATIONItem 1.    Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.    Defaults Upon Senior Securities
    
    
    23Item 4.    Submission of Matters to a Vote of Securityholders
    
    
    23Item 5.    Other Information
    
    
    23Item 6.    Exhibits
    
    
    23SIGNATURES
    
    
    29EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
  
   March 31, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Note 1)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    577
    
    
    $
    598Trade accounts receivable, net
    
    
    10,079
    
    
    
    12,403Current portion of note receivable
    
    
    86
    
    
    
    86Other receivables
    
    
    472
    
    
    
    431Inventories, net
    
    
    11,179
    
    
    
    10,662Prepaids and other current assets
    
    
    616
    
    
    
    427Total current assets
    
    
    23,009
    
    
    
    24,607Property and equipment, net
    
    
    3,772
    
    
    
    3,607Long-term portion of note receivable
    
    
    172
    
    
    
    172Goodwill
    
    
    8,407
    
    
    
    9,034Intangible assets, net
    
    
    710
    
    
    
    790Deferred tax assets, net
    
    
    
    
    
    
    94Other assets
    
    
    1,108
    
    
    
    1,157Total assets
    
    $
    37,178
    
    
    $
    39,461LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesLines of credit
    
    $
    2,858
    
    
    $
    3,743Loans payable
    
    
    594
    
    
    
    719Current portion of long-term debt
    
    
    180
    
    
    
    193Current portion of foreign tax settlement
    
    
    395
    
    
    
    386Accounts payable
    
    
    6,975
    
    
    
    5,347Accrued expenses and other current liabilities
    
    
    3,823
    
    
    
    4,359Preferred stock dividends payable
    
    
    21
    
    
    
    16Total current liabilities
    
    
    14,846
    
    
    
    14,763Long-term debt and capital leases, net
    
    
    5,193
    
    
    
    5,149Foreign tax settlement, long-term
    
    
    470
    
    
    
    528Deferred tax liabilities, net
    
    
    40
    
    
    
    137Liability for uncertain tax positions
    
    
    273
    
    
    
    300Commitments and contingencies (Notes 6 and 7)Shareholders Equity and Noncontrolling InterestsSeries E Redeemable, Nonvoting, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 500 shares authorized; 80 shares
issued and outstanding at March 31, 2009, and December 31, 2008; redeemable
at the discretion of the Company at any time.
    
    
    337
    
    
    
    337Series G Redeemable, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 600 shares authorized; 452 and 444
shares issued and outstanding at March 31, 2009, and December 31, 2008,
respectively; redeemable at the discretion of the Company after five years
from date of issuance.
    
    
    1,978
    
    
    
    1,938Series H Redeemable, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 600 shares authorized; 65 and 64
shares issued and outstanding at March 31, 2009, and December 31, 2008,
respectively; redeemable at the discretion of the Company after five years
from date of issuance.
    
    
    277
    
    
    
    272Series J Redeemable, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 250 shares authorized; 90 shares
issued and outstanding at March 31, 2009, and December 31, 2008;
redeemable at the discretion of the Company at any time.
    
    
    388
    
    
    
    388Series AAA Redeemable, Nonvoting, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 20,000 shares authorized; 166 shares
issued and outstanding at March 31, 2009, and December 31, 2008; redeemable
at the discretion of the Company at any time.
    
    
    830
    
    
    
    830Common stock, $.10 par value, 25,000,000 shares authorized; 11,487,130 and
11,466,606 shares issued and outstanding at March 31, 2009 and December
31, 2008, respectively.
    
    
    1,149
    
    
    
    1,147Additional paid-in capital
    
    
    32,394
    
    
    
    32,706Accumulated other comprehensive income  foreign currency translation
    
    
    (492
    )
    
    
    512Accumulated deficit
    
    
    (21,116
    )
    
    
    (20,398
    )Total DRI shareholders equity
    
    
    15,745
    
    
    
    17,732Noncontrolling interestsNoncontrolling interest  Mobitec Brazil Ltda.
    
    
    384
    
    
    
    596Noncontrolling interest  Castmaster Mobitec India Private Limited
    
    
    227
    
    
    
    256Total noncontrolling interests
    
    
    611
    
    
    
    852Total shareholders equity
    
    
    16,356
    
    
    
    18,584Total liabilities and shareholders equity
    
    $
    37,178
    
    
    $
    39,461
  3




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Three Months Ended March 31,2009
    
    
    2008Net sales
    
    $
    13,265
    
    
    $
    17,025Cost of sales
    
    
    9,516
    
    
    
    10,993Gross profit
    
    
    3,749
    
    
    
    6,032Operating expensesSelling, general and administrative
    
    
    4,473
    
    
    
    4,309Research and development
    
    
    79
    
    
    
    287Total operating expenses
    
    
    4,552
    
    
    
    4,596Operating income (loss)
    
    
    (803
    )
    
    
    1,436Other income (loss)
    
    
    (6
    )
    
    
    92Foreign currency gain (loss)
    
    
    (125
    )
    
    
    163Interest expense
    
    
    (336
    )
    
    
    (303
    )Total other income and expense
    
    
    (467
    )
    
    
    (48
    )Income (loss) before income tax expense
    
    
    (1,270
    )
    
    
    1,388Income tax (expense) benefit
    
    
    19
    
    
    
    (370
    )Net income (loss)
    
    
    (1,251
    )
    
    
    1,018Net (income) loss attributable to noncontrolling interests
    
    
    241
    
    
    
    (296
    )Net income (loss) attributable to DRI
    
    
    (1,010
    )
    
    
    722Provision for preferred stock dividends
    
    
    (76
    )
    
    
    (74
    )Net income (loss) applicable to common shareholders
    
    $
    (1,086
    )
    
    $
    648Net income (loss) per share applicable to common shareholdersBasic
    
    $
    (0.09
    )
    
    $
    0.06Diluted
    
    $
    (0.09
    )
    
    $
    0.06Weighted average number of common shares and common
share equivalents outstandingBasic
    
    
    11,473,219
    
    
    
    11,197,563Diluted
    
    
    11,473,219
    
    
    
    12,873,397
  4




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activitiesNet income (loss)
    
    $
    (1,251
    )
    
    $
    1,018Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activitiesDeferred income taxes
    
    
    
    
    
    
    30Liability for uncertain tax positions
    
    
    (1
    )
    
    
    103Depreciation and amortization of property and equipment
    
    
    212
    
    
    
    233Amortization of intangible assets
    
    
    31
    
    
    
    39Amortization of deferred financing costs
    
    
    109
    
    
    
    63Amortization of debt discount
    
    
    28
    
    
    
    57Loan termination fee accrual
    
    
    61
    
    
    
    Bad debt expense
    
    
    13
    
    
    
    41Stock issued in lieu of cash compensation
    
    
    22
    
    
    
    19Stock-based compensation expense
    
    
    77
    
    
    
    17Write-down of inventory for obsolescence
    
    
    54
    
    
    
    4Loss on sale of fixed assets
    
    
    11
    
    
    
    2Other, primarily effect of foreign currency gain
    
    
    (85
    )
    
    
    (91
    )Changes in operating assets and liabilities(Increase) decrease in trade accounts receivable
    
    
    2,013
    
    
    
    (1,780
    )Increase in other receivables
    
    
    (43
    )
    
    
    (159
    )Increase in inventories
    
    
    (736
    )
    
    
    (1,136
    )Increase in prepaids and other current assets
    
    
    (195
    )
    
    
    (148
    )(Increase) decrease in other assets
    
    
    (21
    )
    
    
    5Increase in accounts payable
    
    
    1,719
    
    
    
    729Increase (decrease) in accrued expenses
    
    
    (524
    )
    
    
    628Decrease in foreign tax settlement
    
    
    (63
    )
    
    
    (85
    )Net cash provided by (used in) operating activities
    
    
    1,431
    
    
    
    (411
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (64
    )
    
    
    (107
    )Investments in software development
    
    
    (444
    )
    
    
    (255
    )Net cash used in investing activities
    
    
    (508
    )
    
    
    (362
    )Cash flows from financing activitiesProceeds from bank borrowings and lines of credit
    
    
    15,854
    
    
    
    19,501Principal payments on bank borrowings and lines of credit
    
    
    (16,759
    )
    
    
    (18,069
    )Payment of dividends on Preferred stock
    
    
    (26
    )
    
    
    (27
    )Net cash provided by (used in) financing activities
    
    
    (931
    )
    
    
    1,405Effect of exchange rate changes on cash and cash equivalents
    
    
    (13
    )
    
    
    11Net increase (decrease) in cash and cash equivalents
    
    
    (21
    )
    
    
    643Cash and cash equivalents at beginning of period
    
    
    598
    
    
    
    729Cash and cash equivalents at end of period
    
    $
    577
    
    
    $
    1,372
  5




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Three Months Ended March 31,2009
    
    
    2008Supplemental disclosures of non-cash investing and financing activities:Increase in fair value of warrants due to modification
    
    $
    56
    
    
    $
    Preferred stock dividends
    
    $
    45
    
    
    $
    45Conversion of preferred stock to common stock
    
    $
    
    
    
    $
    55
  6




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DRI CORPORATION AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 ()
  (1) BASIS OF PRESENTATION AND DISCLOSURE
   Product Warranties
  Three Months ended March 31,2009
    
    
    2008Balance at beginning of period
    
    $
    495
    
    
    $
    491Additions charged to costs and expenses
    
    
    
    
    
    
    41Deductions
    
    
    (86
    )
    
    
    (68
    )Foreign exchange translation (gain) loss
    
    
    (14
    )
    
    
    15Balance at end of period
    
    $
    395
    
    
    $
    479
 Recent Accounting Pronouncements
  7




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
    
    The noncontrolling interests in Mobitec Brazil Ltda and Castmaster Mobitec India Private
Limited have been reclassified to shareholders equity.
 
    
    Consolidated net income (loss) has been adjusted to include the net income (loss)
attributed to the noncontrolling interest in Mobitec Brazil Ltda and Castmaster Mobitec India
Private Limited.
 
    
    Consolidated comprehensive income (loss) has been adjusted to include the comprehensive
income (loss) attributed to the noncontrolling interest in Mobitec Brazil Ltda and Castmaster
Mobitec India Private Limited.
 
    
    We have disclosed for each reporting period the amounts of consolidated income (loss)
attributed to the Company and the noncontrolling interest in Mobitec Brazil Ltda and
Castmaster Mobitec India Private Limited. In addition, for each reporting period we have
presented a reconciliation at the beginning and end of the period of the carrying amount of
equity attributable to the Company and noncontrolling interest in Mobitec Brazil Ltda and
Castmaster Mobitec India Private Limited.
    8




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##### Table of Contents



(2) GOODWILL AND OTHER INTANGIBLE ASSETS
  (3) INVENTORIES
 March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Raw materials and system components
    
    $
    7,079
    
    
    $
    6,803Work in process
    
    
    199
    
    
    
    243Finished goods
    
    
    3,901
    
    
    
    3,616Total inventories
    
    $
    11,179
    
    
    $
    10,662
 (4) PROPERTY AND EQUIPMENT
 EstimatedDepreciable
    
    
    March 31,
    
    
    December 31,Lives (years)
    
    
    2009
    
    
    2008(In thousands)Leasehold improvements
    
    
    5 - 9
    
    
    $
    287
    
    
    $
    286Automobiles
    
    
    5
    
    
    
    13
    
    
    
    13Computer and telecommunications equipment
    
    
    3
    
    
    
    998
    
    
    
    976Software
    
    
    3 - 5
    
    
    
    5,510
    
    
    
    4,592Test equipment
    
    
    3 - 5
    
    
    
    121
    
    
    
    124Furniture and fixtures
    
    
    3 - 7
    
    
    
    2,389
    
    
    
    2,490Software projects in progress
    
    
    
    
    
    
    679
    
    
    
    1,3929,997
    
    
    
    9,873Less accumulated depreciation and amortization
    
    
    
    
    
    
    6,225
    
    
    
    6,266Total property and equipment, net
    
    
    
    
    
    $
    3,772
    
    
    $
    3,607
 (5) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Salaries, commissions, and benefits
    
    $
    1,483
    
    
    $
    1,428Taxes  payroll, sales, income, and other
    
    
    642
    
    
    
    817Warranties
    
    
    395
    
    
    
    495Current portion of capital leases
    
    
    20
    
    
    
    19Interest payable
    
    
    279
    
    
    
    281Deferred revenue
    
    
    348
    
    
    
    694Other
    
    
    656
    
    
    
    625Total accrued expenses
    
    $
    3,823
    
    
    $
    4,359
 (6) LINES OF CREDIT, NOTES PAYABLE AND LOANS PAYABLE
 (a) Domestic line of credit and loans payable
  9




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Fiscal Quarter Ending:
    
    EBITDA:
    
    Leverage Ratio:March 31, 2009
    
    $
    3,000,000
    
    
    
    5.70 to 1.0June 30, 2009
    
    $
    2,500,000
    
    
    
    6.25 to 1.0September 30, 2009
    
    $
    4,000,000
    
    
    
    4.55 to 1.0
  b) International lines of credit and loans payable
     10




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March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Line of credit with PNC Bank, National Association dated June 30, 2008; payable in
full June 30, 2011; secured by all tangible and intangible U.S. assets of the
Company; bears average interest rate of 5.00% and 6.28% in 2009 and 2008,
respectively
    
    $
    1,892
    
    
    $
    1,601Line of credit with Handelsbanken; renews annually on a calendar-year basis;
secured by certain assets of the Swedish subsidiary, Mobitec AB; bears average
interest rate of 3.43% and 6.58% in 2009 and 2008, respectively.
    
    
    
    
    
    
    732Line of credit with Handelsbanken; renews annually on a calendar-year basis;
secured by accounts receivable of the Swedish subsidiary, Mobitec AB; bears
average interest rate of 5.80% and 6.95% in 2009 and 2008, respectively.
    
    
    144
    
    
    
    573Line of credit with Handelsbanken dated June 23, 2004; open-ended term; secured
by accounts receivable and inventory of the German subsidiary, Mobitec GmbH;
bears average interest rate of 3.10% and 5.62% in 2009 and 2008, respectively.
    
    
    822
    
    
    
    837Total lines of credit
    
    $
    2,858
    
    
    $
    3,743
 (7) LONG-TERM DEBT
  March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Term loan with BHC Interim Funding III, L.P.,
dated June 30, 2008;
payable in full June 30, 2011; secured by
substantially all tangible
and intangible assets of the Company; bears
interest rate of 12.75%.
    
    $
    5,000
    
    
    $
    5,000Term loan with Svenska Handelsbanken AB, dated
June 30, 2008;
payable in quarterly installments of $45,000;
secured by accounts
receivable and inventory of the Swedish
subsidiary, Mobitec AB;
bears average interest rate of 6.05% and 7.32%
in 2009 and 2008,
respectively.
    
    
    406
    
    
    
    483Total long-term debt
    
    
    5,406
    
    
    
    5,483Term loan termination fee accrual
    
    
    184
    
    
    
    123Less current portion
    
    
    180
    
    
    
    193Less debt discount
    
    
    250
    
    
    
    2785,160
    
    
    
    5,135Long-term portion of capital leases
    
    
    33
    
    
    
    14Total long-term debt and capital leases, less
current portion
    
    $
    5,193
    
    
    $
    5,149
 11




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(8) PREFERRED STOCK
   (9) PER SHARE AMOUNTS
  Three months ended March 31,2009
    
    
    2008(Unaudited)(In thousands, except share amounts)Net income (loss) applicable to common shareholders
    
    $
    (1,086
    )
    
    $
    648Effect of dilutive securities on net income (loss):Convertible debt
    
    
    
    
    
    
    3Convertible preferred stock
    
    
    
    
    
    
    63Net income (loss) applicable to common shareholders, assuming conversions
    
    $
    (1,086
    )
    
    $
    714Weighted average shares oustanding  Basic
    
    
    11,473,219
    
    
    
    11,197,563Effect of dilutive securities on shares outstanding:Options
    
    
    
    
    
    
    23,238Warrants
    
    
    
    
    
    
    19,849Convertible debt
    
    
    
    
    
    
    206,612Convertible preferred stock
    
    
    
    
    
    
    1,426,135Weighted average shares outstanding  Diluted
    
    
    11,473,219
    
    
    
    12,873,397
  (10) SHAREHOLDERS EQUITY, COMPREHENSIVE INCOME (LOSS) AND NONCONTROLLING INTERESTS
  12




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DRI Shareholders EquityAccumulatedAdditional
    
    
    Accum-
    
    
    Other
    
    
    Total DRI
    
    
    
    
    
    
    Compre-
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-in
    
    
    ulated
    
    
    Comprehensive
    
    
    Shareholders
    
    
    Noncontrolling
    
    
    hensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    Interests
    
    
    Income (Loss)
    
    
    EquityBalance as of January 1, 2009
    
    $
    3,765
    
    
    $
    1,147
    
    
    $
    32,706
    
    
    $
    (20,398
    )
    
    $
    512
    
    
    $
    17,732
    
    
    $
    852
    
    
    
    
    
    
    $
    18,584Cumulative effect of reclassification
of warrants (EITF 07-5)
    
    
    
    
    
    
    
    
    
    
    (333
    )
    
    
    292
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )Balance as of January 1, 2009, as adjusted
    
    $
    3,765
    
    
    $
    1,147
    
    
    $
    32,373
    
    
    $
    (20,106
    )
    
    $
    512
    
    
    $
    17,691
    
    
    $
    852
    
    
    
    
    
    
    $
    18,543Issuance of common stock
    
    
    
    
    
    
    2
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Issuance of Series G Preferred Stock dividend
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40Issuance of Series H Preferred Stock dividend
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (76
    )
    
    
    
    
    
    
    
    
    
    
    (76
    )
    
    
    
    
    
    
    
    
    
    
    (76
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,010
    )
    
    
    
    
    
    
    (1,010
    )
    
    
    (241
    )
    
    $
    (1,251
    )
    
    
    (1,251
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,004
    )
    
    
    (1,004
    )
    
    
    
    
    
    
    (1,004
    )
    
    
    (1,004
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,255
    )Balance as of March 31, 2009
    
    $
    3,810
    
    
    $
    1,149
    
    
    $
    32,394
    
    
    $
    (21,116
    )
    
    $
    (492
    )
    
    $
    15,745
    
    
    $
    611
    
    
    
    
    
    
    $
    16,356
 DRI Shareholders EquityAccumulatedAdditional
    
    
    Accum-
    
    
    Other
    
    
    Total DRI
    
    
    
    
    
    
    Compre-
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-in
    
    
    ulated
    
    
    Comprehensive
    
    
    Shareholders'
    
    
    Noncontrolling
    
    
    hensive
    
    
    Shareholders'Stock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    Interests
    
    
    Income (Loss)
    
    
    EquityBalance as of January 1, 2008
    
    $
    3,618
    
    
    $
    1,119
    
    
    $
    32,079
    
    
    $
    (21,894
    )
    
    $
    4,570
    
    
    $
    19,492
    
    
    $
    422
    
    
    
    
    
    
    $
    19,914Issuance of common stock
    
    
    
    
    
    
    1
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    19Issuance of Series G Preferred Stock dividend
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40Issuance of Series H Preferred Stock dividend
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Conversion of Series E Preferred stock
    
    
    (18
    )
    
    
    1
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series AAA Preferred stock
    
    
    (30
    )
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    
    
    
    
    (74
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    722
    
    
    
    
    
    
    
    722
    
    
    
    296
    
    
    $
    1,018
    
    
    
    1,018Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,004
    
    
    
    1,004
    
    
    
    
    
    
    
    1,004
    
    
    
    1,004Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,022Balance as of March 31, 2008
    
    $
    3,615
    
    
    $
    1,121
    
    
    $
    32,086
    
    
    $
    (21,172
    )
    
    $
    5,574
    
    
    $
    21,224
    
    
    $
    718
    
    
    
    
    
    
    $
    21,942
 13




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Unaudited)(In thousands)Net salesNorth America
    
    $
    7,399
    
    
    $
    6,758Europe
    
    
    3,965
    
    
    
    5,151Asia-Pacific
    
    
    927
    
    
    
    2,374Middle East
    
    
    42
    
    
    
    225South America
    
    
    932
    
    
    
    2,517$
    13,265
    
    
    $
    17,025
 March 31,2009
    
    
    December 31,(Unaudited)
    
    
    2008(In thousands)Long-lived assetsNorth America
    
    $
    3,128
    
    
    $
    2,982Europe
    
    
    1,479
    
    
    
    1,527Asia-Pacific
    
    
    73
    
    
    
    46South America
    
    
    200
    
    
    
    209$
    4,880
    
    
    $
    4,764
 (12) INCOME TAXES
    (14) SUBSEQUENT EVENT
  14




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Business  General
 ® ® ®
  Critical Accounting Policies and Estimates
  §
    
    Allowance for doubtful accounts;§
    
    Inventory valuation;§
    
    Warranty reserve;§
    
    Intangible assets and goodwill;§
    
    Income taxes, including deferred tax assets;§
    
    Revenue recognition; and§
    
    Stock-based compensation.
   Results of Operations
  15




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##### Table of Contents



Three Months Ended March 31,2009
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    71.7
    
    
    
    64.6Gross profit
    
    
    28.3
    
    
    
    35.4Operating expenses:Selling, general and administrative
    
    
    33.7
    
    
    
    25.3Research and development
    
    
    0.6
    
    
    
    1.7Total operating expenses
    
    
    34.3
    
    
    
    27.0Operating income (loss)
    
    
    (6.0
    )
    
    
    8.4Other income and expense
    
    
    (3.5
    )
    
    
    (0.3
    )Income (loss) before income tax (expense) benefit
    
    
    (9.5
    )
    
    
    8.1Income tax (expense) benefit
    
    
    0.1
    
    
    
    (2.2
    )Net income (loss)
    
    
    (9.4
    )
    
    
    5.9Net (income) loss attributable to noncontrolling interests
    
    
    1.8
    
    
    
    (1.7
    )Net income (loss) attributable to DRI
    
    
    (7.6
    )%
    
    
    4.2
    %
 COMPARISON OF OUR RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 Net Sales and Gross Profit.
     16




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##### Table of Contents



Selling, General and Administrative.
 Research and Development Expenses .
 Operating Income (Loss).
 Other Income (Loss), Foreign Currency Gain (Loss), and Interest Expense.
 17




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##### Table of Contents



Income
Tax (Expense)Benefit.
 Net Income (Loss) Applicable to Common Shareholders.
 Industry and Market Overview
    18




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##### Table of Contents



OUR LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows for the Three Months Ended March 31, 2009 and 2008
    Significant Financing Arrangements
  
    
    Our wholly-owned subsidiaries Digital Recorders, Inc. and TwinVision of North America, Inc.
(collectively, the Borrowers) have in place a three-year, asset-based lending agreement (the
PNC Agreement) with PNC Bank, National Association (PNC). DRI has agreed to guarantee the
obligations of the Borrowers under the PNC Agreement. The PNC Agreement provides up to $8.0
million in borrowings under a revolving credit facility and is secured by substantially all
tangible and intangible U.S. assets of the Company. Borrowing availability under the PNC
Agreement is based upon an advance rate equal to 85% of eligible accounts receivable of the
Borrowers plus 85% of the appraised net orderly liquidation value of inventory of the
Borrowers, limited to $750,000. The PNC Agreement provides for one of two possible interest
rates on borrowings: (1) an interest rate based on the rate (the Eurodollar Rate) at which
U.S. dollar deposits are offered by leading banks in the London interbank deposit market (a
Eurodollar Rate Loan) or (2) interest at a rate (the Domestic Rate) based on either
(a) the base commercial lending rate of PNC, or (b) the open rate for federal funds
transactions among members of the Federal Reserve System, as determined by PNC (a Domestic
Rate Loan). The actual annual interest rate for borrowings under the PNC Agreement is (a) the
Eurodollar Rate plus 3.25% for a Eurodollar Rate Loan and (b) the Domestic Rate plus 1.75% for
Domestic Rate Loans. Interest is calculated on the principal amount of borrowings outstanding,
subject to a minimum principal amount of $3.5 million. The PNC Agreement contains certain
covenants and provisions with which we and the Borrowers must comply on a quarterly basis. We
were in compliance with all covenants of the PNC Agreement at March 31, 2009. At March 31,
2009, the outstanding principal balance on the revolving credit facility was $1.9 million and
remaining borrowing availability under the revolving credit facility was approximately $2.2
million.
 
    
    Mobitec AB, the Companys wholly-owned Swedish subsidiary, has credit facilities in place
under agreements with Svenska Handelsbanken AB (Handelsbanken) pursuant to which it may
borrow up to a maximum of 24 million krona, or US$2.9 million (based on exchange rates at
March 31, 2009). At March 31, 2009, borrowings due and outstanding under these credit
facilities totaled 1.2 million krona (US$144,000, based on
exchange rates at March 31, 2009). Additional borrowing
availability under these agreements at March 31, 2009, amounted to
approximately $2.7 million.
These credit agreements renew annually on a calendar-year basis.
 
    
    Mobitec GmbH, the Companys wholly-owned subsidiary in Germany, has a credit facility in
place under an agreement with Handelsbanken pursuant to which it may currently borrow up to a
maximum of 912,000 Euros (US$1.2 million, based on exchange rates at March 31, 2009). At March
31, 2009, borrowings due and outstanding under this credit facility totaled 622,000
 19




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##### Table of Contents



Euros (US$822,000, based on exchange rates at March 31, 2009).
Additional borrowing availability under this credit facility at March
31, 2009, amounted to approximately $383,000. The agreement under which this credit
facility is extended has an open-ended term.
   Fiscal Quarter Ending:
    
    EBITDA:
    
    Leverage Ratio:March 31, 2009
    
    $
    3,000,000
    
    
    
    5.70 to 1.0June 30, 2009
    
    $
    2,500,000
    
    
    
    6.25 to 1.0September 30, 2009
    
    $
    4,000,000
    
    
    
    4.55 to 1.0
   i.e
   Management Conclusion
  Impact of Inflation
  FORWARD-LOOKING STATEMENTS
   
    
    our ability to meet our capital requirements;
 
    
    our ability to meet and maintain our existing debt obligations, including obligations to
make payments under such debt instruments;
 
    
    the sufficiency of our liquidity and capital resources to support current operations for
the remainder of 2009;
 
    
    our future cash flow position;
 
    
    recent legislative action affecting the transportation and/or security industry;
 
    
    future legislative action affecting the transportation and/or security industry;
 
    
    the likelihood of current transit funding legislation being extended through current
resolutions or future legislation;
 
    
    changes in federal or state funding for transportation and/or security-related funding;
 
    
    our future outlook with respect to the domestic and international markets for our products;
and
 
    
    our opinion that increased funding for transit security establishes a positive trend.
   20




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Internal Control- Integrated Framework
  Material Weakness  Mobitec Brazil Ltda.
  Material
Weakness  Revenue Recognition.
  21




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
    
    Proper documentation of all multiple deliverable transactions is prepared and maintained to
support accounting for these types of transactions in accordance with GAAP.
    
    An evaluation of multiple deliverable transactions is performed by management with the
proper skill and experience levels necessary to ensure revenue is recognized and accounted for
in accordance with GAAP.
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Risks Related to Indebtedness, Financial Condition and Results of Operations
 Our substantial debt could adversely affect our financial position, operations and ability to
grow.
 
    
    we could be required to dedicate a substantial portion of our cash flow from operations
to payments on our debt, which would reduce amounts available for working capital, capital
expenditures, research and development and other general corporate purposes;
    
    our flexibility in planning for, or reacting to, changes in our business and the
industries in which we operate could be limited;
    
    we may be more vulnerable to general adverse economic and industry conditions;
 22




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##### Table of Contents




    
    we may be at a disadvantage compared to our competitors that may have less debt than we
do;
    
    it may be more difficult for us to obtain additional financing that may be necessary in
connection with our business;
    
    it may be more difficult for us to implement our business and growth strategies; and
    
    we may have to pay higher interest rates on future borrowings.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  Exhibit No.
    
    Document3.1
    
    Amended and Restated Articles of Incorporation of the Company
(incorporated herein by reference from the Companys
Registration Statement on Form S-3, filed with the SEC on
December 23, 2003)3.2
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Certificate of Designation of Series E
Redeemable Nonvoting Convertible Stock (incorporated herein by
reference from the Companys Report on Form 8-K, filed with
the SEC on November 12, 2003)3.3
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Amended and Restated Certificate of
Designation of Series F Convertible Preferred Stock
(incorporated herein by reference from the Companys Report on
Form 8-K, filed with the SEC on April 14, 2004)3.4
    
    Articles of Amendment to the Articles of Incorporation of the
Company containing Series AAA Preferred Stock Change in
Quarterly Dividend Accrual and Conversion Price (incorporated
herein by reference to the Companys Report on Form 10-K for
the year ended December 31, 2004)
 23




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##### Table of Contents



Exhibit No.
    
    Document3.5
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Amended and Restated Certificate of
Designation of Series G Redeemable Convertible Preferred Stock
(incorporated herein by reference to the Companys Report on
Form 8-K filed on June 28, 2005)3.6
    
    Articles of Correction of Articles of Amendment to the
Articles of Incorporation of the Company containing a
correction to an error in the Amended Certificate of
Designation of Series G Redeemable Convertible Preferred Stock
(incorporated herein by reference to the Companys Report on
Form 10-Q for the quarter ended June 30, 2005)3.7
    
    Articles of Amendment to the Articles of Incorporation of the
Company containing an amendment to eliminate a staggered
election of Board members (incorporated herein by reference to
the Companys Report on Form 10-Q for the quarter ended
June 30, 2005)3.8
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Amended and Restated Certificate of
Designation of Series H Convertible Preferred Stock
(incorporated herein by reference to the Companys Report on
Form 8-K filed on November 4, 2005)3.9
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Certificate of Designation of Series I
Convertible Preferred Stock (incorporated herein by reference
to the Companys Report on Form 8-K filed on March 23, 2006)3.10
    
    Amended and Restated Bylaws of the Company (incorporated
herein by reference from the Companys Registration Statement
on Form SB-2)3.11
    
    Amendment to Amended and Restated Bylaws of the Company
(incorporated herein by reference from the Companys Proxy
Statement for the Annual Meeting of Shareholders for fiscal
year 2000, filed with the SEC on June 6, 2001)3.12
    
    Amended and Restated Bylaws of the Company (incorporated
herein by reference to the Companys Report on Form 8-K filed
on September 18, 2006)3.13
    
    Amendment No. 1 to the Companys Certificate of Designation
with respect to its Series D Junior Participating Preferred
Stock (incorporated herein by reference to the Companys
Report on Form 8-K filed with the SEC on September 28, 2006)3.14
    
    Amendment to Bylaws of DRI Corporation, dated as of September
12, 2007 (incorporated herein by reference to the Companys
Report on Form 8-K filed with the SEC on September 14, 2007)4.5
    
    Rights Agreement, dated as of September 22, 2006, between the
Company and American Stock Transfer & Trust Company, as Rights
Agent, together with the following exhibits thereto: Exhibit A
 Certificate of Designation of Series D Junior Participating
Preferred Stock of Digital Recorders, Inc. and the Amendment
to Certificate of Designation of Series D Junior Participating
Preferred Stock of Digital Recorders, Inc.; Exhibit B  Form
of Right Certificate; and Exhibit C  Summary of Rights to
Purchase Shares (incorporated herein by reference to the
Companys Registration Statement on Form 8-A filed with the
SEC on October 2, 2006)4.6
    
    Omnibus Amendment dated as of January 10, 2007, effective
December 31, 2006, by and among the Company, TwinVision of
North America, Inc., Digital Audio Corporation,
Robinson-Turney International, Inc., and Laurus Master Fund,
Ltd. (incorporated herein by reference to the Companys report
on Form 8-K filed with the SEC on January 16, 2007)4.7
    
    Amended and Restated Secured Term Note dated as of January 10,
2007, effective December 31, 2006, by and between the Company,
TwinVision of North America, Inc., Digital Audio Corporation,
Robinson-Turney International, Inc., and Laurus Master Fund,
Ltd. (incorporated herein by reference to the Companys Report
on Form 8-K filed with the SEC on January 16, 2007)4.8
    
    Second Amended and Restated Registration Rights Agreement
dated as of January 10, 2007, effective December 31, 2006, by
and between the Company and Laurus Master Fund, Ltd.
(incorporated herein by reference to the Companys Report on
Form 8-K filed with the SEC on January 16, 2007)
 24




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##### Table of Contents



Exhibit No.
    
    Document4.9
    
    Certificate of Designation of Series J Convertible Preferred
Stock of Digital Recorders, Inc. (incorporated herein by
reference to the Companys Report on Form 10-Q for the quarter
ended June 30, 2007)4.10
    
    Warrant, dated as of June 30, 2008, issued by DRI Corporation
to BHC Interim Funding III, L.P. (incorporated herein by
reference to the Companys Report on Form 8-K/A filed with the
SEC on August 14, 2008)10.1
    
    Secured Non-Convertible Revolving Note between the Company and
Laurus Master Fund, Ltd., dated March 15, 2006 (incorporated
herein by reference to the Companys Report on Form 8-K filed
on March 21, 2006)10.2
    
    Security Agreement (with Schedules) between the Company and
Laurus Master Fund, Ltd. dated March 15, 2006 (incorporated
herein by reference to the Companys Report on Form 8-K filed
on March 21, 2006)10.3
    
    Grant of Security Interest in Patents and Trademarks (with
Schedules) between the Company and Laurus Master Fund, Ltd.,
dated March 15, 2006 (incorporated herein by reference to the
Companys Report on Form 8-K filed on March 21, 2006)10.4
    
    Stock Pledge Agreement (with Schedules) between the Company
and Laurus Master Fund, Ltd., dated March 15, 2006
(incorporated herein by reference to the Companys Report on
Form 8-K filed on March 21, 2006)10.5
    
    Registration Rights Agreement between the Company and Laurus
Master Fund, Ltd., dated March 15, 2006 (incorporated herein
by reference to the Companys Report on Form 8-K filed on
March 21, 2006)10.6
    
    Common Stock Purchase Warrant between the Company and Laurus
Master Fund, Ltd., dated March 15, 2006 (incorporated herein
by reference to the Companys Report on Form 8-K filed on
March 21, 2006)10.7
    
    Share Purchase Agreement between the Company and Transit
Vehicle Technology Investments, Inc., dated March 21, 2006
(incorporated herein by reference to the Companys Report on
Form 8-K filed on March 23, 2006)10.8
    
    Stock Purchase Warrant between the Company and Transit Vehicle
Technology Investments, Inc., dated March 21, 2006
(incorporated herein by reference to the Companys Report on
Form 8-K filed on March 23, 2006)10.9
    
    Registration Rights Agreement between the Company and Transit
Vehicle Technology Investments, Inc., dated March 21, 2006
(incorporated herein by reference to the Companys Report on
Form 8-K filed on March 23, 2006)10.10
    
    Securities Purchase Agreement dated as of April 28, 2006, by
and between Digital Recorders, Inc., TwinVision of North
America, Inc., Digital Audio Corporation, and Robinson-Turney
International, Inc., and Laurus Master Fund, Ltd.
(incorporated herein by reference to the Companys Report on
Form 8-K filed on May 4, 2006)10.11
    
    Secured Term Note by Digital Recorders, Inc., TwinVision of
North America, Inc., Digital Audio Corporation, and
Robinson-Turney International, Inc., issued to Laurus Master
Fund, Ltd., in the original principal amount of $1,600,000
(incorporated herein by reference to the Companys Report on
Form 8-K filed on May 4, 2006)10.12
    
    Common Stock Purchase Warrant issued by the Company to Laurus
Master Fund, Ltd., dated as of April 28, 2006 (incorporated
herein by reference to the Companys Report on Form 8-K filed
on May 4, 2006)
 25




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##### Table of Contents



Exhibit No.
    
    Document10.13
    
    Amended and Restated Registration Rights Agreement dated as of
April 28, 2006, by and between Digital Recorders, Inc. and
Laurus Master Fund, Ltd. (incorporated herein by reference to
the Companys Report on Form 8-K filed on May 4, 2006)10.14
    
    Share Purchase Agreement, dated as of April 30, 2007, entered
into by and among Dolphin Direct Equity Partners, LP, Digital
Audio Corporation and Digital Recorders, Inc. (incorporated
herein by reference to the Companys Report on Form 10-Q for
the quarter ended March 31, 2007)10.15
    
    Waiver and Consent, dated as of April 30, 2007, entered into
by and between Digital Recorders, Inc., TwinVision of North
America, Inc., Digital Audio Corporation, Robinson-Turney
International, Inc. and Laurus Master Fund, Ltd. (incorporated
herein by reference to the Companys Report on Form 10-Q for
the quarter ended March 31, 2007)10.16
    
    Form of Share Purchase Agreement, dated June 11, 2007, between
Digital Recorders, Inc. and buyer of Series J Convertible
Preferred Stock of Digital Recorders, Inc. with Schedule of
Differences (incorporated herein by reference to the Companys
Report on Form 10-Q for the quarter ended June 30, 2007)10.17
    
    Form of Registration Rights Agreement, dated June 11, 2007,
between Digital Recorders, Inc. and holder of Series J
Convertible Preferred Stock of Digital Recorders, Inc.
(incorporated herein by reference to the Companys Report on
Form 10-Q for the quarter ended June 30, 2007)10.18
    
    Promissory Note, dated April 30, 2007, by Dolphin Direct
Equity Partners, LP issued to Digital Recorders, Inc. in the
principal sum of $285,000 (incorporated herein by reference to
the Companys Report on Form 10-Q for the quarter ended June
30, 2007)10.19
    
    Executive Employment Agreement, effective July 1, 2007, by and
between Mobitec GmbH and Mobitec AB and Oliver Wels
(incorporated herein by reference to the Companys Report on
Form 10-Q for the quarter ended March 31, 2008)10.20
    
    Extension Agreement, dated as of April 30, 2008 by and between
DRI Corporation and Digital Audio Corporation. (incorporated
herein by reference to the Companys Report on Form 8-K filed
on May 6, 2008)10.20.1
    
    Second Extension Agreement, dated as of April 30, 2009, by and
between DRI Corporation and Digital Audio Corporation
(incorporated herein by reference to the Companys current
report on Form 8-K filed with the SEC on May 6, 2009)10.21
    
    Agreement, dated as of June 30, 2008, by and between DRI
Corporation and John D. Higgins (incorporated herein by
reference to the Companys current report on Form 8-K/A filed
with the SEC on August 14, 2008)10.22
    
    Revolving Credit and Security Agreement, dated as of June 30,
2008, by and among, PNC Bank, National Association, and
Digital Recorders, Inc., TwinVision of North America, Inc. and
DRI Corporation (incorporated herein by reference to the
Companys current report on Form 8-K/A filed with the SEC on
August 14, 2008)10.22.1
    
    Amendment No. 2 to Revolving Credit and Security Agreement,
dated as of September 29, 2008, by and between, PNC Bank,
National Association, and Digital Recorders, Inc., TwinVision
of North America, Inc. and DRI Corporation (incorporated
herein by reference to the Companys Report on Form 10-Q for
the quarter ended September 30, 2008)10.23
    
    Revolving Credit Note, dated as of June 30, 2008, issued by
Digital Recorders, Inc., TwinVision of North America, Inc. and
DRI Corporation to PNC Bank, National Association
(incorporated herein by reference to the Companys current
report on Form 8-K/A filed with the SEC on August 14, 2008)10.24
    
    Loan and Security Agreement, dated as of June 30, 2008, by and
among Digital Recorders, Inc., TwinVision of North America,
Inc. and DRI Corporation, and BHC Interim Funding III, L.P.
(incorporated herein by reference to the Companys current
report on Form 8-K/A filed with the SEC on August 14, 2008)
 26




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##### Table of Contents



Exhibit No.
    
    Document10.24.1
    
    First Amendment to the Loan and Security Agreement, dated as
of July 30, 2008, by and among Digital Recorders, Inc.,
TwinVision of North America, Inc. and DRI Corporation, and BHC
Interim Funding III, L.P. (incorporated herein by reference to
the Companys current report on Form 8-K/A filed with the SEC
on August 14, 2008)10.25
    
    Senior Secured Term Note, dated as of June 30, 2008, issued by
Digital Recorders, Inc. and TwinVision of North America, Inc.
to BHC Interim Funding III, L.P. (incorporated herein by
reference to the Companys current report on Form 8-K/A filed
with the SEC on August 14, 2008)10.26
    
    Continuing Unconditional Guaranty, dated as of June 30, 2008,
granted by DRI Corporation in favor of BHC Interim Funding
III, L.P. (incorporated herein by reference to the Companys
current report on Form 8-K/A filed with the SEC on August 14,
2008)10.27
    
    Stock Pledge Agreement, dated as of June 30, 2008, by and
between DRI Corporation and BHC Interim Funding III, L.P.
(incorporated herein by reference to the Companys current
report on Form 8-K/A filed with the SEC on August 14, 2008)10.28
    
    Trademark Security Agreement, dated as of June 30, 2008, by
and between DRI Corporation and BHC Interim Funding III, L.P.
(incorporated herein by reference to the Companys current
report on Form 8-K/A filed with the SEC on August 14, 2008)10.29
    
    Trademark Security Agreement, dated as of June 30, 2008, by
and between Digital Recorders, Inc. and BHC Interim Funding
III, L.P. (incorporated herein by reference to the Companys
current report on Form 8-K/A filed with the SEC on August 14,
2008)10.30
    
    Trademark Security Agreement, dated as of June 30, 2008, by
and between TwinVision of North America, Inc. and BHC Interim
Funding III, L.P. (incorporated herein by reference to the
Companys current report on Form 8-K/A filed with the SEC on
August 14, 2008)10.31
    
    Copyright Security Agreement, dated as of June 30, 2008, by
and between Digital Recorders, Inc. and BHC Interim Funding
III, L.P. (incorporated herein by reference to the Companys
current report on Form 8-K/A filed with the SEC on August 14,
2008)10.32
    
    Copyright Security Agreement, dated as of June 30, 2008, by
and between TwinVision of North America, Inc. and BHC Interim
Funding III, L.P. (incorporated herein by reference to the
Companys current report on Form 8-K/A filed with the SEC on
August 14, 2008)10.33
    
    Patent Security Agreement, dated as of June 30, 2008, by and
between Digital Recorders, Inc. and BHC Interim Funding III,
L.P. (incorporated herein by reference to the Companys
current report on Form 8-K/A filed with the SEC on August 14,
2008)10.34
    
    Undertaking Concerning Loan Payment for purposes other than
personal consumption, by and between Handelsbanken and Mobitec
AB (English translation) (incorporated herein by reference to
the Companys current report on Form 8-K/A filed with the SEC
on August 14, 2008)10.35
    
    Instrument for Debt A  Loan for purposes other than personal
consumption, by and between Handelsbanken and Mobitec AB
(English translation) (incorporated herein by reference to the
Companys current report on Form 8-K/A filed with the SEC on
August 14, 2008)10.36
    
    Factoring Agreement by and between Handelsbanken and Mobitec
AB (English translation) (incorporated herein by reference to
the Companys current report on Form 8-K/A filed with the SEC
on August 14, 2008)10.37
    
    EURO Short Term Loan Facility by and between Handelsbanken and
Mobitec GmbH (incorporated herein by reference to the
Companys current report on Form 8-K/A filed with the SEC on
August 14, 2008)31.1
    
    Section 302 Certification of David L. Turney (filed herewith)
 27




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##### Table of Contents



Exhibit No.
    
    Document31.2
    
    Section 302 Certification of Stephen P. Slay (filed herewith)32.1
    
    Section 906 Certification of David L. Turney (filed herewith)32.2
    
    Section 906 Certification of Stephen P. Slay (filed herewith)
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##### Table of Contents



SIGNATURES
  DRI CORPORATION
 Signature:
    
    /s/ Stephen P. SlayBy:
    
    Stephen P. SlayTitle:
    
    Chief Financial Officer (Principal Financial and Accounting Officer)Date:
    
    May 15, 2009
 29