##### 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 September 30, 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
    
    11,734,073(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  September 30, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations  Three and Nine Months Ended September 30,
2009 and 2008 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2009 and
2008 (Unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 4T. Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Securityholders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34SIGNATURES
    
    
    41EX-4.5.2EX-10.22.4EX-10.24.7EX-10.43.1EX-10.44.1EX-10.45.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    FINANCIAL STATEMENTS
 
 September 30, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Note 1)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1,552
    
    
    $
    598Trade accounts receivable, net
    
    
    17,394
    
    
    
    12,403Current portion of note receivable
    
    
    86
    
    
    
    86Other receivables
    
    
    1,560
    
    
    
    431Inventories
    
    
    13,477
    
    
    
    10,662Prepaids and other current assets
    
    
    877
    
    
    
    427Total current assets
    
    
    34,946
    
    
    
    24,607Property and equipment, net
    
    
    4,705
    
    
    
    3,607Long-term portion of note receivable
    
    
    172
    
    
    
    172Goodwill
    
    
    10,041
    
    
    
    9,034Intangible assets, net
    
    
    773
    
    
    
    790Deferred tax assets, net
    
    
    
    
    
    
    94Other assets
    
    
    984
    
    
    
    1,157Total assets
    
    $
    51,621
    
    
    $
    39,461LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesLines of credit
    
    $
    4,336
    
    
    $
    3,743Loans payable
    
    
    1,642
    
    
    
    719Current portion of long-term debt
    
    
    751
    
    
    
    193Current portion of foreign tax settlement
    
    
    467
    
    
    
    386Accounts payable
    
    
    12,179
    
    
    
    5,347Accrued expenses and other current liabilities
    
    
    5,584
    
    
    
    4,359Preferred stock dividends payable
    
    
    16
    
    
    
    16Total current liabilities
    
    
    24,975
    
    
    
    14,763Long-term debt and capital leases, net
    
    
    6,860
    
    
    
    5,149Foreign tax settlement, long-term
    
    
    213
    
    
    
    528Deferred tax liabilities, net
    
    
    56
    
    
    
    137Liability for uncertain tax positions
    
    
    333
    
    
    
    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 September 30, 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; 471 and 444
shares issued and outstanding at September 30, 2009, and December 31, 2008,
respectively; redeemable at the discretion of the Company after five years
from date of issuance.
    
    
    2,073
    
    
    
    1,938Series H Redeemable, Convertible Preferred Stock, $.10 par value,
liquidation preference of $5,000 per share; 600 shares authorized; 68 and 64
shares issued and outstanding at September 30, 2009, and December 31, 2008,
respectively; redeemable at the discretion of the Company after five years
from date of issuance.
    
    
    292
    
    
    
    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 September 30, 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 September 30, 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; 11,534,993 and
11,466,606 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively.
    
    
    1,154
    
    
    
    1,147Additional paid-in capital
    
    
    29,985
    
    
    
    32,706Accumulated other comprehensive income  foreign currency translation
    
    
    2,726
    
    
    
    512Accumulated deficit
    
    
    (19,003
    )
    
    
    (20,398
    )Total DRI shareholders equity
    
    
    18,782
    
    
    
    17,732Noncontrolling interestsNoncontrolling interest  Mobitec Brazil Ltda.
    
    
    
    
    
    
    596Noncontrolling interest  Castmaster Mobitec India Private Limited
    
    
    402
    
    
    
    256Total noncontrolling interests
    
    
    402
    
    
    
    852Total shareholders equity
    
    
    19,184
    
    
    
    18,584Total liabilities and shareholders equity
    
    $
    51,621
    
    
    $
    39,461
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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    21,606
    
    
    $
    18,794
    
    
    $
    56,385
    
    
    $
    54,922Cost of sales
    
    
    14,401
    
    
    
    12,294
    
    
    
    38,761
    
    
    
    35,847Gross profit
    
    
    7,205
    
    
    
    6,500
    
    
    
    17,624
    
    
    
    19,075Operating expensesSelling, general and administrative
    
    
    5,000
    
    
    
    4,798
    
    
    
    14,628
    
    
    
    13,921Research and development
    
    
    160
    
    
    
    199
    
    
    
    428
    
    
    
    723Total operating expenses
    
    
    5,160
    
    
    
    4,997
    
    
    
    15,056
    
    
    
    14,644Operating income
    
    
    2,045
    
    
    
    1,503
    
    
    
    2,568
    
    
    
    4,431Other income (loss)
    
    
    (8
    )
    
    
    61
    
    
    
    (120
    )
    
    
    130Foreign currency gain (loss)
    
    
    (343
    )
    
    
    125
    
    
    
    (319
    )
    
    
    289Interest expense
    
    
    (358
    )
    
    
    (390
    )
    
    
    (1,059
    )
    
    
    (1,051
    )Total other income and expense
    
    
    (709
    )
    
    
    (204
    )
    
    
    (1,498
    )
    
    
    (632
    )Income before income tax expense
    
    
    1,336
    
    
    
    1,299
    
    
    
    1,070
    
    
    
    3,799Income tax expense
    
    
    (212
    )
    
    
    (291
    )
    
    
    (174
    )
    
    
    (1,179
    )Net income
    
    
    1,124
    
    
    
    1,008
    
    
    
    896
    
    
    
    2,620Net (income) loss attributable to noncontrolling interests
    
    
    (164
    )
    
    
    (269
    )
    
    
    207
    
    
    
    (700
    )Net income attributable to DRI
    
    
    960
    
    
    
    739
    
    
    
    1,103
    
    
    
    1,920Provision for preferred stock dividends
    
    
    (80
    )
    
    
    (77
    )
    
    
    (234
    )
    
    
    (226
    )Net income applicable to common shareholders
    
    $
    880
    
    
    $
    662
    
    
    $
    869
    
    
    $
    1,694Net income per share applicable to common shareholdersBasic
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.15Diluted
    
    $
    0.07
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.15Weighted average number of common shares and common
share equivalents outstandingBasic
    
    
    11,522,979
    
    
    
    11,453,588
    
    
    
    11,498,333
    
    
    
    11,290,217Diluted
    
    
    13,395,830
    
    
    
    13,052,316
    
    
    
    11,566,882
    
    
    
    12,885,628
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Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    896
    
    
    $
    2,620Adjustments to reconcile net income to net cash provided by operating activitiesDeferred income taxes
    
    
    7
    
    
    
    Change in liability for uncertain tax positions
    
    
    (29
    )
    
    
    297Depreciation and amortization of property and equipment
    
    
    750
    
    
    
    721Amortization of intangible assets
    
    
    87
    
    
    
    118Amortization of deferred financing costs
    
    
    346
    
    
    
    231Amortization of debt discount
    
    
    83
    
    
    
    143Amortization of beneficial conversion feature
    
    
    
    
    
    
    54Change in fair value of warrant liability
    
    
    110
    
    
    
    Loan termination fee accrual
    
    
    184
    
    
    
    Bad debt expense
    
    
    107
    
    
    
    100Stock issued in lieu of cash compensation
    
    
    74
    
    
    
    64Stock-based compensation expense
    
    
    269
    
    
    
    111Write-down of inventory for obsolescence
    
    
    133
    
    
    
    81Loss on sale of fixed assets
    
    
    14
    
    
    
    4Other, primarily effect of foreign currency (gain) loss
    
    
    291
    
    
    
    (347
    )Changes in operating assets and liabilitiesIncrease in trade accounts receivable
    
    
    (3,782
    )
    
    
    (2,944
    )Increase in other receivables
    
    
    (960
    )
    
    
    (52
    )Increase in inventories
    
    
    (1,962
    )
    
    
    (2,686
    )Increase in prepaids and other current assets
    
    
    (410
    )
    
    
    (478
    )(Increase) decrease in other assets
    
    
    (35
    )
    
    
    4Increase in accounts payable
    
    
    5,991
    
    
    
    1,567Increase in accrued expenses
    
    
    869
    
    
    
    1,925Decrease in foreign tax settlement
    
    
    (449
    )
    
    
    (263
    )Net cash provided by operating activities
    
    
    2,584
    
    
    
    1,270Cash flows from investing activitiesProceeds from sale of fixed assets
    
    
    3
    
    
    
    5Purchases of property and equipment
    
    
    (111
    )
    
    
    (390
    )Investments in software development
    
    
    (1,495
    )
    
    
    (1,075
    )Net cash used in investing activities
    
    
    (1,603
    )
    
    
    (1,460
    )Cash flows from financing activitiesProceeds from bank borrowings and lines of credit
    
    
    59,676
    
    
    
    68,641Principal payments on bank borrowings and lines of credit
    
    
    (59,799
    )
    
    
    (65,702
    )Issuance of common stock
    
    
    
    
    
    
    3Payments related to new debt financing
    
    
    
    
    
    
    (1,193
    )Payment of dividends on Preferred stock
    
    
    (79
    )
    
    
    (83
    )Payment of dividends to noncontrolling interests
    
    
    
    
    
    
    (184
    )Net cash provided by (used in) financing activities
    
    
    (202
    )
    
    
    1,482Effect of exchange rate changes on cash and cash equivalents
    
    
    175
    
    
    
    (84
    )Net increase in cash and cash equivalents
    
    
    954
    
    
    
    1,208Cash and cash equivalents at beginning of period
    
    
    598
    
    
    
    729Cash and cash equivalents at end of period
    
    $
    1,552
    
    
    $
    1,937
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Nine Months Ended September 30,2009
    
    
    2008(In
thousands)Supplemental disclosures of non-cash investing and financing activities:Fair value of warrants issued in connection with new term loan
    
    $
    
    
    
    $
    333Preferred stock dividends
    
    $
    155
    
    
    $
    145Purchase of equipment under capital lease obligation
    
    $
    27
    
    
    $
    21Conversion of convertible subordinated debenture
    
    $
    
    
    
    $
    250Amortization of convertible subordinated debenture beneficial
conversion feature
    
    $
    
    
    
    $
    54Conversion of preferred stock to common stock
    
    $
    
    
    
    $
    55Increase in
fair value of warrants due to modification
    
    $
    67
    
    
    $
    Acquisition of noncontrolling interest under short and long-term debt
obligations
    
    $
    2,950
    
    
    $
    
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DRI CORPORATION AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 ()
  (1) BASIS OF PRESENTATION AND DISCLOSURE
   Product Warranties
  Nine Months ended September 30,2009
    
    
    2008(In thousands)Balance at beginning of period
    
    $
    495
    
    
    $
    491Additions charged to costs and expenses
    
    
    173
    
    
    
    119Deductions
    
    
    (155
    )
    
    
    (137
    )Foreign exchange translation (gain) loss
    
    
    67
    
    
    
    (21
    )Balance at end of period
    
    $
    580
    
    
    $
    452
 Recent Accounting Pronouncements
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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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.
      Fair Value of Assets and Liabilities
  9




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Fair Value of Financial Instruments
  (2) MOBITEC BRAZIL LTDA
   10




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§
    
    Permit Mobitec AB to create, become and remain liable with respect to the indebtedness
represented by that certain promissory note, issued by Mobitec AB to the Sellers in
connection with the acquisition of the Interests by Mobitec EP, in the principal amount of
US$1,950,000;§
    
    Allow the Loan Parties and their Subsidiaries (as defined in the BHC Agreement) to
become liable upon the obligations or liabilities of guarantees in an aggregate amount not
to exceed 2,000,000 Brazilian Reals (approximately US$1.1 million, based on exchange rates
as of September 30, 2009) made by Mobitec Brazil or Mobitec EP for purposes of asset-based
working capital and capital lease financing of Mobitec Brazil;§
    
    Permit Mobitec EP to purchase the Interests from the Sellers as set forth in the
Purchase Agreement;§
    
    Permit Mobitec AB to acquire Mobitec EP for the purpose of acquiring the Interests and
to contribute the Mobitec AB Shares to Mobitec EP;§
    
    Consent to the merger of Mobitec EP with and into Mobitec Brazil, so long as Mobitec
Brazil is the successor company to such merger;§
    
    Allow Mobitec Brazil to change its Organizational Documents (as defined in the BHC
Agreement) in connection with the contribution of the Mobitec AB Shares to Mobitec EP and
related changes to the Mobitec AB Pledge (as defined in the Loan Amendment); and§
    
    Allow each of Mobitec Brazil and Mobitec EP to change its Organizational Documents
solely in connection with the merger of Mobitec EP with and into Mobitec Brazil, so long as
Mobitec Brazil is the successor company to such merger.
      11




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
    
    Modify the capacity in which Lorena Demore is a party to
the Purchase Agreement from that of Seller to that of
Intervening Party and Guarantor of the Sellers
obligations, jointly and severally with JADI;
    
    Amend the definition of, and all references to, Sellers
contained in the Purchase Agreement so that only Roberto
Demore shall be considered a Seller;
    
    Delete all instances in the Purchase Agreement that refer
to Lorena Demore, in her capacity as Seller, and replace
them with Roberto Demore, in his capacity as Seller; and
    
    Establish that any other instances in the Purchase
Agreement which refer to Lorena Demore, in any capacity
other than as Seller, shall refer to Lorena Demore in her
capacity as Intervening Party and Guarantor of the
Sellers obligation, jointly and severally with JADI.
    (3) GOODWILL AND OTHER INTANGIBLE ASSETS
  (4) INVENTORIES
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Raw materials and system components
    
    $
    9,236
    
    
    $
    6,803Work in process
    
    
    27
    
    
    
    243Finished goods
    
    
    4,214
    
    
    
    3,616Total inventories
    
    $
    13,477
    
    
    $
    10,662
 (5) PROPERTY AND EQUIPMENT
 EstimatedDepreciable
    
    September 30,
    
    
    December 31,Lives (years)
    
    2009
    
    
    2008(In thousands)Leasehold improvements
    
    5 - 9
    
    $
    305
    
    
    $
    286Automobiles
    
    5
    
    
    185
    
    
    
    13Computer and telecommunications equipment
    
    3
    
    
    1,196
    
    
    
    976Software
    
    3 - 5
    
    
    6,038
    
    
    
    4,592Test equipment
    
    3 - 5
    
    
    132
    
    
    
    124Furniture and fixtures
    
    3 - 7
    
    
    2,416
    
    
    
    2,490Software projects in progress
    
    
    
    
    1,847
    
    
    
    1,39212,119
    
    
    
    9,873Less accumulated depreciation and amortization
    
    
    
    
    7,414
    
    
    
    6,266Total property and equipment, net
    
    
    
    $
    4,705
    
    
    $
    3,607
 12




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(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Salaries, commissions, and benefits
    
    $
    1,984
    
    
    $
    1,428Taxes  payroll, sales, income, and other
    
    
    1,143
    
    
    
    817Warranties
    
    
    580
    
    
    
    495Current portion of capital leases
    
    
    14
    
    
    
    19Interest payable
    
    
    334
    
    
    
    281Deferred revenue
    
    
    569
    
    
    
    694Other
    
    
    960
    
    
    
    625Total accrued expenses
    
    $
    5,584
    
    
    $
    4,359
 (7) LINES OF CREDIT AND LOANS PAYABLE
 (a) Domestic line of credit and loans payable
    13




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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
     14




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September 30,
    
    
    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.
    
    $
    2,067
    
    
    $
    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 3.41% 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 5.03% and 6.95% in 2009 and 2008, respectively.
    
    
    1,448
    
    
    
    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 3.29% and 5.62% in 2009 and 2008, respectively.
    
    
    821
    
    
    
    837Total lines of credit
    
    $
    4,336
    
    
    $
    3,743
 15




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##### Table of Contents



(8) LONG-TERM DEBT
  September 30,
    
    
    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 $54,000; secured by accounts
receivable and inventory of the Swedish subsidiary, Mobitec AB;
bears average interest rate of 5.84% and 7.32% in 2009 and 2008,
respectively.
    
    
    482
    
    
    
    483Term loan with Robert Demore, dated August 31, 2009; payable in
quarterly installments of $162,500; unsecured; bears interest rate of
5.0%.
    
    
    1,950
    
    
    
    Other long-term debt
    
    
    36
    
    
    
    Total long-term debt
    
    
    7,468
    
    
    
    5,483Term loan termination fee accrual
    
    
    306
    
    
    
    123Less current portion
    
    
    751
    
    
    
    193Less debt discount
    
    
    194
    
    
    
    2786,829
    
    
    
    5,135Long-term portion of capital leases
    
    
    31
    
    
    
    14Total long-term debt and capital leases, less current portion
    
    $
    6,860
    
    
    $
    5,149
 (9) PREFERRED STOCK
   (10) COMMON STOCK WARRANTS
   16




---



##### Table of Contents



(11) PER SHARE AMOUNTS
  Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)(In thousands, except share amounts)Net income applicable to common shareholders
    
    $
    880
    
    
    $
    662
    
    
    $
    869
    
    
    $
    1,694Effect of dilutive securities on net income:Convertible debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Convertible preferred stock
    
    
    80
    
    
    
    66
    
    
    
    
    
    
    
    173Net income applicable to common shareholders, assuming conversions
    
    $
    960
    
    
    $
    728
    
    
    $
    869
    
    
    $
    1,877Weighted average shares outstanding  Basic
    
    
    11,522,979
    
    
    
    11,453,588
    
    
    
    11,498,333
    
    
    
    11,290,217Effect of dilutive securities on shares outstanding:Options
    
    
    37,933
    
    
    
    53,451
    
    
    
    6,199
    
    
    
    49,812Warrants
    
    
    122,488
    
    
    
    77,223
    
    
    
    62,350
    
    
    
    58,344Convertible debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,133Convertible preferred stock
    
    
    1,712,430
    
    
    
    1,468,054
    
    
    
    
    
    
    
    1,337,122Weighted average shares outstanding  Diluted
    
    
    13,395,830
    
    
    
    13,052,316
    
    
    
    11,566,882
    
    
    
    12,885,628
  (12) SHAREHOLDERS EQUITY, COMPREHENSIVE INCOME (LOSS) AND NONCONTROLLING INTERESTS
  17




---



##### Table of Contents



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 (ASC 815-40)
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    
    
    
    7
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    74Issuance of Series G Preferred Stock dividend
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    135Issuance of Series H Preferred Stock dividend
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    20Reclassification of warrants
    
    
    
    
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    207Modification of warrants
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    10Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (234
    )
    
    
    
    
    
    
    
    
    
    
    (234
    )
    
    
    
    
    
    
    
    
    
    (234
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    269Purchase of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    (2,707
    )
    
    
    
    
    
    
    
    
    
    
    (2,707
    )
    
    
    (243
    )
    
    
    
    
    
    (2,950
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,103
    
    
    
    
    
    
    
    1,103
    
    
    
    (207
    )
    
    $
    896
    
    
    896Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,214
    
    
    
    2,214
    
    
    
    
    
    
    
    2,214
    
    
    2,214Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,110Balance as of September 30, 2009
    
    $
    3,920
    
    
    $
    1,154
    
    
    $
    29,985
    
    
    $
    (19,003
    )
    
    $
    2,726
    
    
    $
    18,782
    
    
    $
    402
    
    
    
    
    
    $
    19,184
 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
    
    
    
    
    
    
    3
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Issuance of Series G Preferred Stock dividend
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    125Issuance of Series H Preferred Stock dividend
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Conversion of Series E Preferred stock
    
    
    (18
    )
    
    
    1
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series AAA Preferred stock
    
    
    (30
    )
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Conversion of Convertible SubordinatedDebenture
    
    
    
    
    
    
    23
    
    
    
    227
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Amortization
of convertible subordinated debenture beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    333Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )Dividends paid to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )
    
    
    
    
    
    
    (184
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    111Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,920
    
    
    
    
    
    
    
    1,920
    
    
    
    700
    
    
    $
    2,620
    
    
    
    2,620Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,520
    )
    
    
    (1,520
    )
    
    
    
    
    
    
    (1,520
    )
    
    
    (1,520
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,100Balance as of September 30, 2008
    
    $
    3,715
    
    
    $
    1,146
    
    
    $
    32,687
    
    
    $
    (19,974
    )
    
    $
    3,050
    
    
    $
    20,624
    
    
    $
    938
    
    
    
    
    
    
    $
    21,562
 (13) SEGMENT AND GEOGRAPHIC INFORMATION
  18




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##### Table of Contents



Three Months Ended September,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)(In thousands)
    
    
    (In thousands)Net salesNorth America
    
    $
    8,248
    
    
    $
    8,005
    
    
    $
    24,301
    
    
    $
    22,460Europe
    
    
    6,787
    
    
    
    4,580
    
    
    
    20,054
    
    
    
    15,639Asia-Pacific
    
    
    4,120
    
    
    
    2,304
    
    
    
    6,567
    
    
    
    6,991Middle East
    
    
    191
    
    
    
    74
    
    
    
    291
    
    
    
    676South America
    
    
    2,260
    
    
    
    3,831
    
    
    
    5,172
    
    
    
    9,156$
    21,606
    
    
    $
    18,794
    
    
    $
    56,385
    
    
    $
    54,922
 September 30,2009
    
    
    December 31,(Unaudited)
    
    
    2008(In thousands)Long-lived assetsNorth America
    
    $
    3,456
    
    
    $
    2,982Europe
    
    
    1,873
    
    
    
    1,527Asia-Pacific
    
    
    133
    
    
    
    46South America
    
    
    227
    
    
    
    209$
    5,689
    
    
    $
    4,764
 (14) INCOME TAXES
    (15) FOREIGN TAX SETTLEMENT
    (16) SUBSEQUENT EVENTS
  
    
    Permit the Borrowers and DRI to make a recallable equity
investment in Mobitec AB on or about October 1, 2009 (the
BHC Effective Date), in an amount not to exceed the
Contribution Amount (as defined below);
    
    Permit the Borrowers and DRI to make a recallable equity
investment in Mobitec Empreendimientos e Participações
Ltda., Mobitec ABs wholly-owned Brazilian subsidiary, on
or about the BHC Effective Date in an amount not to exceed
$400,000;
    
    Allow the Borrowers to make dividends or distributions to
DRI to enable DRI to pay up to the sum of (a) $150,000 plus
(b) the result of 9.5% of the amount of the Series K
Preferred Stock issued by DRI on or prior to October 31,
2009, in the aggregate in any fiscal year, of dividends or
distributions with respect to DRIs preferred stock;
    
    Allow the Borrowers and DRI to enter into any transaction,
capital contribution, investment and transfer which, in the
aggregate for all such events, do not exceed $2 million
plus the Contribution Amount; and
    
    Permit DRI to adopt the Certificate of Designation of, and
amend its Organizational Documents (as defined in the BHC
Agreement) to authorize, the Series K Preferred Stock.
 19




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##### Table of Contents




    
    Obtain PNCs consent for DRI to issue a new series of
preferred stock and to be designated the Series K Senior
Convertible Preferred Stock (the Series K Preferred
Stock), so long as the net proceeds of such issuance are
utilized to repay outstanding Advances (as defined in the
PNC Agreement) and to use Advances to make a recallable
equity investment in Mobitec AB on or after the PNC
Effective Date in an amount not to exceed, if DRI receives
gross proceeds from the issuance of the Series K Preferred
Stock of (i) no more than $3.5 million, $1 million, (ii) $5
million, $1.5 million, and (iii) in excess of $3.5 million
but less than $5 million, $1 million plus the lesser of (a)
$500,000 and (b) an amount determined by multiplying (x)
the quotient (expressed as a percentage) of (1) the amount
by which gross proceeds from the issuance of Series K
Preferred Stock exceeds $3.5 million, divided by (2) $1.5
million, by (y) $500,000 (the foregoing clauses (i) through
(iii) collectively referred to as the Contribution
Amount); provided , however , that (x) the amount of the
proceeds applied to repay Advances must be equal to or
greater than the Contribution Amount and (y) the amount of
the proceeds as applied to prepay the Term Loan (as defined
in Note 7) may not exceed the Prepayment Amount, as defined
below; and
    
    Obtain PNCs consent to the prepayment of the Term Loan
with a portion of the proceeds of the Series K Preferred
Stock in an amount not to exceed the Prepayment Amount;The Prepayment Amount shall be an amount that is dependent upon the gross proceeds that DRI
receives from the issuance of the Series K Preferred Stock, as follows: if DRI receives gross
proceeds from the issuance of the Series K Preferred Stock of (i) no more than $3.5 million,
$250,000, (ii) $5 million, $1 million, and (iii) in excess of $3.5 million, but less than $5
million, $250,000 plus the lesser of (a) $750,000 and (b) an amount determined by multiplying
(x) the quotient (expressed as a percentage) of (1) the amount by which gross proceeds from
the issuance of the Series K Preferred Stock exceed $3.5 million, divided by (2) $1.5 million,
by (y) $750,000 (the foregoing clauses (i) through (iii) are collectively referred to as the
Prepayment Amount);In addition to the above consents, the PNC Amendment also:
    
    Allows the Borrowers to make dividends or distributions to
DRI to enable DRI to pay up to the sum of (a) $150,000 plus
(b) the result of 9.5% of the amount of the Series K
Preferred Stock issued by DRI on or prior to October 31,
2009;
    
    Permits the Borrowers and DRI to enter into any
transaction, capital contribution, investment and transfers
which, in the aggregate for all such events, do not exceed
$2 million plus the Contribution Amount; and
    
    Permits DRI to adopt the Certificate of Designation of, and
amend its Articles of Incorporation to authorize, the
Series K Preferred Stock.
    20




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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.
   21




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##### Table of Contents



Recent Accounting Pronouncements
     
    
    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.
  22




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##### Table of Contents



.
      23




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##### Table of Contents



Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    66.7
    
    
    
    65.4
    
    
    
    68.7
    
    
    
    65.3Gross profit
    
    
    33.3
    
    
    
    34.6
    
    
    
    31.3
    
    
    
    34.7Operating expenses:Selling, general and administrative
    
    
    23.1
    
    
    
    25.5
    
    
    
    25.9
    
    
    
    25.3Research and development
    
    
    0.7
    
    
    
    1.1
    
    
    
    0.8
    
    
    
    1.3Total operating expenses
    
    
    23.8
    
    
    
    26.6
    
    
    
    26.7
    
    
    
    26.6Operating income
    
    
    9.5
    
    
    
    8.0
    
    
    
    4.6
    
    
    
    8.1Other income and expense
    
    
    (3.3
    )
    
    
    (1.6
    )
    
    
    (2.7
    )
    
    
    (1.2
    )Income before income tax expense
    
    
    6.2
    
    
    
    6.4
    
    
    
    1.9
    
    
    
    6.9Income tax expense
    
    
    (1.0
    )
    
    
    (1.5
    )
    
    
    (0.3
    )
    
    
    (2.1
    )Net income
    
    
    5.2
    
    
    
    4.9
    
    
    
    1.6
    
    
    
    4.8Net (income) loss attributable to noncontrolling interests
    
    
    (0.8
    )
    
    
    (0.9
    )
    
    
    0.4
    
    
    
    (0.9
    )Net income attributable to DRI
    
    
    4.4
    %
    
    
    4.0
    %
    
    
    2.0
    %
    
    
    3.9
    %
 COMPARISON OF OUR RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 Net Sales and Gross Profit.
     24




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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.
 Income
Tax (Expense) Benefit.
 25




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##### Table of Contents



Net Income (Loss) Applicable to Common Shareholders.
 COMPARISON OF OUR RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 Net Sales and Gross Profit.
      26




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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.
 Income
Tax (Expense) Benefit.
 Net Income (Loss) Applicable to Common Shareholders.
 27




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##### Table of Contents



Industry and Market Overview
      28




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##### Table of Contents



OUR LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows for the Nine Months Ended September 30, 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 domestic accounts receivable
of the Borrowers plus 75% of eligible foreign receivables of the Borrowers, limited to the
lesser of $2.5 million or the amount of coverage under acceptable credit insurance policies of
the Borrowers, as determined by PNC in its reasonable discretion, 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. At September 30, 2009, the outstanding principal balance
on the revolving credit facility was approximately $2.1 million and remaining borrowing
availability under the revolving credit facility was approximately $3.2 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
currently borrow up to a maximum of 27.5 million krona, or approximately US$3.9 million (based
on exchange rates at September 30, 2009). At September 30, 2009, borrowings due and
outstanding under these credit facilities totaled 10.1 million krona (approximately US$1.4
million, based on exchange rates at September 30, 2009). Additional borrowing availability
under these agreements at September 30, 2009 amounted to approximately US$2.5 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 approximately 1.4 million Euro (approximately US$2.0 million, based on exchange
rates at September 30, 2009). At September 30, 2009, borrowings due and outstanding under this
credit facility totaled 563,000 Euro (approximately US$821,000, based on exchange rates at
September 30, 2009). Additional borrowing availability under this credit facility at September
30, 2009 amounted to approximately US$1.2 million. The agreement under which this credit
facility is extended has an open-ended term.
 29




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##### Table of Contents

\

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
     Series K Preferred Stock
   30




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##### Table of Contents



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;
 
    
    our ability to comply with debt covenant requirements;
 
    
    our ability to sell additional shares of Series K Preferred Stock in future periods;
 
    
    the sufficiency of our liquidity and capital resources to support current operations for
the remainder of 2009 and 2010;
 
    
    expected revenue growth in our domestic and international operations and increased
production efforts to meet such expected growth;
 
    
    our ability to secure additional financing on commercially reasonable terms;
 
    
    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.
  31




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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.
 32




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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;
    
    we may be at a disadvantage compared to our competitors that may have less
debt than we do;
 33




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##### Table of Contents




    
    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;
    
    we may have to pay higher interest rates on future borrowings. and
    
    we may not comply with financial loan covenants, which could require us to
incur additional expenses to obtain waivers from lenders or could restrict the
availability of financing we can obtain to support our working capital requirements.
 We believe that we may not be able to comply with leverage ratio requirements applicable for our fourth quarter under two separate financing arrangements.
 
 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)3.5
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Amended and Restated Certificate of
Designation of Series G Redeemable Convertible Preferred
Stock
 34




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##### Table of Contents



Exhibit No.
    
    Document(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
    
    Articles of Amendment to Articles of Incorporation of the
Company containing 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)3.11
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Certificate of Designation of Series K
Senior Convertible Preferred Stock of DRI Corporation
(incorporated herein by reference to the Companys current
report on Form 8-K filed with the SEC on October 15, 2009)3.11.1
    
    Articles of Amendment to Articles of Incorporation of the
Company containing Certificate of Designation of Series K
Senior Convertible Preferred Stock of DRI Corporation
(incorporated herein by reference to the Companys current
report on Form 8-K filed with the SEC on November 12, 2009)3.12
    
    Amended and Restated Bylaws of the Company (incorporated
herein by reference from the Companys Registration Statement
on Form SB-2)3.13
    
    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)3.14
    
    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)3.15
    
    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)3.16
    
    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)4.1
    
    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)4.2
    
    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)4.3
    
    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
 35




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##### Table of Contents



Exhibit No.
    
    Documentto the
Companys Report on Form 8-K filed with the SEC on January
16, 2007)4.4
    
    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)4.5
    
    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)4.5.1
    
    First Amendment to Warrant, dated March 26, 2009, by and
between DRI Corporation and BHC Interim Funding III, L.P.
(incorporated herein by reference to the Companys Report on
Form 10-K filed with the SEC on March 31, 2009)4.5.2
    
    Second Amendment to Warrant, dated September 30, 2009, by and
between DRI Corporation and BHC Interim Funding III, L.P.
(filed herewith)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
 36




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##### Table of Contents



Exhibit No.
    
    DocumentApril 28, 2006 (incorporated
herein by reference to the Companys Report on Form 8-K filed
on May 4, 2006)10.13
    
    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 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)10.22.2
    
    Amendment No. 3 to Revolving Credit and Security Agreement,
dated as of March 26, 2009, by and between Digital Recorders,
Inc., TwinVision of North America, Inc., DRI Corporation, the
financial institutions party thereto and PNC Bank, National
Association (incorporated herein by reference to the
Companys Report on Form 10-K filed with the SEC on March 31,
2009)10.22.3
    
    Amendment No. 4 to Revolving Credit and Security Agreement,
dated as of July 30, 2009, by and
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##### Table of Contents



Exhibit No.
    
    Documentbetween Digital Recorders,
Inc., TwinVision of North America, Inc., DRI Corporation, the
financial institutions party thereto and PNC Bank, National
Association (incorporated herein by reference to the
Companys Report on Form 8-K filed with the SEC on August 5,
2009)10.22.4
    
    Amendment No. 5 to Revolving Credit and Security Agreement,
dated as of October 5, 2009, by and among Digital Recorders,
Inc., TwinVision of North America, Inc., DRI Corporation, the
financial institutions party thereto and PNC Bank, National
Association (filed herewith)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)10.24.1
    
    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)10.24.2
    
    Second Amendment to Loan and Security Agreement, dated as of
March 26, 2009, by and among Digital Recorders, Inc. and
TwinVision of North America, Inc., as Borrowers, DRI
Corporation, as Guarantor, and BHC Interim Funding III, L.P.,
as Lender (incorporated herein by reference to the Companys
report on Form 10-K filed with the SEC on March 31, 2009)10.24.3
    
    Letter Agreement, dated as of July 21, 2009, by and among DRI
Corporation, Digital Recorders, Inc., TwinVision of North
America, Inc. and BHC Interim Funding III, L.P. (incorporated
herein by reference to the Companys quarterly report on Form
10-Q for the quarter ended June 30, 2009)10.24.4
    
    Letter of Amendment to Letter Agreement, dated as of July 31,
2009, by and among Digital Recorders, Inc. and TwinVision of
North America, Inc., as Borrowers, DRI Corporation, as
Guarantor, and BHC Interim Funding III, L.P., as Lender
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)10.24.5
    
    Third Amendment to Loan and Security Agreement, dated as of
August 7, 2009, by and among Digital Recorders, Inc. and
TwinVision of North America, Inc., as Borrowers, DRI
Corporation, as Guarantor, and BHC Interim Funding III, L.P.,
as Lender (incorporated herein by reference to the Companys
quarterly report on Form 10-Q for the quarter ended June 30,
2009)10.24.6
    
    Letter of Amendment to Loan and Security Agreement, dated as
of August 18, 2009, by and among DRI Corporation and BHC
Interim Funding III, L.P. (incorporated herein by reference
to the Companys current report on Form 8-K filed with the
SEC on August 24, 2009)10.24.7
    
    Fourth Amendment to Loan and Security Agreement, dated as of
October 1, 2009, by and among Digital Recorders, Inc.,
TwinVision of North America, Inc., DRI Corporation and BHC
Interim Funding III, L.P. (filed herewith)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)
 38




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##### Table of Contents



Exhibit No.
    
    Document10.29
    
    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)10.38
    
    EURO Short Term Loan Facility by and between Handelsbanken
and Mobitec GmbH, dated as of June 25, 2009 (incorporated
herein by reference to the Companys Report on Form 8-K filed
with the SEC on July 1, 2009)10.39
    
    Undertaking Concerning Loan Payment for purposes other than
personal consumption, dated June 16, 2009, by and between
Handelsbanken and Mobitec AB (English translation)
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)10.40
    
    Undertaking Concerning Loan Payment for purposes other than
personal consumption, dated June 16, 2009, by and between
Handelsbanken and Mobitec AB (English translation)
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)10.41
    
    General Pledging, dated June 16, 2009, by and between
Handelsbanken and Mobitec AB (English translation)
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)10.42
    
    Contract A Supplementary Overdraft Facility for purposes
other than personal consumption, dated June 16, 2009, by and
between Handelsbanken and Mobitec AB (English translation)
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)10.43
    
    Quota Purchase Agreement, dated as of July 22, 2009, by and
among Mobitec AB, Mobitec Empreendimientos e Participações
Ltda., Mobitec Brasil Ltda, Roberto Juventino Demore, Lorena
Giusti Demore, and JADI Itinerários Eletrônicos Ltda
(incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarter ended June 30, 2009)
(confidential treatment requested for specific portions of
this agreement)10.43.1
    
    First Amendment to Quota Purchase Agreement, dated as of
August 31, 2009, by and among Mobitec Empreendimientos e
Participações Ltda., Roberto Juventino Demore, Lorena Giusti
 39




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##### Table of Contents



Exhibit No.
    
    DocumentDemore, JADI Itinerários Eletrônicos Ltda, Mobitec AB and
Mobitec Brasil Ltda. (filed herewith) (confidential treatment
requested for specific portions of this agreement)10.44
    
    Promissory Note, dated July 22, 2009, by Mobitec
Empreendimientos e Participações Ltda., as Maker, and Mobitec
AB, as Guarantor, issued to Roberto Juventino Demore and
Lorena Giusti Demore, in the principal amount of $1,000,000
(English translation) (incorporated herein by reference to
the Companys quarterly report on Form 10-Q for the quarter
ended June 30, 2009) (confidential treatment requested for
specific portions of this agreement)10.44.1
    
    Promissory Note, dated August 31, 2009, by Mobitec
Empreendimientos e Participações Ltda., as Maker, issued to
Roberto Juventino Demore in the principal amount of
$1,000,000 (filed herewith) (confidential treatment requested
for specific portions of this agreement)10.45
    
    Promissory Note, dated July 22, 2009, by Mobitec AB issued to
Roberto Juventino Demore and Lorena Giusti Demore, in the
principal amount of $1,950,000 (incorporated herein by
reference to the Companys quarterly report on Form 10-Q for
the quarter ended June 30, 2009) (confidential treatment
requested for specific portions of this agreement)10.45.1
    
    Promissory Note, dated August 31, 2009, by Mobitec AB, issued
to Roberto Juventino Demore in the principal amount of
$1,950,000 (filed herewith) (confidential treatment requested
for specific portions of this agreement)10.46
    
    Form of Subscription Agreement, dated as of October 26, 2009,
by and between DRI Corporation and holder of Series K Senior
Convertible Preferred Stock of DRI Corporation (incorporated
herein by reference to the Companys current report on Form
8-K filed with the SEC on October 30, 2009)10.47
    
    Form of Registration Rights Agreement, dated as of October
26, 2009, by and between DRI Corporation and holder of Series
K Senior Convertible Preferred Stock of DRI Corporation
(incorporated herein by reference to the Companys current
report on Form 8-K filed with the SEC on October 30, 2009)31.1
    
    Section 302 Certification of David L. Turney (filed herewith)31.2
    
    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)
 40




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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:
    
    November 16, 2009
 41