-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UM2O3T1DFExOQVpytfFucAPlcgdh8eWeGZpY/fZ9+uNMEYOi8FlVb/7Mzv9/EAu4 9gQVP4Z5iAJBGAAqr3EEjw== 0000905718-08-000183.txt : 20080214 0000905718-08-000183.hdr.sgml : 20080214 20080214140958 ACCESSION NUMBER: 0000905718-08-000183 CONFORMED SUBMISSION TYPE: SC 13G/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20080214 DATE AS OF CHANGE: 20080214 GROUP MEMBERS: DAVID GRIN GROUP MEMBERS: EUGENE GRIN GROUP MEMBERS: LAURUS CAPITAL MANAGEMENT, LLC GROUP MEMBERS: VALENS CAPTIAL MANAGEMENT, LLC GROUP MEMBERS: VALENS OFFSHORE SPV II, CORP. GROUP MEMBERS: VALENS U.S. SPV I, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL RECORDING CORP CENTRAL INDEX KEY: 0000318439 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 132730954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13G/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-33033 FILM NUMBER: 08612985 BUSINESS ADDRESS: STREET 1: 1000 FARM MARKET RD 300 STREET 2: P O BOX 1118 CITY: LEVELLAND STATE: TX ZIP: 79336 BUSINESS PHONE: 8068944982 FORMER COMPANY: FORMER CONFORMED NAME: DRC SOUNDSTREAM INC DATE OF NAME CHANGE: 19811103 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LAURUS MASTER FUND LTD CENTRAL INDEX KEY: 0001189294 IRS NUMBER: 980337673 STATE OF INCORPORATION: E9 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13G/A BUSINESS ADDRESS: STREET 1: 152 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125415800 SC 13G/A 1 digital13gam1.txt SC13GAM1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13G Under the Securities Exchange Act of 1934 (Amendment No. 1)* DIGITAL RECORDERS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.10 par value per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 253869101 - -------------------------------------------------------------------------------- (CUSIP Number) December 31, 2007 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of this Statement) Check the appropriate box to designate the rule pursuant to which this Schedule 13G is filed: [ ] Rule 13d-1(b) [X] Rule 13d-1(c) [ ] Rule 13d-1(d) *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Laurus Master Fund, Ltd. 98-0337673 - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Cayman Islands - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): OO - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Laurus Capital Management, LLC 13-4150669 - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Delaware - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): CO - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Valens U.S. SPV I, LLC 20-8903266 - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Delaware - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): OO - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Valens Offshore SPV II, Corp. 26-0811267 - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Delaware - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): CO - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Valens Capital Management, LLC 20-8903345 - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Delaware - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): OO - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): David Grin - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: Israel - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): IN - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. CUSIP No. 253869101 - -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Eugene Grin - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Citizenship or Place of Organization: United States - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With (5) Sole Voting Power: 0* -------------------------------------- (6) Shared Voting Power: 305,000* -------------------------------------- (7) Sole Dispositive Power: 0* -------------------------------------- (8) Shared Dispositive Power: 305,000* -------------------------------------- - -------------------------------------------------------------------------------- (9) Aggregate Amount Beneficially Owned by Each Reporting Person: 305,000* - -------------------------------------------------------------------------------- (10) Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions): [ ] - -------------------------------------------------------------------------------- (11) Percent of Class Represented by Amount in Row (9): 2.71%* - -------------------------------------------------------------------------------- (12) Type of Reporting Person (See Instructions): IN - -------------------------------------------------------------------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. Item 1(a). Name Of Issuer: Digital Recorders, Inc. Item 1(b). Address of Issuer's Principal Executive Offices: 5949 Sherry Lane, Suite 1050 Dallas, Texas 75225 Item 2(a). Name of Person Filing: Laurus Master Fund, Ltd. This Schedule 13G is also filed on behalf of Valens U.S. SPV I, LLC, a Delaware limited liability company, Valens Offshore SPV II, Corp, a Delaware corporation, Laurus Capital Management, LLC, a Delaware limited liability company, Valens Capital Management, LLC, a Delaware limited liability company, Eugene Grin and David Grin. Laurus Capital Management, LLC manages Laurus Master Fund, Ltd. Valens Capital Management, LLC manages Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share voting and investment power over the shares owned by Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. Information related to each of Laurus Capital Management, LLC, Valens U.S. SPV I, LLC, Valens Offshore SPV II, Corp., Valens Capital Management, LLC, Eugene Grin and David Grin is set forth on Appendix A hereto. Item 2(b). Address of Principal Business Office or, if None, Residence: c/o Laurus Capital Management, LLC 335 Madison Avenue, 10th Floor New York, NY 10017 Item 2(c). Citizenship: Cayman Islands Item 2(d). Title of Class of Securities: Common Stock, par value $0.10 per share Item 2(e). CUSIP No.: 253869101 Item 3. If This Statement Is Filed Pursuant to Sections 240.13d-1(b) or 240.13d-2(b) or (c), check whether the Person Filing is a: Not Applicable Item 4. Ownership: (a) Amount Beneficially Owned: 305,000* (b) Percent of Class: 2.71%* (c) Number of Shares as to which the person has: (i) sole power to vote or to direct the vote 0 (ii) shared power to vote or to direct the vote 305,000* (iii) sole power to dispose or to direct the disposition of 0 (iv) shared power to dispose or to direct the disposition of 305,000* - ------------------- *Based on 11,178,599 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding as of October 31, 2007, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. As of December 31, 2007, Laurus Master Fund, Ltd. (the "Fund"), Valens U.S. SPV I, LLC ("Valens U.S") and Valens Offshore SPV II, Corp. ("Valens OFF SPV II", and together with the Fund and Valens U.S., the "Investors") held (i) a warrant (the "August Warrant") to acquire 80,000 Shares, at an exercise price of $2.00 per Share, subject to certain adjustments and (ii) 225,000 Shares. The August Warrant contains an issuance limitation prohibiting the Investors from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Investors of more than 9.99% of the Shares then issued and outstanding (the "9.99% Issuance Limitation"). The Issuance Limitation under the August Warrant may be waived by the Investors upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Valens US and Valens OFF SPV II are managed by Valens Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and Valens Capital Management, LLC and share sole voting and investment power over the securities owned by the Investors reported in this Schedule 13G, as amended. Item 5. Ownership of Five Percent or Less of a Class: If this statement is being filed to report the fact that as of the date hereof the reporting person has ceased to be the owner of more than five percent of the class of securities, check the following: [X] Item 6. Ownership of More Than Five Percent on Behalf of Another Person: Not Applicable Item 7. Identification and Classification of the Subsidiary Which Acquired the Securities: Not Applicable Item 8. Identification and Classification of Members of the Group: Not Applicable Item 9. Notice of Dissolution of Group: Not Applicable Item 10. Certification By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect. SIGNATURE --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. February 14, 2008 ---------------------------------- Date LAURUS MASTER FUND, LTD. /s/ Eugene Grin ---------------------------------- Eugene Grin Director Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001) CUSIP No. 253869101 APPENDIX A A. Name: Laurus Capital Management, LLC, a Delaware limited liability company Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Place of Organization: Delaware B. Name: Valens U.S. SPV I, LLC, a Delaware limited liability company Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Place of Organization: Delaware C. Name: Valens Offshore SPV II, Corp., a Delaware corporation Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Place of Organization: Delaware D. Name: Valens Capital Management, LLC, a Delaware limited liability company Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Place of Organization: Delaware E. Name: Eugene Grin Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Principal Director of Laurus Master Fund, Ltd. Occupation: Principal of Laurus Capital Management, LLC Citizenship: United States F. Name: David Grin Business Address: 335 Madison Avenue, 10th Floor New York, New York 10017 Principal Director of Laurus Master Fund, Ltd. Occupation: Principal of Laurus Capital Management, LLC Principal of Valens Capital Management, LLC Citizenship: Israel CUSIP No. 253869101 Each of Laurus Capital Management, LLC, Valens U.S. SPV I, LLC, Valens Offshore SPV II, Corp., Valens Capital Management, LLC, Eugene Grin and David Grin hereby agree, by their execution below, that the Schedule 13G (as amended) to which this Appendix A is attached is filed on behalf of each of them, respectively. Laurus Capital Management, LLC /s/ Eugene Grin -------------------------------------- Eugene Grin Principal February 14, 2008 Valens U.S. SPV I, LLC Valens Offshore SPV II, Corp. By: Valens Capital Management, LLC individually and as investment manager /s/ David Grin -------------------------------------- David Grin Principal February 14, 2008 /s/ David Grin -------------------------------------- David Grin February 14, 2008 /s/ Eugene Grin -------------------------------------- Eugene Grin February 14, 2008 -----END PRIVACY-ENHANCED MESSAGE-----