10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

Commission file number 000-28539

DRI CORPORATION

(Exact name of Registrant as specified in its Charter)

North Carolina
(State or other jurisdiction of
incorporation or organization) 56-1362926
(I.R.S. Employer
Identification Number)

13760 Noel Road, Suite 830
Dallas, Texas 75240
(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code:

(214) 378-8992

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.10 Par Value	The NASDAQ Capital Market®
(Title of Each Class)	(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act of 1934: Yes o     No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes o     No þ

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ     No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the Registrant was required to submit and post such files.) Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o     No þ

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

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller Reporting Company þ
	(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o     No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2009 was approximately $17,224,139.

Indicate the number of shares outstanding of the Registrant’s Common Stock as of April 15, 2010:

Common Stock, par value $.10 per share	11,761,763
(Class of Common Stock)	Number of Shares

DOCUMENTS INCORPORATED BY REFERENCE:

Part III incorporates certain information by reference from the Registrant’s definitive proxy statement, which will be filed on or before April 30, 2010, for the Annual Meeting of Shareholders to be held on or before May 27, 2010.

FORWARD-LOOKING STATEMENTS

“Forward-looking” statements appear throughout this Annual Report. We have based these forward-looking statements upon our current expectations and projections about future events. It is important to note our actual results could differ materially from those contemplated in our forward-looking statements as a result of various factors, including those described in Item 1A “Risk Factors” as well as all other cautionary language in this Annual Report. Readers should be aware that the occurrence of the events described in these considerations and elsewhere in this Annual Report could have an adverse effect on the business, results of operations or financial condition of the entity affected.

Forward-looking statements in this Annual Report may include, without limitation, the following:

•  Statements regarding our ability to meet our capital requirements;

•  Statements regarding our ability to meet and maintain our existing debt obligations, including obligations to make payments under such debt instruments;

•  Statements regarding our future cash flow position;

•  Statements regarding our ability to obtain lender financing sufficient to meet our working capital requirements;

•  Statements about our efforts to manage and effect certain cost reductions;

•  Statements regarding the timing or amount of future revenues;

•  Statements regarding product sales in future periods;

•  Statements regarding the effectiveness of any of management’s strategic objectives or initiatives or the implications thereof on our shareholders, creditors, or other constituencies;

•  Statements regarding expected results;

•  Statements regarding current trends and indicators;

•  Statements regarding our ability to comply with Section 404 of the Sarbanes-Oxley Act of 2002;

•  Statements regarding recent legislative action affecting the transportation and/or security industry, including, without limitation, the Safe, Accountable, Flexible, Efficient, Transportation Equity Act — A Legacy for Users, and any successor legislation, and the American Recovery and Reinvestment Act of 2009 and their impact on the Company’s results of operations;

•  Statements regarding changes in federal or state funding for transportation and/or security-related funding;

•  Statements regarding current conditions in the global capital markets and the global economy and their impact on the Company’s results of operation;

•  Statements regarding possible growth through acquisitions;

•  Statements regarding future sources of capital to fund such growth, including sources of additional equity financing;

•  Statements regarding anticipated advancements in technology related to our products and services;

•  Statements regarding future product and service offerings;

•  Statements regarding the success of product and service introductions;

•  Statements regarding the ability to include additional security features to existing products and services;

•  Statements regarding the potential positive effect such additional security features may have on revenues;

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•  Statements regarding the expected contribution of sales of new and modified security related products to our profitability;

•  Statements regarding future events or expectations including the expected timing of order deliveries;

•  Statements regarding the expected customer acceptance of products;

•  Statements regarding potential benefits our security features may have for our customers;

•  Statements regarding the success of special alliances with various product partners;

•  Statements regarding the availability of alternate suppliers of the component parts required to manufacture our products;

•  Statements regarding our intellectual property rights and our efforts to protect and defend such rights; and

•  Statements that contain words like “believe,” “anticipate,” “expect” and similar expressions that are used to identify forward-looking statements.

Readers should be aware that all of our forward-looking statements are subject to a number of risks, assumptions and uncertainties, such as but not limited to, (and in no particular order):

•  Risks that we may not be able to meet our capital requirements;

•  Risks that we may not be able to meet and maintain our debt obligations, including obligations to make payments under such debt instruments;

•  Risks regarding our future cash flow position;

•  Risks that we may be unable to obtain lender financing sufficient to meet our working capital requirements;

•  Risks that we may not be able to effect desired and planned reductions in certain costs;

•  Risks that management’s strategic objectives or initiatives may not be effective;

•  Risks that assumptions behind future revenue timing or amounts may not prove accurate over time;

•  Risks that current trends and indicators may not be indicative of future results;

•  Risks that we may lose customers or that customer demand for our products and services may decline;

•  Risks that there will be reductions in federal and/or state funding for the transportation and/or security industry;

•  Risks that current legislative action affecting the transportation and/or security industry may not have a favorable impact on the Company’s results of operations;

•  Risks that we may be unable to grow through acquisitions;

•  Risks that we may be unable to secure additional sources of capital to fund growth, including the inability to secure additional equity or lender financing;

•  Risks that future technological advances may not occur when anticipated or that future technological advances will make our current product and service offerings obsolete;

•  Risks that potential benefits our security products may have for our customers do not materialize;

•  Risks that we will be unable to meet expected timing of order deliveries;

•  Risks that product and service offerings may not be accepted by our customers;

•  Risks that product and service introductions may not produce desired revenue results;

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•  Risks that we may be unable to create meaningful security product features in either new or existing products;

•  Risks regarding the uncertainties surrounding our anticipated success of special alliances with various product partners;

•  Risks that we may be unable to address and remediate any deficiencies in our internal controls over financial reporting and/or our disclosure controls;

•  Risks that insufficient internal controls over financial reporting may cause us to fail to meet our reporting obligations, result in material misstatements in our financial statements, and negatively affect investor confidence;

•  Risks that our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could fail to be successful;

•  Risks that we may be unable to obtain alternate suppliers of our component parts if our current suppliers are no longer available or cannot meet our future needs for such parts; and

•  Risks that our efforts to protect and defend our intellectual property rights will not be sufficient.

This list is only an example of the risks that may affect the forward-looking statements. If any of these risks or uncertainties materialize (or if they fail to materialize), or if the underlying assumptions are incorrect, then actual results may differ materially from those projected in the forward-looking statements.

Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, without limitation, those discussed elsewhere in this Annual Report. Readers are cautioned not to place undue reliance upon these forward-looking statements, which reflect our analysis, judgment, belief or expectation only as of the date of this Annual Report. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this Annual Report.

WHERE YOU MAY FIND ADDITIONAL INFORMATION

Our internet address is www.digrec.com. We make publicly available free of charge on our internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Information contained on our website is not a part of this Annual Report.

You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.

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INDEX

			Page No.
PART I
	Item 1.	Business		6
	Item 1A.	Risk Factors		16
	Item 1B.	Unresolved Staff Comment		22
	Item 2.	Properties		22
	Item 3.	Legal Proceedings		23
	Item 4.	(Removed and Reserved)		23
PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities		23
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 8.	Financial Statements and Supplementary Data		43
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		83
	Item 9A(T).	Controls and Procedures		83
	Item 9B.	Other Information		85
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		85
	Item 11.	Executive Compensation		85
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		85
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		85
	Item 14.	Principal Accounting Fees and Services		85
PART IV
	Item 15.	Exhibits		86
SIGNATURES				96
EX-3.1.2
EX-3.10.2
EX-3.10.3
EX-4.8.3
EX-10.37.5
EX-10.39.7
EX-10.49.3
EX-10.64.1
EX-10.68.1
EX-10.69.1
EX-21.1
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I

Item 1.   Business

General

In this Annual Report on Form 10-K, we refer to DRI Corporation as “DRI”, “the Company”, “us”, “we” and “our.” DRI was incorporated in March 1983 as Digital Recorders, Inc. and became a public company through an initial public offering in November 1994. In June 2007, our shareholders approved changing the Company’s name to DRI Corporation. DRI’s common stock, $.10 par value per share (“Common Stock”), trades on the NASDAQ Capital Market^® under the symbol “TBUS.”

Prior to 2007, DRI had historically operated within two major business segments: (1) the transportation communications segment and (2) the law enforcement and surveillance segment. In April 2007, the Company’s Digital Audio Corporation subsidiary, which comprised all of the operations of the law enforcement and surveillance segment, was divested. Accordingly, the Company currently operates within one major business segment.

Through its business units and wholly owned subsidiaries, DRI designs, manufactures, sells, and services information technology products either directly or through manufacturers’ representatives or distributors. DRI produces passenger information communication products under the Talking Bus^®, TwinVision^®, VacTell^tm and Mobitec^® brand names, which are sold to transportation vehicle equipment customers worldwide. The Talking Bus^®, VacTell^tm and TwinVision^® brands are sold by our business units in the United States (“U.S.”) primarily to the U.S. and Canadian markets. Net sales by our U.S. business units represent 40% of total net sales split 70% in the U.S. market, 24% in the Canadian market, and the remaining 6% in the European market. Long-lived assets within the U.S. include 59% of all long-lived assets and are all owned by our U.S. businesses. The Mobitec^® brand, which represents 60% of total net sales, is sold in the Nordic market in Sweden, Norway, Denmark, and Finland, in several countries in the European market including Germany, France, Poland, United Kingdom, Spain, and Hungary, in the South American market, primarily in Brazil, and in the Asia-Pacific and Middle-East markets. Long-lived assets within the Nordic market include 32% of all long-lived assets and are all owned by our subsidiaries in Europe. All other long-lived assets within the remaining markets account for approximately 9% of the total long-lived assets. See the accompanying consolidated financial statements and notes to consolidated financial statements for geographical information regarding the Company’s sales and long-lived assets.

DRI’s customers generally fall into one of two broad categories: end-user customers or original equipment manufacturers (“OEM”). DRI’s end-user customers include municipalities; regional transportation districts; state, and local departments of transportation; transit agencies; public, private, or commercial operators of bus and van vehicles; and rental car agencies. DRI’s OEM customers are the manufacturers of transportation rail, bus and van vehicles. The relative percentage of sales to end-user customers compared to OEM customers varies widely and frequently from quarter-to-quarter and year-to-year, and within products and product lines comprising DRI’s mix of total sales in any given period.

U.S. Operations

Our current U.S.-based operations serve markets primarily in the U.S. and Canada and consist of the following subsidiaries:

•  Digital Recorders, Inc. (“DR”), based in the Research Triangle Park area of North Carolina, was established in September 1983. DR operated as a business unit of the Company under the name “Digital Recorders” until August 2007, at which time it was incorporated as a wholly-owned subsidiary of the Company. DR’s primary products include: computer aided dispatch Global Positioning Satellite (“GPS”) tracking; automatic vehicle location (“AVL”) systems; VacTell^tm video surveillance security systems; automatic vehicle monitoring (“AVM”) systems; and Talking Bus^® automatic voice announcement systems. Some of these products feature security related functionality. DR’s customers include

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transit operating agencies, commercial transportation vehicle operators, and manufacturers of those vehicles primarily in the U.S. and Canada.

•  TwinVision of North America, Inc. (“TVna”), a wholly-owned subsidiary of DRI based in the Research Triangle Park area of North Carolina, was established by DRI in May 1996. TVna designs, manufactures, sells, and services electronic destination sign systems used on transit and transportation rail, bus and van vehicles. Some of these products include security related functionality. TVna’s customers include transit operating agencies, commercial transportation vehicle operators, and manufacturers of those vehicles primarily in the U.S. and Canada.

•  RTI, Inc., a wholly-owned subsidiary of DRI based in Dallas, Texas, was established in August 1994 and acquired by DRI in July 1998. With the acquisition of RTI, Inc., DRI also acquired TwinVision^® business development and marketing capabilities, as well as an exclusive license to the Lite Vision Corporation’s display technology, which at the time was the primary display technology in use. RTI, Inc. is a marketing consulting and business development firm devoted to the public transit industry’s needs, primarily those of European-based businesses. RTI, Inc. presently generates no revenue.

International Operations

Our current international operations serve markets in Europe, the Far East, the Middle East, South America, Australia, Asia-Pacific and generally all markets throughout the world outside the U.S. and Canada. Our current international operations consist of the following subsidiaries:

•  DRI-Europa AB, based in Göteborg, Sweden, is a wholly-owned subsidiary of DRI that serves as the umbrella organizational structure for DRI’s international operations.

•  Mobitec GmbH, based in Ettlingen, Germany, is a wholly-owned subsidiary of DRI-Europa AB. Mobitec GmbH primarily sells and services Mobitec^® products. Mobitec GmbH’s customers include transit operating agencies, commercial transportation vehicle operators, and the manufacturers of those vehicles in select markets in Europe, Asia-Pacific, and the Middle-East.

•  Mobitec AB is a wholly-owned subsidiary of DRI-Europa AB based in Göteborg, Sweden. Based upon our internal market share calculations, we believe Mobitec AB holds the largest market share of electronic destination sign systems in the Nordic markets. In addition to serving the Nordic markets, Mobitec AB also has sales and service offices in Germany, operated by Mobitec GmbH, and Australia, operated by its wholly-owned subsidiary Mobitec Pty Ltd. Mobitec AB’s customers include transit operating agencies, commercial transportation vehicle operators, and the manufacturers of those vehicles in the Nordic and other select European markets. Mobitec AB also owns 51% of the Castmaster Mobitec India Private Limited joint venture located in India and 100% of Mobitec Empreendimientos e Participações Ltda. located in Brazil.

•  Mobitec Pty Ltd (“Mobitec Pty”) is a wholly-owned subsidiary of Mobitec AB based in Peakhurst NSW, Australia. Mobitec Pty Ltd imports and sells complete Mobitec^® electronic destination sign systems primarily within the Australian market. Based upon our internal market share calculations, we believe Mobitec Pty Ltd holds a majority market share in the Australian market.

•  Mobitec Empreendimientos e Participações Ltda. (“Mobitec EP”), based in São Paulo, Brazil, was established in May 2009 as a holding company to facilitate the July 2009 acquisition of the remaining 50% ownership interest of Mobitec Brazil Ltda not previously owned by the Company. Mobitec EP was originally established as a wholly-owned subsidiary of Mobitec AB. To meet Brazilian legal requirements of at least two shareholders in a limited liability company, in June 2009, 1% of the ownership interest of Mobitec EP was transferred from Mobitec AB to Mobitec GmbH. Mobitec EP presently generates no revenue.

•  Mobitec Brazil Ltda. (“Mobitec Brazil”), based in Caxias do Sul, Brazil, is engaged in manufacturing, selling and servicing electronic destination sign systems to OEM’s and some end-user customers and operating authority customers, primarily in South America. Its products are also shipped throughout

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Mexico, the Caribbean, and the Middle East. Through May 2009, Mobitec Brazil was a 50%-owned subsidiary of Mobitec AB. In June 2009, to facilitate the acquisition of the remaining 50% ownership interest of Mobitec Brazil not previously owned by the Company, Mobitec AB transferred its 50% ownership interest in Mobitec Brazil to Mobitec EP. In July 2009, Mobitec EP acquired the remaining 50% interest of Mobitec Brazil that was not previously owned by the Company. As a result of the acquisition, which is more fully described in Note 2 to the accompanying consolidated financial statements, Mobitec Brazil became a wholly-owned subsidiary of Mobitec EP. To meet Brazilian legal requirements of at least two shareholders in a limited liability company, on January 1, 2010, 1% of the ownership interest of Mobitec Brazil was transferred from Mobitec EP to Mobitec GmbH.

•  Castmaster Mobitec India Private Limited (“Castmaster Mobitec”), which began operations in the fourth quarter of 2007, is a joint venture between Mobitec AB and Castmaster Enterprises Private Limited, a company incorporated in India. Mobitec AB owns 51% of Castmaster Mobitec, which is based in Delhi, India. Castmaster Mobitec has exclusive rights to produce, sell and service Mobitec^® destination sign systems in India and selected markets in that region.

•  Mobitec Far East Pte. Ltd. (“Mobitec Far East”), based in Singapore, was established in October 2009 as a wholly-owned subsidiary of DRI to facilitate sales and services of Mobitec^® products in select Asia-Pacific markets, primarily Singapore. Mobitec Far East currently has no operations and currently generates no revenue.

Divestiture of Digital Audio Corporation

On April 30, 2007 (the “Closing Date”), the Company and its wholly-owned subsidiary Digital Audio Corporation (“DAC”) entered into a Share Purchase Agreement with Dolphin Direct Equity Partners, LP (“Dolphin”), a Delaware limited partnership, pursuant to which Dolphin acquired all of DAC’s issued and outstanding shares of common stock. DAC comprised all of the operations of the law enforcement and surveillance segment reported by the Company prior to divestiture. Accordingly, the Company’s continuing operations consist of only one operating segment, the transportation communications segment.

Mobitec Brazil Acquisition

Pursuant to terms of a Quota Purchase Agreement entered into on July 22, 2009 and amended September 17, 2009, Mobitec EP acquired the remaining fifty percent (50%) of the issued and outstanding interests of Mobitec Brazil for an aggregate consideration of US$2.95 million. Per terms of the Quota Purchase Agreement, the acquisition by Mobitec EP of the remaining fifty percent (50%) of the interests of Mobitec Brazil is effective July 1, 2009, the date upon which the Company assumed full control of the business. This acquisition is more fully described in Note 2 to the accompanying consolidated financial statements.

Industry and Market Overview

The digital communications technology market in transit and transportation applications as served by DRI developed because of several factors. In the earliest stages, the digital destination signs market developed due to the quest for lower operating expenses and greater fleet flexibility. Later the market was influenced by the Americans With Disabilities Act (“ADA”), the Clean Air Act, the Intermodal Surface Transportation Efficiency Act (“ISTEA”) and related or follow-on legislation, intelligent transportation systems initiatives, and the need to further enhance fleet flexibility. The ADA initially accelerated the trend toward systems for automatic next-stop announcements by requiring that fixed-route transit systems announce major stops and transfer points to assist visually challenged passengers. However, a more fundamental and longer-term impetus for the development of this market is the need to provide improved passenger information and customer services to operators and riders of public and private transit and transportation vehicles as well as to provide fleet efficiency, management and security services. DRI’s electronic information display systems, automatic voice announcement and vehicle locating systems provide transit systems’ customers with next stop, transfer point, route and destination information, vehicle location and operational condition information, and public service announcements, as well as security-related functionality in certain instances. On the U.S. public side of this

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market, in addition to state, local, and regional grants and “fare-box” income, transit operating authorities can normally apply to the U.S. Federal Transit Administration (“FTA”) for grants covering up to approximately 80% of funding for certain equipment purchases with the remainder of product acquisition funding being provided by state and local sources. Additionally, more recently, funds have been allocated in the American Recovery and Reinvestment Act of 2009 to assist transit system operators in securing additional equipment such as that which we supply. This funding is available at 100% of the procured item contracted value. In the international markets, funding comes from a variety of sources including federal, local, and regional grants as well as local operating “fare-box” income. Privately funded users of DRI’s transit communications sector products include rental car shuttle vehicles and tourist vehicle operators.

The Safe, Accountable, Flexible, Efficient, Transportation Equity Act — A Legacy for Users (“SAFETEA-LU”) was the primary program funding the U.S. public surface transit market at the federal level through federal fiscal year 2009. SAFETEA-LU promoted the development of modern, expanded, intermodal public transit systems nationwide and also designated a wide range of tools, services, and programs intended to increase the capacity of the nation’s mobility systems. SAFETEA-LU guaranteed a record level $52.6 billion in funding for public transportation through federal fiscal year 2009, including approximately $10.3 billion to fund federal transit programs in federal fiscal year 2009. Economic stimulus legislation under the American Recovery and Reinvestment Act of 2009 (the “ARRA”) included $8.4 billion reserved for U.S. public transportation infrastructure projects, of which approximately $6.9 billion was authorized for use in our core served U.S. market. The Company’s domestic subsidiaries initially saw an increase in customer requests for estimates, quotes and proposals as a direct result of the ARRA funding. However, the actual rate of conversion of those quotes and proposals into firm orders has been slower than expected. Additionally, we cannot determine with any certainty that certain projects would or would not have materialized in absence of the ARRA funding. However, we estimate that, ARRA projects have led to new orders, deliverable to a small extent in 2009, and mostly in 2010, totaling between $2.8 million and $5.5 million. Further, we expect additional order activity under the ARRA to materialize in 2010, which could bring the ultimate total business funded under that program to approximately $8 million. We believe the funding under SAFETEA-LU and the ARRA have led to a favorable and increasing market for most of our products in the U.S. segment of our served market.

Authorized federal funding under SAFETEA-LU expired at September 30, 2009. Continuation of the expiring legislation has been implemented under specific legislated extensions. According to reports from the American Public Transportation Association (“APTA”), the U.S. House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies Appropriations marked-up its annual appropriations bill on July 13, 2009. For fiscal year 2010, the bill would provide $10.5 billion for federal transit programs, roughly a 1 percent increase over the fiscal year 2009 level, as well as $4 billion for high speed rail. Likewise, the Senate subsequently passed its measure. Final passage and reconciliation was expected to occur when Congress reconvened after its August 2009 recess. However, instead of final passage and reconciliation, extensions were utilized to continue funding on a short-term basis leading up to a recent mid-range extension to December 31, 2010.

One significant component of U.S. market federal finding is a trust fund that receives income from taxes on motor fuels (note that federal funds provide approximately 20% of all funds in the transit industry). Receipts to the trust fund have been inadequate to provide and sustain the needed federal funding of U.S. transit systems. Recently, additional funds were deposited in the trust fund from general revenue sources and it is believed that such funds are sufficient to extend the life of that program through federal fiscal year 2011.

Another significant source of U.S. transit funding is state and local taxes or other forms of state and local resources. As a result of the slow-down in the U.S. economy in recent periods, many transit operating authorities in the U.S. are having trouble maintaining levels of service they have historically provided and some have commenced service cutbacks and reductions. This issue is being addressed through additional operating funding possibly being made available at the federal level.

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New authorizing legislation has been prepared by the U.S. House Committee on Transportation & Infrastructure, which has released its proposal for the next surface transportation authorization bill to replace SAFETEA-LU. The proposal, “A Blueprint for Investment and Reform,” recommends a $450 billion investment in surface transportation programs over a six-year period, including $99.8 billion for public transportation programs that, if enacted, would approximate a 90 percent increase over SAFETEA-LU funding levels. The bill recommends an additional $50 billion to create a national high speed rail network. Funding ways and means for the proposed legislation must still be addressed. There can be no assurance that new legislation will materialize and final passage of any form of new legislation is not expected to occur until late in 2010 at the earliest and may not occur until sometime in 2011 or later. Extensions of the expired legislation will be necessary until ways and means to finance a new longer-term legislation can be determined. The Company’s senior management is involved in development of the new legislation and extensions of the expired legislation through active participation in APTA and continues to monitor the development of the new legislation and its potential impact on the Company’s future operating results. Currently, management believes that such legislative issues will have minimal impact on the U.S. market at least into late 2010, at which time there could be a depressing impact on the U.S. market that we serve.

Federal funding issues described herein do not impact the larger, international market we serve. Sales by our international subsidiaries increased by approximately 31% in 2009 compared to 2008 (after giving effect to changes in currency exchange rates) as we continued to seek opportunities to expand our presence internationally, both in current served markets and in new markets around the globe. Our international operations have seen some customer procurement plan revisions, including rescheduling of delivery dates and some scale-back. Some of this was due, in the opinion of management, at least partially, to the global economic slowdown in certain specific international market sectors. However, certain other international and domestic customer rescheduling of orders has recently been experienced primarily for reasons other than economic circumstances. While such issues as these can and do occasionally impact the Company, we believe long-term market drivers for the global transit industry, which include traffic grid-lock, high fuel prices, environmental issues, economic issues and the need to provide safe and secure transportation systems, continue to suggest a favorable overall long term trend and environment for DRI, and we remain optimistic about the Company’s prospects in the global transit and transportation markets.

While as much as 80% of certain major capital expenditures in the U.S. can be funded federally in most instances, federal funding accounts for less than 20% of all funding in the U.S. market. The remainder comes from a combination of state and local public funds and passenger “fare-box” revenue. However, even though federal funding is a relatively low share of the total, its presence, absence or uncertainty, in our opinion, has a larger impact on the market than the 20% might imply. Funding for markets outside of the U.S. comes from a variety of sources. These sources vary widely from region-to-region and from period-to-period but include combinations of local, regional, municipal, federal, and private entities or funding mechanisms as well as funds generated by collection of fares.

The automatic voice announcement systems market served by DRI’s DR subsidiary emerged primarily because of ADA legislation. DR was among the pioneers to develop automatic voice announcement technology including GPS tracking and triggering. DR’s Talking Bus^® system met favorable acceptance in terms of concept, design, and technology, and was acknowledged to be ADA compliant. That regulatory-driven acceptance has evolved and grown into a basic customer service consideration. We believe that over 60% of all new bus vehicles in North America contained automatic voice announcement systems in recent years. We expect this percentage to moderately increase over the next several years as automatic voice announcement systems reduce cost, decrease in maintenance cost and complexity, integrate to deliver other features and services, and become more distinctly perceived as a form of customer service. To date, our DR subsidiary has had minimal international sales. Management believes DR holds a significant U.S. market share in stand-alone (as opposed to similar functionality included in larger integrated information system installations) automatic voice announcement systems.

Enhancement and expansion of the AVL and AVM capabilities of DR’s DR-600 Talking Bus^® system has enabled DRI to expand the market it serves to include fleet management (“Engineered Systems”) services for operators and users of transit vehicle systems. An outcome of this is the ability to provide more and better

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information to the users of transit systems by placing real-time current vehicle location information at passenger boarding locations and vehicle operating efficiency and vehicle health information at operational headquarters and other strategic locations. Additionally, this capability is emerging as a form of security risk mitigation for our customers. It is in this area of our business that we form alliances with others in order to enhance our market capability and access. Furthering security features and security related transit products, DR produces and sells VacTell^tm video actionable intelligence solutions, which combines well-established Digital Recorders^® on- and off-vehicle location and monitoring products with advanced digital video recording and wireless communications technologies to deliver the ability to enhance management of security events.

The electronic destination sign system market served by our U.S. and international operations is highly competitive. Aside from the benefit of opening new geographic market segments, growth of this business is closely tied to overall market growth, increased market share, or technological advances. A significant portion of transit buses in operation worldwide have some form of electronic destination sign system. We estimate approximately 98% of those systems in the U.S. are electronic. The percentage of buses with electronic destination sign systems varies greatly among international markets, with some markets as high as 98% and some markets as low as 5%. We estimate approximately 50% of destination sign systems in our overall international markets are electronic and believe this percentage is trending upward. We believe that TVna holds a significant market share in the U.S., while Mobitec AB holds a majority market share in the Nordic market and Mobitec AB, through subsidiaries, holds significant, and in some cases, majority market share in most of its primary geographic served markets world-wide.

Key Competitors

Most of the markets in which we participate are highly competitive and are subject to technological advances, as well as evolving industry and regulatory standards. We believe the principal competitive factors in all markets we serve include ease of use, after-sales service and support, local presence and support on a multi-national basis, price, the ability to integrate products with other technologies, maintaining leading edge technology, and responding to governmental regulation.

In DRI’s electronic destination sign systems market, management views Luminator Holding L.P. (“Luminator”), an operating unit of Mark IV Industries, Inc., as its principal competitor. Clever Devices Ltd. is the most significant competitor in the domestic automatic voice announcement systems market. In the engineered systems market, management considers INIT GmbH, Continental AG, and the former TMS subsidiary of Orbital Sciences, now owned by ACS, to be DRI’s most significant competitors. Numerous other competitors exist, particularly in the international markets, and most tend to serve discrete regions or territories rather than the global market served by DRI. Of the international competitors, those comprising the majority of competitive market shareholdings are LLE, Luminator, Hanover Displays, Gorba, INIT, Continental, and ACS. All of these except ACS, Luminator, and Hanover Displays are based in Central Europe. Hanover Displays is based in the United Kingdom with significant market share there, as well as sales in selected regions of the continental European market. ACS and Luminator are based in the U.S.

Products and Product Design

DRI’s current products include:

•  DR600^tm, a vehicle logic unit for buses that provides automatic vehicle monitoring, automatic vehicle location, and automatic vehicle schedule adherence communication systems and programs, generally including GPS triggering of product features;

•  GPS tracking of vehicles;

•  Talking Bus^® next stop automatic voice announcement system and next stop internal signage;

•  A Software Suite that provides modules for customized transit applications including computer-aided dispatch, automatic vehicle location, vehicle monitoring, wireless data exchange, and Central Recording Station;

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•  Transit Arrival Signs and software;

•  Airport Shuttle Automatic Vehicle Location products and Arrival Signs;

•  Integration of and with vehicle sub-systems including destination signs, fare collection, automatic passenger counters, engine controllers, transmission, multiplexer, etc.;

•  TwinVision^® all-LED (light-emitting diode) electronic destination sign systems;

•  TwinVision^® Chromatic Series family of color electronic destination sign systems;

•  TwinVision^® Smart Series family of electronic destination sign systems;

•  ELYSÉ^® and Central Recording Station software;

•  Mobitec^® electronic destination sign systems and electronic information display systems; and

•  VacTell^tm video surveillance, recording and actionable intelligence products.

The Digital Recorders systems enable voice-announced transit vehicle stops, GPS-based automatic vehicle location, automatic vehicle monitoring, and other passenger information, such as next stop, transfer point, route and destination information, and public service announcements. The vehicle locating and monitoring aspect of this product further provides security-related capabilities. These systems can be used in transit buses and vans, light rail vehicles, trains, subway cars, people movers, monorails, airport vehicles and tour buses, as well as other private and commercial vehicles. Compliant with industry-recognized standards, the system uses an open architecture, computer-based microprocessor electronics system design including interoperability with third-party equipment. The open architecture design permits expansion to customer size requirements and integration with other electronic systems. Wireless 802.11x data exchange is available. This system, as well as all of DRI’s products, is designed to meet the severe operating demands of temperature, humidity, shock, vibration, and other environmental conditions found in typical transit applications.

DRI’s electronic destination sign system products, which are generally known by the TwinVision^® and Mobitec^® brand names, represent technologically advanced products pioneered by our Mobitec GmbH, TVna, and Mobitec AB subsidiaries. The product line includes various models covering essentially all popular applications. Where applicable, these products adhere to ADA requirements and function under industry-recognized standards. They each possess an open architecture, microprocessor-based design. In 2000, TVna and Mobitec GmbH introduced an all-LED, solid-state product. The all-LED product dominates sales of destination sign systems in North America and in the international markets, while prior generation, mechanical “flip-dot” or “flip-dot/LED” products, accounts for a declining percentage of sales by DRI’s international subsidiaries. As the name implies, the “all-LED” product provides improved illumination and eliminates moving parts, thereby delivering better readability and lowered maintenance expenses.

In 2001, TVna and Mobitec GmbH introduced the TwinVision^® Chromatic Series, including TwinVision^® Chroma I and TwinVision^® Chroma IV, which offered DRI’s customers greater color “route identification” flexibility and message display options for electronic destination signage. These products incorporate colorized route capabilities while retaining electronic destination sign system message display advantages for the color-vision impaired. In 2008, TVna introduced the TwinVision^® All-LED Smart Series and TwinVision^® Chromatic Smart Series. The Smart Series products feature a more advanced processing system that has been integrated with the Company’s all-LED and Chromatic Series electronic destination sign systems. In 2009, TVna introduced the new Silver Series destination sign system having significantly better and brighter image features. Utilizing state-of-the-art processors to monitor system health and solid-state LED devices to provide extremely bright messages with wide-angle visibility both day and night, these products help reduce fleet maintenance costs and system diagnostic times, as well as deliver improved message displays.

Message programming for all electronic destination sign system products is accomplished via proprietary ELYSÉ^® software developed by Mobitec GmbH and refined by TVna, or similar companion software developed by Mobitec AB. Programming is accomplished through such means as PCMCIA memory card download, USB devices and certain wireless capabilities.

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Under terms of a license agreement with the University of Washington, DR uses certain technology developed by the Intelligent Transportation Systems Research program at the University under the names “BusView” and “MyBus.” The technology, some of which we have integrated with the Talking Bus^® system, enables transit system users to access information about the vehicle they wish to board, such as schedule data, via the internet. This technology, combined with DRI’s internal developments, is helping extend DR’s product offerings into automatic vehicle location, fleet management, automatic vehicle monitoring, and off-vehicle passenger information markets and security. Under the license agreement with the University of Washington, the Company pays royalties for use of the technology. The royalties paid are not significant to the Company’s results of operations.

Marketing and Sales Organization

DRI’s products are marketed by in-house sales and marketing personnel, commissioned independent sales representatives, and by distributors or dealers in selected limited circumstances as appropriate for each business unit and market segment. Marketing and sales activities include database marketing; selective advertising; direct contact selling; publication of customer newsletters; participation in trade shows and industry conventions; and cooperative activities with systems integrators and alliance partners on a selective basis.

Management regularly evaluates alternative methods of promoting and marketing DRI’s products and services. Web site and internet-based marketing techniques currently serve to assist marketing and sales efforts, but the custom-specification, request-for-quote nature of DRI’s markets does not lend itself to full-scale, internet-driven marketing and sales efforts.

Customers

Though we had no major customer (defined as those customers to which we made sales greater than 10% of DRI’s total sales) in 2009, we continue to generate a significant portion of our sales from a relatively small number of key customers. In 2009, 2008 and 2007, our top five customers accounted for 36.0%, 33.4%, and 21.3%, respectively, of total annual sales. These key customers, the composition of which may vary from year to year, are primarily transit bus original equipment manufacturers. We sell our products to a limited set of customers and can experience concentration of revenue with related credit risk. Loss of one or more of these key customers could have an adverse material impact on the Company.

Seasonality and Fluctuation in Results

DRI’s sales are not generally “seasonal” in nature. However, a significant portion of sales for each product line is made, either directly or indirectly, to government or publicly funded entities. In addition, many sales to transit original equipment manufacturers are themselves related to sales by those manufacturers to government or publicly funded entities. In general, due to project funding availability considerations being somewhat tied to governmental agencies in some instances, we may occasionally experience the appearance of seasonality-like movement in revenue. In the U.S., the federal government and many state and local governments operate on an October to September fiscal year. Several key international government customers operate on an April to March fiscal year. In addition, government agencies occasionally have a tendency to purchase infrequently and in large quantities, creating uneven demand cycles throughout the year. These cycles generate periods of relatively low order activity as well as periods of intense order activity. This fluctuation in ordering tends to make sales patterns uneven and make it difficult to forecast quarter-to-quarter and year-to-year results.

Sales to DRI customers are characterized by relatively larger contracts and lengthy sales cycles that generally extend for a period of two months to 24 months. The majority of sales of the Company’s products and services are recognized upon physical shipment of products and completion of the service, provided all accounting criteria for recognition have been met. Sales and revenues for projects involving multiple elements (i.e., products, services, installation and other services) are recognized under specific accounting criteria based on the products and services delivered to the customer and the customer’s acceptance of such products and

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services. Sales and revenues from more complex or time-spanning projects within which there are multiple deliverables including products, services, and software are recognized based upon the facts and circumstances unique to each project. This generally involves recognizing sales and revenue over the life of the project based upon (1) meeting specific delivery or performance criteria. See discussion of DRI’s revenue recognition policies in Item 7 below.

DRI’s sales tend to be made pursuant to larger contracts, requiring deliveries over several months. Purchases by a majority of DRI’s customers are frequently somewhat dependent, directly or indirectly, on federal, state, regional and local funding. Manufacturers of transportation equipment, who, in turn, sell to agencies or entities dependent on government funding, are the principal customers for DRI’s products. Further, governmental type purchasers generally are required to make acquisitions through a public bidding process. The fact that much of DRI’s sales are derived from relatively large contracts with a small number of customers can result in fluctuations in DRI’s sales and, thus, operating results, from quarter-to-quarter, period-over-period and year-to-year.

Due to DRI’s business dealings in foreign countries, the Company may experience foreign currency transaction gains and losses in relation to the changes in foreign currency rates, which can result in variances from quarter-to-quarter and year-to-year. The Company does not engage in currency hedging at this time.

Backlog

DRI’s backlog as of December 31, 2009, was $26.3 million compared to $9.9 million as of December 31, 2008, and $12.0 million as of December 31, 2007. Fluctuations in backlog can occur and generally are due to: (1) timing of the receipt of orders; (2) order cycle fluctuations arising from the factors described under the heading “Seasonality and Fluctuation in Results”; and (3) the extent of long-term orders in the marketplace. We believe backlog is becoming less of a trend indicator for the Company due to the fact that some of our larger customers depend on the Company to monitor their production and anticipate when Company products will be needed. As a result, customer purchase orders classified as “backlog” may not materialize until relatively close to the necessary delivery date. DRI currently anticipates that it will deliver all, or substantially all, of the backlog as of December 31, 2009 during fiscal year 2010.

Research and Development

DRI is committed to the continued technological enhancement of all its products and to the development or acquisition of products having advanced technological features. However, continued development of any individual product is dependent upon product acceptance in the marketplace. DRI’s objective is to develop products that are considered high quality, technologically advanced, cost competitive, and capable of capturing a significant share of the addressable market. Product development based upon advanced technologies is one of the primary means by which management differentiates DRI from its competitors.

Management anticipates that technological enhancements to the Talking Bus^® automatic voice announcement system, VacTell^tm video surveillance security products, and TwinVision^® and Mobitec^® electronic destination sign system products will continue in the future. Such technological enhancements are designed to enhance DRI’s ability to integrate these products with other technologies, reduce unit cost of production, capture market share and advance the state-of-the-art technologies in DRI’s ongoing efforts to improve profit margins. The enhancements should increase available marketable product features as well as aid in increasing market share, product profit margins and market penetration. In addition to enhancing existing products, DRI generally has new generations of products under various stages of development or under development refinement of U.S. products to make ready for the international market.

Research and development activities continued in all product areas during 2009. Research and development expenses were $552,000 in 2009, $974,000 in 2008, and $1.1 million in 2007. During 2009, as in prior years, salaries of certain engineering personnel who were used in the development of software and other related costs met the capitalization criteria of Accounting Standards Codification (“ASC”) Topic 985-20, “Costs of Computer Software to be Sold, Leased or Marketed.” The total amount of personnel and other expense capitalized in 2009 was $2.1 million as compared to capitalization of $1.5 million and $669,000 for

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such costs for the years ended December 31, 2008 and 2007, respectively. In 2009, the Company stepped-up its efforts to develop more technologically advanced products that would meet our customers’ needs and which we believe would provide an advantage over our competitors’ products. We increased our engineering resources in 2009, which allowed us to execute our plan to increase these development efforts. We believe the technological advances to our products resulting from these increased capitalized development projects will generate increased revenues for us in future periods. In aggregate, research and development expenditures in 2009 were $2.6 million as compared to aggregate expenditures of $2.5 million and $1.8 million in 2008 and 2007, respectively. This increase in aggregate research and development expenditures is attributable to the Company’s continued efforts to pursue technological enhancements to existing products and to develop new, technologically advanced products that will meet our customers’ needs.

Because we believe technological advances are necessary to maintain and improve product lines and, thus, market position, we expect to continue to invest in research and development activities in future periods. Due to our research and development spending, we may experience fluctuations in operating results since costs may be incurred in periods prior to the related or resulting sales. Additionally, technological advances increase the potential for existing products to become obsolete. The Company takes technological advances into consideration when evaluating the carrying amount of its inventory on a period-to-period basis.

Manufacturing Operations

Our principal suppliers generally are ISO (or substantial equivalent) certified contract-manufacturing firms that produce DRI-designed equipment. DR also performs part of its assembly work in-house purchasing major components and services from several suppliers in the U.S.

TVna purchases display components and assemblies for electronic destination sign systems from multiple companies in the U.S., Europe, and Asia. We generally assemble these products, and some related subassemblies, in-house. Domestic production is compliant with “Buy-America” regulations.

Mobitec AB produces the majority of the products it sells, as well as products for sales of Mobitec GmbH, Mobitec Pty, and Castmaster Mobitec in Herrljunga, Sweden. It purchases raw materials, components, and assemblies primarily from suppliers located in the Nordic, Asian and European markets. In late 2009, Castmaster Mobitec started local production work in India.

Mobitec Brazil Ltda produces its products in Caxias do Sul, Brazil. It purchases raw materials, components and assemblies from companies in Europe, LEDs from DRI’s other subsidiaries and suppliers in Asia, and the remainder primarily from various local suppliers in Brazil.

Customer Service

We believe our commitment to customer service has enhanced the customer’s opinion of DRI compared to our competitors. Our plan is to continue defining and refining our service-oriented organization as a sustainable competitive advantage.

Proprietary Rights

We currently own four design patents and have a combination of trademarks, copyrights, alliances, trade secrets, nondisclosure agreements, and licensing agreements to establish and protect our ownership of, and access to, proprietary and intellectual property rights as well as patent applications. Our attempts to keep the results of our research and development efforts proprietary may not be sufficient to prevent others from using some or all of such information or technology. By “designing around” our intellectual property rights, our competitors may be able to offer similar functionality provided by our products without violating our intellectual property rights. We have registered our Digital Recorders^®, Talking Bus^®, TwinVision^®, Mobitec^®, ELYSÉ^®, DR500C+^®, DR600^®, and VacTell^tm trademarks, as well as other trademarks, logos, slogans, taglines, and trade names with the U.S. Patent and Trademark Office and, where appropriate, with similar governmental agencies abroad.

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We intend to pursue new patents and other intellectual property rights protection methods covering technology and developments on an on-going basis. We also intend to use our best efforts to maintain the integrity of our trademarks, logos, slogans, taglines, trade names, and other proprietary names, as well as to protect them from unauthorized use, infringement, and unfair competition.

Employees

As of December 31, 2009, DRI employed 244 people, of which 89 were employed domestically and 155 were employed internationally. Of the 89 domestic employees, 5 were employed in our Dallas corporate administrative office. Although European subsidiaries include some limited work-place agreements, DRI employees are not covered by any collective bargaining agreements and management believes its employee relations are good. We believe future success will depend, in part, on our continued ability to attract, hire, and retain qualified personnel.

Item 1A.   Risk Factors

Many of the risks discussed below have affected our business in the past, and many are likely to continue to do so. These risks may materially adversely affect our business, financial condition, operating results or cash flows, or the market price of our Common Stock.

Risks Related to Indebtedness, Financial Condition and Results of Operations

Our substantial debt could adversely affect our financial position, operations and ability to grow.  As of December 31, 2009, we had total debt of approximately $15 million. Included in this debt is $7.2 million under our domestic and European revolving credit facilities, a $4.8 million term loan due June 30, 2011, a $209,000 loan due on September 30, 2010, a $470,000 loan due on June 30, 2011, a $1.95 million loan due on October 30, 2012, a $132,000 loan due on October 7, 2014, a $22,000 loan due on September 7, 2012, a $93,000 loan due on April 30, 2010, loans of $135,000 with 180-day terms, a $1,900 loan due on January 17, 2010, and three loans of $24,000 due on November 16, 2010. Our domestic revolving credit facility had an outstanding balance of $3.8 million as of December 31, 2009 and matures on June 30, 2011. Our European revolving credit facilities have outstanding balances of $2.0 million as of December 31, 2009 under agreements with a Swedish bank with an expiration date of December 31, 2010 and an outstanding balance of $1.4 million as of December 31, 2009 under an agreement with a German bank with an open-ended term. Our substantial indebtedness could have adverse consequences in the future, including without limitation:

•  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;

•  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.

Some of our debt bears interest at variable rates.  If interest rates increase, or if we incur additional debt, the potential adverse consequences, including those described above, may be intensified. If our cash flow

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and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay planned expansion and capital expenditures, sell assets, obtain additional equity financing or restructure our debt. Some of our existing credit facilities contain covenants that, among other things, limit our ability to incur additional debt.

Future cash requirements or restrictions on cash could adversely affect our financial position, and an event of default under our outstanding debt instruments could impair our ability to conduct business operations.  The following items, among others, could require unexpected future cash payments, limit our ability to generate cash or restrict our use of cash:

•  triggering of certain payment obligations, or acceleration of payment obligations, under our revolving credit facilities and loan agreements;

•  costs associated with unanticipated litigation relating to our intellectual property or other matters;

•  taxes due upon the transfer of cash held in foreign locations; and

•  taxes assessed by local authorities where we conduct business.

In the event we are unable to avoid an event of default under one or more of our existing credit facilities, it may be necessary or advisable to retire and terminate one or more of the facilities and pay all remaining balances borrowed. Any such payment would further limit our available cash and cash equivalents. Furthermore, it is unlikely we would have adequate resources available when necessary to avoid an event of default or if we do not have adequate time to retire the credit facilities. The consequences of an event of default under one or more of our credit facilities or other debt instruments may prevent us from continuing normal business operations.

The above cash requirements or restrictions could lead to an inadequate level of cash for operations or for capital requirements, which could have a material negative impact on our financial position and significantly harm our ability to operate the business.

Our operating results may continue to fluctuate.  Our operating results may fluctuate from period to period and period over period depending upon numerous factors, including: (1) customer demand and market acceptance of our products and solutions; (2) new product introductions; (3) variations in product mix; (4) delivery due-date changes; and (5) other factors. We operate in a market characterized by long and occasionally erratic sales cycles. The time from first contact to order delivery may be a period of two years or longer in certain instances. Delivery schedules, as first established with the customer in this long cycle may change with little or no advance notice as the original delivery schedule draws near. Our business is sensitive to the spending patterns and funding of our customers, which, in turn, are subject to prevailing economic and governmental funding conditions and other factors beyond our control. Moreover, we derive sales primarily from significant orders from a limited number of customers. For that reason, a delay in delivery of our products in connection with a single order may significantly affect the timing of our recognition of sales between periods. Moreover, sales lost due to the cancellation of, or our inability to fill, an order in one period may not be necessarily made up by sales in any future period.

Risks Related to Our Operations and Product Development

A significant portion of our sales is derived from sales to a small number of customers. If we are not able to obtain new customers or repeat business from existing customers, our business could be seriously harmed.  We sell our products to a limited and largely fixed set of customers and potential customers. We sell primarily to original equipment manufacturers and to end users such as municipalities, regional transportation districts, transit agencies, federal, state and local departments of transportation, and rental car agencies. In 2009, 2008 and 2007, our top five customers accounted for 36.0%, 33.4%, and 21.3%, respectively, of total annual sales. The identity of the customers who generate the most significant portions of our sales may vary from year to year. If any of our major customers stopped purchasing products from us, and we were not able to obtain new customers to replace the lost business, our business and financial condition would be materially adversely affected. Many factors affect whether customers reduce or delay their investments in products such as those

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we offer, including decisions regarding spending levels and general economic conditions in the countries and specific markets where the customers are located.

We depend on third parties to supply components we need to produce our products.  Our products and solutions are dependent upon the availability of quality components that are procured from third-party suppliers. Reliance upon suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts (which can adversely affect the reliability and reputation of our products), a shortage of components and reduced control over delivery schedules (which can adversely affect our manufacturing efficiencies and timing of deliveries to customers) and increases in component costs (which can adversely affect our profitability).

We have some single-sourced supplier relationships, because either alternative sources are not readily or economically available or the relationship is advantageous due to performance, quality, support, delivery, and capacity or price considerations. If these sources are unable to provide timely and reliable supply, we could experience manufacturing interruptions, delays, or inefficiencies, adversely affecting our results of operations. Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could adversely affect operating results.

Many of our customers rely, to some extent, on government funding, which subjects us to risks associated with governmental budgeting and authorization processes.  A majority of our domestic U.S. sales, either directly or indirectly through OEM’s, are to end customers having some degree of national, federal, regional, state, or local governmental-entity funding. These governmental-entity funding mechanisms are beyond our control and often are difficult to predict. Further, general budgetary authorizations and allocations for state, local and federal agencies can change for a variety of reasons, including general economic conditions, and have a material adverse effect on us. SAFETEA-LU, which was the primary program funding the U.S. public surface transit market at the federal level expired in September 2009. Extension of the expired legislation has been implemented under continuing resolutions while new legislation to replace SAFETEA-LU is being developed. It is uncertain when new legislation will be developed and enacted, if at all, and at what levels federal funding for public transportation programs will be available if new legislation is enacted. Such funding uncertainties could lead to disruption in our domestic market, which, in turn, could result in a downturn in demand for our products and have a material adverse effect on our financial position and results of operations.

In addition to federal funding to the public transit side of our domestic market, a majority of our customers rely on state and local funding, which tends to be affected by general economic conditions. A decrease in state and local funding in our domestic markets can have a depressing effect on sales of our products. It is not possible to precisely quantify or forecast this type of impact. Any unfavorable change in any of these factors and considerations could have a material adverse effect upon us.

We must continually improve our technology to remain competitive.  Our industry is characterized by, and our business strategy is substantially based upon, continuing improvement in technology. This results in frequent introduction of new products, short product life cycles and continual change in product price/performance characteristics. We must develop new technologies in our products and solutions in order to remain competitive. We cannot assure you that we will be able to continue to achieve or sustain the technological leadership that is necessary for success in our industry. In addition, our competitors may develop new technologies that give them a competitive advantage, and we may not be able to develop or obtain a right to use those or equal technologies at a reasonable cost, if at all, or to develop alternative solutions that enable us to compete effectively. A failure on our part to manage effectively the transitions of our product lines to new technologies on a timely basis could have a material adverse effect upon us. In addition, our business depends upon technology trends in our customers’ businesses. To the extent that we do not anticipate or address these technological changes, our business may be adversely impacted.

We operate in several international locations and, in India, with less than full ownership control.  Not all countries embrace the full scope of the regulatory requirements placed on U.S. public companies. Operating under those inhibiting circumstances can make it difficult to assure that all of our internal controls are being followed as we would expect and detection of non-compliance may not be as timely as desired.

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We cannot assure you that any new products we develop will be accepted by customers.  Even if we are able to continue to enhance our technology and offer improved products and solutions, we cannot assure you we will be able to deliver commercial quantities of new products in a timely manner or that our products will achieve market acceptance. Further, it is necessary for our products to adhere to generally accepted and frequently changing industry standards, which are subject to change in ways that are beyond our control.

Risks Related to Our International Operations

There are numerous risks associated with international operations, which represent a significant part of our business.  Our international operations generated approximately 59% of our sales in 2009. Our sales outside the U.S. were primarily in Europe (particularly the Nordic countries), South America, the Middle East, India, and Australia. The success and profitability of international operations are subject to numerous risks and uncertainties, such as economic and labor conditions, political instability, tax laws (including U.S. taxes upon foreign subsidiaries), and changes in the value of the U.S. dollar versus the local currency in which products are bought and sold. Any unfavorable change in one or more of these factors could have a material adverse effect on us.

Complying with foreign tax laws can be complicated, and we may incur unexpected tax obligations in some jurisdictions.  We maintain cash deposits in foreign locations and many countries impose taxes or fees upon removal from the country of cash earned in that country. While we believe our tax positions in the foreign jurisdictions in which we operate are proper and defensible, tax authorities in those jurisdictions may nevertheless assess taxes and render judgments against us. In such an event, we could be required to make unexpected cash payments in satisfaction of such assessments or judgments or incur additional expenses to defend our position. As an example, Mobitec Brazil was assessed $1.5 million in Industrialized Products Taxes, a form of federal value-added tax in Brazil, and related penalties and fines in 2006. The assessment was the result of an audit performed by Brazil’s Federal Revenue Service in 2006 and varying interpretations of Brazil’s complex tax law by Brazil’s Federal Revenue Service and the Company.

Risks Related to Internal Controls

Required reporting on internal control over financial reporting.  In accordance with Section 404 of the Sarbanes-Oxley Act, we report on the effectiveness of our internal controls over financial reporting in each Annual Report. In Item 9A(T) of this Annual Report, we report material weaknesses in our internal controls over financial reporting at December 31, 2009. We can give no assurances our efforts to remediate our reported material weaknesses will be successful or that our efforts to maintain effective internal controls over financial reporting will be successful in future reporting periods. This could cause investors to lose confidence in our internal control environment.

Risks Related to Intellectual Property

We may not be able to defend successfully against claims of infringement against the intellectual property rights of others, and such defense could be costly.  Third parties, including our competitors, individual inventors or others, may have patents or other proprietary rights that may cover technologies that are relevant to our business. Claims of infringement have been asserted against us in the past. Even if we believe a claim asserted against us is not valid, defending against the claim may be costly. Intellectual property litigation can be complex, protracted, and highly disruptive to business operations by diverting the attention and energies of management and key technical personnel. Further, plaintiffs in intellectual property cases often seek injunctive relief and the measures of damages in intellectual property litigation are complex and often subjective or uncertain. In some cases, we may decide that it is not economically feasible to pursue a vigorous and protracted defense and decide instead to negotiate licenses or cross-licenses authorizing us to use a third party’s technology in our products or to abandon a product. If we are unable to defend successfully against litigation of this type, or to obtain and maintain licenses on favorable terms, we could be prevented from manufacturing or selling our products, which would cause severe disruptions to our operations. For these reasons, intellectual property litigation could have a material adverse effect on our business or financial condition.

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Risks Related to Our Equity Securities

The public market for our Common Stock may be volatile, especially since market prices for technology stocks often have been unrelated to operating performance.  We cannot assure you that an active trading market will be sustained or that the market price of our Common Stock will not decline. The market price of our Common Stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to factors such as:

•  Actual or anticipated variations in our quarterly operating results;

•  Historical and anticipated operating results;

•  Announcements of new product or service offerings;

•  Technological innovations;

•  Competitive developments in the public transit industry;

•  Changes in financial estimates by securities analysts;

•  Conditions and trends in the public transit industry;

•  Funding initiatives and other legislative developments affecting the transit industry;

•  Adoption of new accounting standards affecting the technology industry or the public transit industry; and

•  General market and economic conditions and other factors.

Further, the stock markets, and particularly the NASDAQ Capital Market, have experienced extreme price and volume fluctuations that have particularly affected the market prices of equity securities of many technology companies and have often been unrelated or disproportionate to the operating performance of such companies. These broad market factors have had and may continue to have an adverse affect on the market price of our Common Stock. In addition, general economic, political and market conditions, such as recessions, interest rate variations, international currency fluctuations, terrorist acts, military actions or war, may adversely affect the market price of our Common Stock.

Our preferred stock has preferential rights over our Common Stock.  At December 31, 2009 we had outstanding shares of Series AAA Redeemable, Nonvoting, Convertible Preferred Stock, Series E Redeemable, Nonvoting, Convertible Preferred Stock, Series G Redeemable, Convertible Preferred Stock, Series H Redeemable, Convertible Preferred Stock, and Series K Redeemable, Convertible Preferred Stock, all of which have rights in preference to holders of our Common Stock in connection with any liquidation of the Company. The aggregate liquidation preference is $830,000 for the Series AAA Preferred, $400,000 for the Series E Preferred, $2.4 million for the Series G Preferred, $345,000 for the Series H Preferred, $1.5 million for the Series K Preferred, and in each case plus accrued but unpaid dividends. Holders of the Series AAA Preferred, Series E Preferred, Series G Preferred, Series H Preferred, and Series K Preferred are entitled to receive cumulative quarterly dividends at the rate of five percent (5.0%) per annum, seven percent (7.0%) per annum, eight percent (8.0%) per annum, eight percent (8.0%) per annum, and nine and one-half percent (9.5%) per annum, respectively, on the liquidation value of those shares. Dividends on the Series G Preferred are payable in kind in additional shares of Series G Preferred and dividends on the Series H Preferred are payable in kind in additional shares of Series H Preferred. Dividends on the Series K Preferred are payable in kind in additional shares of Series K Preferred or in cash, at the option of the holder. The agreement under which we secured our domestic senior credit facility prohibits the payment of dividends to holders of our Common Stock. The preferential rights of the holders of our preferred stock could substantially limit the amount, if any, that the holders of our Common Stock would receive upon any liquidation of the Company.

Risks Related to Anti-Takeover Provisions

Our articles of incorporation, bylaws and North Carolina law contain provisions that may make takeovers more difficult or limit the price third parties are willing to pay for our stock.  Our articles of incorporation

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authorize the issuance of shares of “blank check” preferred stock, which would have the designations, rights and preferences as may be determined from time to time by the board of directors. Accordingly, the board of directors is empowered, without shareholder approval (but subject to applicable regulatory restrictions), to issue additional preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Common Stock. Our board of directors could also use the issuance of preferred stock, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. In addition, our bylaws require that certain shareholder proposals, including proposals for the nomination of directors, be submitted within specified periods of time in advance of our annual shareholders’ meetings. These provisions could make it more difficult for shareholders to effect corporate actions such as a merger, asset sale or other change of control of the Company. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our Common Stock, and they may have the effect of delaying or preventing a change in control.

We are also subject to two North Carolina statutes that may have anti-takeover effects. The North Carolina Shareholder Protection Act generally requires, unless certain “fair price” and procedural requirements are satisfied, the affirmative vote of 95% of our voting shares to approve certain business combination transactions with an entity that is the beneficial owner, directly or indirectly, of more than 20% of our voting shares, or with one of our affiliates if that affiliate has previously been a beneficial owner of more than 20% of our voting shares. The North Carolina Control Share Acquisition Act, which applies to public companies that have substantial operations and significant shareholders in the state of North Carolina, eliminates the voting rights of shares acquired in transactions (referred to as “control share acquisitions”) that cause the acquiring person to own a number of our voting securities that exceeds certain threshold amounts, specifically, one-fifth, one-third and one-half of our total outstanding voting securities. There are certain exceptions. For example, this statute does not apply to shares that an acquiring person acquires directly from us. The holders of a majority of our outstanding voting stock (other than such acquiring person, our officers and our employee directors) may elect to restore voting rights that would be eliminated by this statute. If voting rights are restored to a shareholder that has made a control share acquisition and holds a majority of all voting power in the election of our directors, then our other shareholders may require us to redeem their shares at fair value. These statutes could discourage a third party from making a partial tender offer or otherwise attempting to obtain a substantial position in our equity securities or seeking to obtain control of us. They also might limit the price that certain investors might be willing to pay in the future for shares of our Common Stock, and they may have the effect of delaying or preventing a change of control.

Provisions of our bylaws limit the ability of shareholders to call special meetings of shareholders and therefore could discourage, delay or prevent a merger, acquisition or other change in control of our company.  Under the Company’s Amended and Restated Bylaws, special meetings of the shareholders may be called by the Chairman of the Board, the President, the Board of Directors or any shareholder or shareholders holding in the aggregate 51% of the voting power of all the shareholders. The effect of this provision of our Amended and Restated Bylaws could delay or prevent a third party from acquiring the Company or replacing members of the Board of Directors, even if the acquisition or the replacements would be beneficial to our shareholders. These factors could also reduce the price that certain investors might be willing to pay for shares of the Common Stock and result in the market price being lower than it might be without these provisions.

Risks Associated with Potential Growth

We may not be able to obtain the financing we will need to implement our operating strategy.  We cannot assure you that our revolving credit facilities and cash flow from operations will be sufficient to fund our current business operations nor can we assure you that we will not require additional sources of financing to fund our operations. Additional financing may not be available to us on terms we consider acceptable, if available at all. If we cannot raise funds on acceptable terms, we may not be able to develop next-generation products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which could have a material adverse effect on our ability to grow our business. Further, if we issue equity securities, holders of our Common Stock may experience dilution of their ownership

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percentage, and the new equity securities could have rights, preferences or privileges senior to those of our Common Stock.

There are many risks associated with potential acquisitions.  We intend to continue to evaluate potential acquisitions that we believe will enhance our existing business or enable us to grow. If we acquire other companies or product lines in the future, it may dilute the value of our existing shareholders’ ownership. The impact of dilution may restrict our ability to consummate further acquisitions. Issuance of equity securities in connection with an acquisition may further restrict utilization of net operating loss carryforwards because of an annual limitation due to ownership changes under the Internal Revenue Code. We may also incur debt and losses related to the impairment of goodwill and other intangible assets if we acquire another company, and this could negatively impact our results of operations. We currently do not have any definitive agreements to acquire any company or business, and we may not be able to identify or complete any acquisition in the future. Additional risks associated with acquisitions include the following:

•  It may be difficult to assimilate the operations and personnel of an acquired business into our own business;

•  Management information and accounting systems of an acquired business must be integrated into our current systems;

•  Our management must devote its attention to assimilating the acquired business, which diverts attention from other business concerns;

•  We may enter markets in which we have limited prior experience; and

•  We may lose key employees of an acquired business.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

We do not own any real estate. Instead, we lease properties both in the U.S. and abroad. Following are our locations:

						Monthly
City and State	Country	Area			Use	Rent		Expiration
Durham, NC	USA		49,864	sf	Office, service and repair, warehouse and assembly	$	27,685	April 2011
Dallas, TX	USA		3,466	sf	Office(a)	$	5,632	November 2013
Sydney	Australia		1,055	sm	Office, service and repair, warehouse	$	5,595	September 2012
Caxias do Sul	Brazil		880	sm	Office, service and repair, warehouse and assembly	$	4,325	June 2014
Herrljunga	Sweden		3,251	sm	Office, service and repair, warehouse and assembly (b),(c)	$	16,660	March 2020
Ettlingen	Germany		470	sm	Office, service and repair, warehouse (c)	$	9,460	December 2017
New Delhi	India		920	sy	Office, service and repair, warehouse and assembly	$	7,487	June 2014

(a)	Used by administration — U.S. Corporate
(b)	Used by administration — international
(c)	Area, Use, Monthly Rent and Expiration include space expansions to be completed in 2010

The Company is currently in the process of expanding the production, warehouse and office space it currently leases in Sweden. The cost of this expansion is being borne by the landlord and will result in increased rent expense in Sweden when such expansion is completed. Upon completion of the expansion in Sweden, we believe our facilities will be adequate and suitable for current and foreseeable needs, absent future possible acquisitions. We further believe additional office and manufacturing space will be available in, or near, existing facilities at a cost approximately equivalent to, or slightly higher than, rates currently paid, to accommodate further internal growth as necessary.

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Item 3.   Legal Proceedings

The Company, in the normal course of its operations, is involved in legal actions incidental to the business. In management’s opinion, the ultimate resolution of these matters will not have a material adverse effect upon the current financial position of the Company or future results of operations.

Item 4.   (Removed and Reserved)

PART II

Item 5.   Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

The following table sets forth the range of high and low sales prices for our Common Stock, as reported by the NASDAQ Capital Market^®, from January 1, 2008 through December 31, 2009. The prices set forth reflect inter-dealer quotations, without retail markups, markdowns, or commissions, and do not necessarily represent actual transactions.

	High		Low
Year Ended December 31, 2008
First Quarter	$	2.50	$	1.82
Second Quarter		3.09		2.12
Third Quarter		2.82		2.10
Fourth Quarter		2.06		0.80
Year Ended December 31, 2009
First Quarter	$	1.19	$	0.72
Second Quarter		1.81		0.89
Third Quarter		2.55		1.24
Fourth Quarter		2.62		1.30

As of December 31, 2009, there were approximately 2,541 holders of our Common Stock (including 124 shareholders of record.)

We have not paid dividends on our Common Stock nor do we anticipate doing so in the near future. Our prior and current credit facilities restrict the payment of dividends upon any class of stock except on our Preferred Stock. We also have five classes of outstanding Preferred Stock with dividend rights that have priority over any dividends payable to holders of Common Stock.

Equity Compensation Plan Information

The following table provides information, as of the end of fiscal year 2009, with respect to all compensation plans and individual compensation arrangements of DRI under which equity securities are authorized for issuance to employees or non-employees:

					Number of Securities
					Remaining Available for
	Number of Securities to		Weighted-Average		Future Issuance Under
	be Issued Upon Exercise		Exercise Price of		Equity Compensation Plans
	of Outstanding Options,		Outstanding Options,		(Excluding Securities
	Warrants and Rights		Warrants and Rights		Reflected in Column a)
Plan Category	(a)		(b)		(c)
1993 Incentive Stock Option Plan		118,000	$	2.32		None
2003 Stock Option Plan		1,361,870	$	2.36		172,183
Total		1,479,870	$	2.36		172,183

* All options issued under the 1993 Incentive Stock Option Plan and the 2003 Stock Option Plan have been approved by the Company’s shareholders.

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The Company has in place a shareholder-approved, equity-based stock compensation plan for members of the Board of Directors and certain key executive managers of the Company (the “Stock Compensation Plan”). The Stock Compensation Plan partially compensates members of the Board of Directors and certain key executive management of the Company in the form of stock of the Company in lieu of cash compensation. The Stock Compensation Plan is made available on a fully voluntary basis. The number of shares payable under the Stock Compensation Plan is determined by dividing the cash value of stock compensation by the higher of (1) the actual closing price on the last trading day of each month or (2) the book value of the Company on the last day of each month. Fractional shares are rounded up to the next full share amount.

Issuance of Unregistered Securities

The issuances set forth below were made in reliance upon the available exemptions from registration requirements of the Securities Act, contained in Section 4(2), on the basis that such transactions did not involve a public offering. DRI determined that the purchasers of securities described below were sophisticated investors who had the financial ability to assume the risk of their investment in DRI’s securities and acquired such securities for their own account and not with a view to any distribution thereof to the public. The certificates evidencing the securities bear legends stating that the securities are not to be offered, sold or transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from such registration requirements.

During the year ended December 31, 2009, the Company issued 80,641 shares of Common Stock to fourteen individuals under the Stock Compensation Plan at an average price of $1.25 per share in lieu of $100,750 in cash compensation. Section 16 reports filed with the SEC include the actual prices at which shares were issued to each individual.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT ARE IN ITEM 8 OF THIS DOCUMENT.

Business — General

We, directly or through contractors, design, manufacture, sell and service information technology products. Prior to 2007, DRI had historically operated within two major business segments: (1) the transportation communications segment and (2) the law enforcement and surveillance segment. In April 2007, the Company’s DAC subsidiary, which comprised all of the operations of the law enforcement and surveillance segment, was divested. Accordingly, the Company currently operates within one major business segment. While service is a significant aspect of DRI’s marketing strategy, it is not yet a significant generator of revenue for the Company.

DRI’s products are sold worldwide within the passenger information communication industry and market. We sell to transportation vehicle equipment customers generally in two broad categories: end customers and original equipment manufacturers of transportation vehicles. End customers include municipalities, regional transportation districts, federal, state and local departments of transportation, transit agencies, public, private, or commercial operators of vehicles, and rental car agencies. The relative percentage of sales to end customers as compared to OEM customers varies widely and frequently from quarter-to-quarter and year-to-year and within products and product lines comprising DRI’s mix of total sales in any given period.

Sales to DRI’s customers are characterized by a lengthy sales cycle that generally extends for a period of two to 24 months. In addition, purchases by a majority of DRI’s customers are dependent upon federal, state and local funding that may vary from year to year and quarter to quarter.

The majority of sales of the Company’s products and services are recognized upon physical shipment of products and completion of the service, provided all accounting criteria for recognition have been met. Sales and revenues for projects involving multiple elements (i.e., products, services, installation and other services)

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are recognized under specific accounting criteria based on the products and services delivered to the customer and the customer’s acceptance of such products and services. Because DRI’s operations are characterized by significant research and development expenses preceding product introduction, net sales and certain related expenses may not be recorded in the same period, thereby producing fluctuations in operating results. DRI’s dependence upon large contracts and orders, as well as upon a small number of relatively large customers or projects, increases the magnitude of fluctuations in operating results particularly on a period-to-period, or period-over-period, comparison basis. For a more complete description of DRI’s business, including a description of DRI’s products, sales cycle and research and development, see “Item 1. Business” in this Annual Report.

Results of Operations

The following discussion provides an analysis of DRI’s results of operations and liquidity and capital resources. This should be read in conjunction with DRI’s consolidated financial statements and related notes thereto. The operating results of the years presented were not significantly affected by inflation.

The following table sets forth the percentage of DRI’s sales represented by certain items included in DRI’s Statements of Operations:

	Year Ended December 31,
	2009			2008			2007
Net sales		100.0	%		100.0	%		100.0	%
Cost of sales		69.9			66.1			67.9
Gross profit		30.1			33.9			32.1
Operating expenses:
Selling, general and administrative		24.8			26.9			26.3
Research and development		0.6			1.4			2.0
Total operating expenses		25.4			28.3			28.3
Operating income		4.7			5.6			3.8
Total other income and expense		(1.3	)		(1.0	)		(1.5	)
Income from continuing operations before income tax expense		3.4			4.6			2.3
Income tax expense		(1.0	)		(1.6	)		(0.5	)
Income from continuing operations, net of tax		2.4			3.0			1.8
Loss from discontinued operations		—			—			(0.4	)
Net income		2.4			3.0			1.4
Less: Net income attributable to noncontrolling interests, net of tax		(0.2	)		(0.9	)		(0.3	)
Net income attributable to DRI Corporation		2.2	%		2.1	%		1.1	%

Comparison of Results for the Years Ended December 31, 2009 and 2008

Net Sales and Gross Profit

Due to commonality of customers, products, technology, and management, we manage and report our U.S. and foreign operations as a single reporting segment. For discussion purposes, we differentiate between sales and gross profit for the U.S. market and the foreign markets to better provide our investors with useful information.

For 2009, sales increased $11.7 million, or 16.6%, from $70.6 million for 2008 to $82.3 million for 2009. The increase resulted from higher sales of $4.1 million by our U.S. subsidiaries and higher sales of $7.6 million from our foreign subsidiaries.

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The increase in U.S. sales for the year ended December 31, 2009 as compared to the year ended December 31, 2008 continues a trend we have seen in recent periods which we believe is due to the favorable impact of increased transit funding under SAFETEA-LU and, to some extent, funding under the American Recovery and Reinvestment Act of 2009, as well as the favorable influence of high fuel prices on transit ridership. We believe the enactment of SAFETEA-LU and the record-high funding increases for transit, in addition to higher fuel prices, have had a favorable impact on our business and have contributed to increased sales opportunities in the U.S. market for many of our products.

The increase in international sales is inclusive of a decrease due to foreign currency fluctuations for the year ended December 31, 2009 of approximately $5.3 million. Exclusive of this decrease resulting from foreign currency fluctuations, sales by our foreign subsidiaries increased approximately $12.9 million in 2009 compared to 2008. The most significant increase in international sales occurred in India where, in the third and fourth quarter of 2009, Castmaster Mobitec began fulfillment of large orders received earlier in fiscal year 2009 from OEM’s and large transit system operators in that market. Increased sales also occurred in the European market, primarily resulting from our European subsidiaries fulfilling orders from OEM’s for delivery to end-users in Dubai and in the Asia-Pacific market, primarily in Australia. Increased sales in these markets were partially offset by decreased sales in the South America market, primarily in Brazil, where some order scale-back was experienced in the first half of 2009 due to economic issues in that market. DRI does not use currency hedging tools. Each of our foreign subsidiaries primarily conducts business in their respective functional currencies thereby reducing the impact of foreign currency transaction differences. If the U.S. dollar strengthens compared to the foreign currencies converted, it is possible the total sales reported in U.S. dollars could decline.

Expected sales growth will be dependent upon the expansion of new product offerings and technology, as well as expansion into new geographic areas. We believe our relatively high market share positions in some markets preclude significant sales growth from increased market share.

Our gross profit increased $908,000 or 3.8%, from $23.9 million in 2008 to $24.8 million in 2009. As a percentage of sales, gross profit was 33.9% of net sales in 2008 as compared to 30.1% in 2009. Of the $908,000 net increase in gross profit, an ($86,000) decrease was attributable to U.S. operations and a $994,000 increase was attributable to international operations.

The U.S. gross profit as a percentage of sales for 2009 was 29.8% as compared to 34.3% for 2008. Substantially all of the increase in sales in the U.S. in 2009 when compared to 2008 resulted from increased sales of electronic destination sign systems and related products, which yield lower margins than other products sold by the Company. Additionally, the following factors were primary contributors to the decrease in U.S. gross profit percentage in 2009 as compared to 2008: (1) a variation in sales mix on multiple deliverable engineered systems projects resulted in lower gross margins in 2009. As certain elements of these projects are delivered, gross margins on these projects can vary depending on the product or service delivered. In 2009, more deliveries of lower-margin elements were completed, resulting in lower than usual margins for these engineered systems projects; and (2) higher labor absorption costs in 2009 resulting from increased sustained engineering work performed on engineered system products recently introduced into the market. All of these factors contributed to a decreased U.S. gross profit percentage in 2009 when compared to 2008.

The international gross profit as a percentage of sales for 2009 was 30.3% as compared to 33.5% for 2008. The decrease in international margins is reflective of a variation in product and customer mix and a variation in geographical dispersion of product sales that resulted in lower margins in 2009 compared to 2008. Decreases in international gross margins in 2009 compared to 2008 resulted primarily from (1) margins on fulfillment of previously-mentioned orders from OEM’s for delivery to end-users in Dubai being lower than margins typically realized on sales of similar products, (2) margins on fulfillment of the large orders in India previously mentioned being lower than margins typically realized as a result of strong competition in that market, and (3) higher labor absorption costs due to an increase in temporary production employees to meet increased production demands of the increased sales previously mentioned.

Though we may experience continued pricing pressure, we expect improvements in gross margins through more frequent sales of a combination of products and services offering a broader “project” solution, and

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through the introduction of technology improvements. However, period-to-period, overall gross margins will still reflect the variations in sales mix and geographical dispersion of product sales.

Selling, General and Administrative

Selling, general, and administrative (“SG&A”) expenses for 2009 increased $1.4 million, or 7.4%, from $19.0 million for 2008 to $20.4 million for 2009. Excluding a decrease of $1.5 million due to the change in foreign currency exchange rates from 2008 to 2009, SG&A expenses increased approximately $2.9 million from 2008 to 2009. Exclusive of the decrease due to foreign currency exchange fluctuations, SG&A expenses have increased primarily due to (1) increased personnel-related expenses of approximately $1.6 million resulting from an increase in personnel as well as salary and wage increases for current employees throughout 2009, (2) increased travel expenses of approximately $223,000 and increased promotion, advertising, and business development costs of approximately $294,000, as the Company continues its efforts to market the Company on a global basis, (3) increased bank-related fees of approximately $300,000 due to (a) increased amortization of deferred finance costs resulting from the domestic debt agreements entered into in June 2008 and from additional deferred finance costs incurred in connection with amendments to those domestic debt agreements in 2009 and (b) having a full year of loan-related fees in 2009 on our domestic debt agreements entered into in June 2008 compared to having only 6 months of such fees in 2008, (4) increased compensation expense of approximately $160,000 recorded under ASC Topic 718-20 as a result of stock options issued in the third quarter of 2008 and the second quarter of 2009, (5) increased audit, accounting and tax fees of approximately $162,000 resulting primarily from the engagement of outside firms to provide due diligence and audit services in connection with the acquisition of the remaining 50% interest of Mobitec Brazil and the engagement of an outside firm to provide global tax planning consulting services, (6) an increase of approximately $370,000 in outside consulting fees resulting primarily from (a) consultants engaged in 2009 to assist the Company with product customization and (b) increased fees to consultants engaged to assist the Company in generating and maintaining sales in select North American markets, (7) increased operating taxes of approximately $304,000 resulting from estimated tax liabilities accrued in 2009, and (8) increased income tax penalties of $125,000 recorded in 2009 related to uncertain tax positions. These increases were partially offset by (1) a reduction in expenses in connection with a legal settlement in Australia of $184,000 recorded to SG&A expenses in 2008, (2) a reduction of expenses in connection with a reduction of Mobitec Brazil’s foreign tax settlement of $266,000 recorded to SG&A expenses in 2009, and (3) a reduction of $364,000 in expenses incurred in 2008 related to the Company’s participation in the tri-annual APTA Expo in 2008.

Research and Development

Research and development expenses for 2009 decreased $422,000, or 43.3%, from $974,000 for 2008 to $552,000 for 2009. This category of expense includes internal engineering personnel and outside engineering expense for software and hardware development, sustaining product engineering, and new product development. During 2009, salaries and related costs of certain engineering personnel who were used in the development of software met the capitalization criteria of ASC Topic 985-20, “Costs of Computer Software to be Sold, Leased or Marketed.” The total amount of personnel and other expense capitalized in 2009 was $2.1 million as compared to $1.5 million for 2008. In aggregate, research and development expenditures in 2009 were $2.6 million as compared to aggregate expenditures of $2.5 million in 2008. This increase in research and development expenditures is attributable to the Company’s continued efforts to pursue technological enhancements to existing products and to develop new, technologically advanced products that will meet our customers’ needs. Product development based upon advanced technologies is one of the primary means by which management believes DRI differentiates itself from its competitors.

Operating Income (Loss)

The net change in our operating income was a decrease of $72,000 from net operating income of $3.9 million in 2008 to net operating income of $3.8 million in 2009. The decrease in operating income is due to higher sales and gross profit and lower research and development costs offset by higher selling, general and administrative expenses as previously described.

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Other Income, Foreign Currency Gain (Loss) and Interest Expense

Other income, foreign currency gain (loss), and interest expense decreased $343,000 from ($687,000) in 2008 to ($1.0 million) in 2009 due to an increase in interest expense of $27,000, a decrease in other income (loss) of $289,000, and a decrease in foreign currency gain of $27,000. In 2008, interest expense of $54,000 was recorded to amortize the fair value of a beneficial conversion feature of a debenture that was converted to Common Stock; this resulted in a decrease in interest expense in 2009 as compared to 2008. Interest expense was also lower in 2009 due to lower borrowings on international lines of credit and loans throughout most of 2009 as compared to 2008. These decreases were partially offset by increased interest expense resulting from increased borrowings on our domestic lines of credit and loans.

Income Tax Expense

Income tax expense was $836,000 in 2009 as compared with an income tax expense of $1.1 million in 2008. The Company’s effective tax rate was 29.7% and 36.3% in 2009 and 2008, respectively. The Company’s 29.7% effective tax rate in 2009 differs from the expected U.S. statutory rate of 34% due primarily to a correcting increase to the prior year net operating loss carryforward, lower rates on income reported in foreign tax jurisdictions, a reduction of tax liabilities for uncertain tax positions, and a decrease in the valuation allowance recorded against deferred tax assets. The Company’s 36.3% effective tax rate in 2008 differed from the expected U.S. statutory rate of 34% due primarily to higher rates on income reported in foreign tax jurisdictions and an increase in the valuation allowance recorded against deferred tax assets, partially offset by a correcting increase to the prior year net operating loss carryforward. A reconciliation of the effective tax rates for 2009 and 2008 to the expected U.S. statutory rate of 34% is provided in Note 16 to the accompanying consolidated financial statements.

Net Income (Loss) Applicable to Common Shareholders

Net income applicable to common shareholders increased $318,000 from net income of $1.2 million in 2008 to net income of $1.5 million in 2009. This increase is due to the factors previously addressed, as well as a $16,000 increase in preferred stock dividends.

Comparison of Results for the Years Ended December 31, 2008 and 2007

Net Sales and Gross Profit

For 2008, sales increased $12.6 million, or 21.8%, from $57.9 million for 2007 to $70.6 million for 2008. The increase resulted from higher sales of $2.2 million by our U.S. subsidiaries and higher sales of $10.4 million from our foreign subsidiaries.

The increase in U.S. sales for 2008 as compared to 2007 was a result of higher OEM sales, with substantially all of the sales increase coming from increased sales of engineered systems and related products. Engineered systems include our computer aided dispatch GPS tracking systems, AVL systems, VacTell^tm video surveillance security systems, AVM systems, and Talking Bus^® automatic voice announcement systems. The increase in sales in 2008 is due in substantial part to the favorable impact of transit funding under the Safe, Accountable, Flexible, Efficient, Transportation Equity Act — A Legacy for Users (“SAFETEA-LU”) and the favorable influence of higher fuel prices during much of 2008 on transit ridership. In 2007, federal funding for public transportation under SAFETEA-LU was $8.975 billion and in 2008, federal public transportation funding increased to $9.492 billion. In 2008, we saw new engineered systems products and new features with advanced technology added to existing engineered systems products being embraced more and more by customers. We believe the increased funding under SAFETEA-LU in combination with customer acceptance of new and enhanced engineered systems products, in addition to the impact of higher fuel prices, resulted in increased sales in the U.S. in 2008.

The increase in international sales resulted from higher sales in several established markets in Europe, South America and Asia Pacific, which includes sales generated by our joint venture in India, which began operations in the fourth quarter of 2007. In Europe, increased revenues were most notably generated in

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Sweden and the United Kingdom. In South America, the most significant increase was generated in Brazil where an increase in public transit funding by the Brazilian government contributed to increased sales in that market. The increases in these markets were partially offset by lower sales in the Middle East market. The increase in international sales is inclusive of an increase due to foreign currency fluctuations for the period ended December 31, 2008 of approximately $1.7 million.

Our gross profit increased $5.3 million or 28.3%, from $18.6 million in 2007 to $23.9 million in 2008. As a percentage of sales, gross profit was 32.1% of net sales in 2007 as compared to 33.9% in 2008. Of the $5.3 million net increase in gross profit, a $1.2 million increase was attributable to U.S. operations and a $4.1 million increase was attributable to international operations.

The U.S. gross profit as a percentage of sales for 2008 was 34.3% as compared to 32.7% for 2007. The increase in gross profit margin resulted primarily from the increased sales of engineered systems and related products, which yield higher margins than other products sold by the Company. Additionally contributing to the increase in the U.S. gross profit margin in 2008, though to a lesser extent, was a reduction of direct production labor absorption costs in 2008 resulting from a workforce reduction implemented by the Company in the U.S. in the second quarter of 2007 and a reduction of warranty expense included in cost of sales in 2008. The decrease in warranty expense resulted primarily from warranty part returns, a decrease in the number of specific warranty projects in 2009, as there were two larger warranty projects in 2007 for which the warranty reserve was adjusted and no such projects in 2008, and from the Company reversing warranty reserves previously recorded when a customer determined warranty work previously anticipated was no longer required.

The international gross profit as a percentage of sales for 2008 was 33.5% as compared to 31.7% for 2007. Since the third quarter of 2007, the Company entered into new purchasing agreements with several major suppliers to our international subsidiaries, which resulted in more favorable pricing of component parts purchased by the Company. The lower pricing of component parts resulted in lower cost of sales in 2008. Additionally, reduced amortization of capitalized software development costs resulting from certain of those assets becoming fully amortized in 2008 contributed to the increase in gross profit in 2008. These reductions in cost of sales were partially offset by increased shipping costs, primarily due to shipments for sales in India, and higher production costs in Brazil, as some production was outsourced to third-parties to help meet the increased sales demand in that market.

Selling, General and Administrative

Selling, general, and administrative expenses for 2008 increased $3.8 million, or 24.9%, from $15.2 million for 2007 to $19.0 million for 2008. Excluding an increase of $454,000 due to the change in foreign currency exchange rates from 2007 to 2008, selling, general, and administrative expense increased approximately $3.3 million from 2007 to 2008. Overall, SG&A expenses increased to support the needs of our domestic and international operations in achieving sales growth from 2007 to 2008. The most significant increase in SG&A expenses was due to increased personnel expenses resulting from an increase in personnel as well as salary and wage increases for current employees. In addition, SG&A expenses increased due to (1) increased marketing and business development costs, including increased trade show participation and specifically, participation in the tri-annual APTA Expo in the fourth quarter of 2008, as we strive to market the Company on a global basis, (2) increased travel costs resulting from our increased marketing and business development efforts as well as overall cost increases for travel activity, (3) increased public company costs, including board of director costs, public company reporting costs, investor relations, and audit fees, (4) increased consulting fees resulting primarily from the engagement of an investment banking firm to assist the Company with its strategic financial planning and the engagement of consultants to assist the Company in increasing sales in certain North American markets, (5) increased legal fees, inclusive of a settlement expense, attributable to the Company’s efforts to settle a legal matter in Australia, (6) increased amortization of deferred finance costs in connection with new loan agreements entered into in the third quarter of 2008, (7) increased compensation expense recorded under ASC Topic 718-20 as a result of stock options issued in 2008, and (8) increased bad debt expense recorded to state certain accounts receivable at net realizable value. Additionally, our joint venture in India began operations in the fourth quarter of 2007 and additional SG&A

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expenses are now being incurred in support of that operation. Partially offsetting these increases was a reduction of consulting fees resulting from reduced costs in the Company’s efforts to comply with the Sarbanes-Oxley Act of 2002.

Research and Development

Research and development expenses for 2008 decreased $175,000, or 15.2%, from $1.1 million for 2007 to $974,000 for 2008. This category of expense includes internal engineering personnel and outside engineering expense for software and hardware development, sustaining product engineering, and new product development. During 2008, salaries and related costs of certain engineering personnel who were used in the development of software met the capitalization criteria of ASC Topic 985-20, “Costs of Computer Software to be Sold, Leased or Marketed.” The total amount of personnel and other expense capitalized in 2008 was $1.5 million as compared to $669,000 for 2007. In aggregate, research and development expenditures in 2008 were $2.5 million as compared to aggregate expenditures of $1.8 million in 2007. This increase in research and development expenditures is attributable to the Company’s continued efforts to pursue technological enhancements to existing products and to develop new, technologically advanced products that will meet our customers’ needs. Product development based upon advanced technologies is one of the primary means by which management believes DRI differentiates itself from its competitors.

Operating Income (Loss)

The net change in our operating income was an increase of $1.6 million from net operating income of $2.3 million in 2007 to net operating income of $3.9 million in 2008. The increase in operating income is due to higher sales and gross profit and lower research and development costs offset by higher selling, general and administrative expenses as previously described.

Other Income, Foreign Currency Gain (Loss) and Interest Expense

Other income, foreign currency gain (loss), and interest expense decreased $197,000 from $884,000 in 2007 to $687,000 in 2008 due to an increase in interest expense of $236,000, an increase in other income of $85,000, and an increase in foreign currency gain of $348,000. The increase in interest expense is primarily attributable to the increase in debt, which occurred in the last six months of 2008. During the first six months of 2008, interest expense increased $13,000 compared to the first six months of 2007. During the first six months of 2008, interest expense of $54,000 was recorded to amortize the fair value of a beneficial conversion feature of a debenture that was converted to Common Stock. Additionally, in the first six months of 2008, interest expense increased due to increased borrowings and higher interest rates on debt of our international subsidiaries. These increases in interest expense were partially offset by decreased borrowings and lower interest rates on our domestic debt during the first six months of 2008. The Company entered into new debt agreements in the third quarter of 2008, which increased its total outstanding debt. The increase in interest expense of $223,000 in the last six months of 2008 is primarily due to the increase in outstanding debt under these new agreements and increased expense resulting from accruing termination fees on the domestic term loan agreement entered into in the third quarter of 2008 ratably over the three-year term of the agreement. The increase in foreign currency gain is primarily a result of foreign currency gains from sales transactions billed in Euros, which weakened significantly against other currencies in 2008.

Income Tax Expense

Income tax expense was $1.1 million in 2008 as compared with an income tax expense of $291,000 in 2007. The Company’s effective tax rate was 36.3% and 25.2% in 2008 and 2007, respectively. A reconciliation of the effective tax rates for 2008 and 2007 to the expected U.S. statutory rate of 34% is provided in Note 16 to the accompanying consolidated financial statements.

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Discontinued Operations

On April 30, 2007, we divested DAC, an operating segment which is reflected as discontinued operations in the accompanying consolidated financial statements. Income and losses from discontinued operations have been reported separately from continuing operations. Since the divestiture of DAC occurred on April 30, 2007, there is no income (loss) from discontinued operations reported in 2008, whereas four months’ results of operations are reported in 2007.

Net Income (Loss) Applicable to Common Shareholders

Net income applicable to common shareholders increased $813,000 from net income of $380,000 in 2007 to net income of $1.2 million in 2008. This increase is due to the factors previously addressed, as well as a $9,000 increase in preferred stock dividends.

Liquidity and Capital Resources

Cash Flows

The Company’s net working capital as of December 31, 2009, was $11.8 million compared to $9.8 million as of December 31, 2008. Our principal sources of liquidity from current assets included cash and cash equivalents of $1.8 million, trade and other receivables of $19.8 million, inventories of $13.0 million, and prepaids and other current assets of $1.8 million. The most significant current liabilities at December 31, 2009, included asset-based borrowings of $7.2 million, accounts payable of $10.1 million, accrued expenses and other current liabilities of $6.4 million, and the current portion of long-term debt and capital leases of $960,000. The asset-based lending agreements, both foreign and domestic, are directly related to sales and customer account collections and inventory. Our domestic asset-based lending agreement was negotiated with the intent that borrowings on the revolving credit facility would be long-term debt. However, ASC Topic 470-10-45-5, “Classification of Revolving Credit Agreements Subject to Lock-Box Arrangement and Subjective Acceleration Clauses,” requires the Company to classify all of our outstanding debt under this agreement as a current liability. The agreement has a subjective acceleration clause, which could enable the lender to call the loan, but such language is customary in asset-based lending agreements and management does not expect the lender to use this particular clause to inhibit the Company from making borrowings as provided under the loan agreement.

Our operating activities provided net cash of $1.6 million for the year ended December 31, 2009. Sources of cash from operations primarily resulted from an increase in accounts payable of $4.1 million, and an increase in accrued expenses of $1.2 million. Cash used in operating activities primarily resulted from an increase in trade accounts receivable of $4.6 million, an increase in inventories of $1.7 million, an increase in prepaids and other current assets of $1.3 million, an increase in other receivables of $394,000, an increase in other assets of $6,000, and a decrease in the foreign tax settlement of $334,000. Non-cash expense items totaling $2.7 million were primarily related to depreciation and amortization, bad debt expense, Common Stock issued in lieu of cash compensation, stock based compensation expense, loan termination fees, inventory obsolescence charges, and a change in the fair value of the warrant liability, offset by a gain on foreign currency translation and an increase in bank fees. The increase in trade accounts receivable primarily results from an overall increase of sales in 2009 compared to 2008 and in particular, a 109.8% increase in sales by our foreign subsidiaries during the fourth quarter of 2009 compared to the fourth quarter in 2008. The increase in inventories resulted from a build-up of inventory to meet higher overall product sales in 2009 compared to 2008. The increase in accounts payable is due to higher inventory purchases to support a significant increase in sales by our foreign subsidiaries in 2009, particularly during the fourth quarter of 2009. The increase in prepaids and other current assets is primarily due to an increase in prepayments to suppliers. The increase in accrued expenses is primarily due to an increase in income taxes payable due to higher income in 2009 compared to 2008, an increase in accrued payroll costs due to an increase in employees, an increase in accrued commissions and warranty reserve due to higher sales in 2009 compared to 2008, offset by lower deferred revenue due to substantial delivery of orders in 2009 for which revenue had been previously deferred in 2008. We consider the changes incurred in our operating assets and liabilities routine, given the number and size of

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orders relative to our industry and our size. We expect working capital requirements to continue to increase with growth in sales, primarily due to the timing between when we must pay suppliers and the time we receive payment from our customers.

Our investing activities used cash of $3.3 million for the year ended December 31, 2009. The primary uses of cash were for expenditures relating to internally developed software and purchases of computer, test, and office equipment, as well as for the acquisition of the noncontrolling interest in Mobitec Brazil. We do not anticipate any significant expenditures for, or sales of, capital equipment in the near future.

Our financing activities provided net cash of $2.8 million for the year ended December 31, 2009. Sources of cash primarily resulted from net borrowings under asset-based lending agreements for both our U.S. and our foreign subsidiaries as well as proceeds from the issuance of Series K Preferred stock. Our primary uses of cash for financing activities were payment of financing costs related to amendments of the BHC agreement and payment of dividends.

Significant Financing Arrangements

The Company’s primary source of liquidity and capital resources has been from financing activities. The Company has agreements with lenders under which revolving lines of credit have been established to support the working capital needs of our current operations. These lines of credit are as follows:

•  DR and TVna (collectively, the “Borrowers”) have in place a three-year, asset-based lending agreement (the “PNC Agreement”) with PNC Bank, National Association (“PNC”) which terminates June 30, 2011. 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. 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. At December 31, 2009, the outstanding principal balance on the revolving credit facility was approximately $3.8 million and remaining borrowing availability under the revolving credit facility was approximately $1.5 million.

•  Mobitec AB 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$3.8 million (based on exchange rates at December 31, 2009) through September 30, 2010, on which date, under terms of the credit agreements, the maximum borrowing capacity will be reduced by 3.5 million krona, or approximately US$488,000 (based on exchange rates at December 31, 2009). At December 31, 2009, borrowings due and outstanding under these credit facilities totaled 14.7 million krona (approximately US$2.0 million, based on exchange rates at December 31, 2009). Additional borrowing availability under these agreements at December 31, 2009 amounted to approximately US$1.8 million. These credit agreements renew annually on a calendar-year basis.

•  Mobitec GmbH 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 December 31, 2009) through April 30, 2010, on which date, under terms of the credit agreement, the maximum borrowing capacity will be reduced by 500,000 Euro, or approximately US$717,000 (based on exchange rates at December 31, 2009). At December 31, 2009, borrowings due and outstanding under this credit facility totaled 954,000 Euro (approximately US$1.4 million, based on exchange rates at December 31, 2009). Additional borrowing availability under this credit facility at December 31, 2009 amounted to approximately US$640,000. The agreement under which this credit facility is extended has an open-ended term.

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In addition to the revolving lines of credit described herein, the Company has agreements under which additional loans and credit facilities have been established to provide working capital to our domestic and foreign operations as follows:

•  At December 31, 2009, pursuant to terms of a loan agreement (the “BHC Agreement”) with BHC Interim Funding III, L.P. (“BHC”), the Borrowers had an outstanding principal balance of $4.8 million due on a term loan (the “Term Loan”) which had an original principal balance of a $5.0 million. The Term Loan has a maturity date of June 30, 2011.

•  At December 31, 2009, Mobitec AB had an outstanding principal balance of 1.5 million krona (approximately US$209,000, based on exchange rates at December 31, 2009) due on a term loan under a credit agreement with Handelsbanken (the “Mobitec Term Loan”). The Mobitec Term Loan has a maturity date of September 30, 2010.

•  At December 31, 2009, Mobitec AB had an outstanding principal balance of 3.4 million krona (approximately US$470,000, based on exchange rates at December 31, 2009) due on an additional term loan under a credit agreement with Handelsbanken (the “Mobitec Loan”). The Mobitec Loan is payable in quarterly principal installments of 375,000 krona (approximately US$52,000, based on exchange rates at December 31, 2009) and matures June 30, 2011.

•  At December 31, 2009, Mobitec Brazil has outstanding borrowings from two banks in Brazil of approximately 235,000 Brazilian Real (“BRL”) (approximately US$135,000, based on exchange rates at December 31, 2009). The borrowings are secured by accounts receivable on certain export sales by Mobitec Brazil Ltda and have a term of 180 days.

•  At December 31, 2009, Mobitec Brazil had five loans payable to a bank in Brazil with an aggregate outstanding principal balance of approximately 206,000 BRL (approximately US$119,000, based on exchange rates as of December 31, 2009). One loan has a principal balance of approximately 161,000 BRL (approximately US$93,000, based on exchange rates as of December 31, 2009) and matures April 13, 2010. The four remaining loans have an aggregate outstanding principal balance of approximately 45,000 BRL (approximately US$26,000, based on exchange rates as of December 31, 2009) and have maturity dates ranging from January 17, 2010 to November 16, 2010.

The Company’s outstanding lines of credit and loans, and the agreements under which these credit facilities were established, are more fully described in Note 9 and Note 10 to the accompanying consolidated financial statements.

The PNC Agreement and the BHC Agreement contain certain covenants with which we and our subsidiaries must comply. Among the covenants contained in the PNC Agreement and BHC Agreement are requirements that we and our domestic subsidiaries maintain certain leverage ratios as of the end of each fiscal quarter for the twelve-month period then ending. On March 26, 2009, the PNC Agreement and BHC Agreement were each amended to revise the minimum EBITDA and leverage ratios required to be maintained as of the end of each of the fiscal quarters ending March 31, 2009, June 30, 2009 and September 30, 2009 as set forth below.

Fiscal Quarter Ending:	EBITDA:		Leverage Ratio:
March 31, 2009	$	3,000,000		5.70 to 1.0
June 30, 2009	$	2,500,000		6.25 to 1.0
September 30, 2009	$	4,000,000		4.55 to 1.0

On October 1, 2009, the BHC Agreement was amended (the “BHC Amendment”) to, among other things, effect the following:

•  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);

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•  Permit the Borrowers and DRI to make a recallable equity investment in Mobitec EP 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 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.

On October 5, 2009 (the “PNC Effective Date”), the PNC Agreement was amended (the “PNC Amendment”) to, among other things, effect the following:

•  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 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.

For the quarter ended September 30, 2009, we and the Borrowers were not in compliance with the leverage ratio required to be maintained under terms of the PNC Agreement and the BHC Agreement as

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amended on March 26, 2009. PNC agreed to amend the PNC Agreement to revise the leverage ratio required to be maintained for the quarter ended September 30, 2009 to 5.25 to 1.00. BHC agreed to waive the violation of the leverage ratio covenant for the quarter ended September 30, 2009. On December 29, 2009, the PNC Agreement and BHC Agreement were each amended to revise the minimum leverage ratios required to be maintained as of the end of each fiscal quarter as set forth below.

Fiscal Quarter Ending:	Leverage Ratio:
September 30, 2009		5.25 to 1.0
December 31, 2009		5.00 to 1.0
March 31, 2010		6.75 to 1.0
June 30, 2010		8.25 to 1.0
September 30, 2010		7.00 to 1.0
December 31, 2010 and each fiscal quarter ending thereafter		5.50 to 1.0

With the exception of the leverage ratio for the quarter ended September 30, 2009, as described herein, we were in compliance with all financial loan covenants in 2009. Additionally, PNC and BHC agreed to extend the date for the Company to provide audited 2009 financial statements to April 30, 2010.

Series K Preferred Stock

Between October 26, 2009 and January 5, 2010, the Company sold an aggregate of 310 shares of the Company’s Series K Preferred Stock, par value $0.10 per share, to multiple outside investors. Gross proceeds from the sale of the Series K Preferred Stock of $1.6 million were used for general corporate working capital purposes and applied toward a $270,000 payment to BHC. Of the $270,000 payment to BHC, which occurred on November 2, 2009, $250,000 was a payment of principal on the Term Loan and $20,000 was payment of a termination fee pursuant to terms of the BHC Agreement. On January 5, 2010, the Company agreed to issue an aggregate of 24 shares of the Series K Preferred Stock to a placement agent as consideration for such agent’s services to the Company in connection with the placement of the 310 shares of Series K Preferred Stock described herein. Upon the issuance of shares to the placement agent, the Company has 334 shares of Series K Preferred Stock issued and outstanding. The terms and conditions of the Series K Preferred Stock are more fully described in Note 12 to the accompanying consolidated financial statements.

Management Conclusion

Our liquidity is primarily measured by the borrowing availability on our domestic and international revolving lines of credit and is determined, at any point in time, by comparing our borrowing base (generally, eligible accounts receivable and inventory) to the balances of our outstanding lines of credit. Borrowing availability on our domestic and international lines of credit is driven by several factors, including the timing and amount of orders received from customers, the timing and amount of customer billings, the timing of collections on such billings, lead times and amounts of inventory purchases, and the timing of payments to vendors, primarily on payments to vendors from whom we purchase inventory. In addition to these factors, in fiscal year 2010, we expect revenue growth in our domestic and international markets and increased production efforts to meet such growth to impact the borrowing availability on our domestic and international lines of credit and may require us to seek additional financing to support the working capital and capital expenditure needs of our operations during fiscal year 2010. Historically, the Company has secured financing through lending agreements with banks and other lenders, including amending or extending existing lending agreements, and through offerings of its equity securities. If additional financing is required in fiscal year 2010, we believe we will be able to secure financing through one of these sources on commercially reasonable terms, though we can give no assurances of such.

As described herein, certain of our loan agreements contain covenants with which we and our subsidiaries must comply on a quarterly basis. We believe we will be able to comply with such loan covenants in each quarter of fiscal year 2010, though we can give no assurance of such compliance.

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Critical Accounting Policies and Estimates

DRI’s significant accounting policies and estimates used in the preparation of the Consolidated Financial Statements are discussed in Note 1 of the Notes to Consolidated Financial Statements. The following is a listing of DRI’s critical accounting policies and estimates and a brief description of each:

•  Allowance for doubtful accounts;

•  Inventory valuation and warranty reserve;

•  Intangible assets and goodwill;

•  Income taxes, including deferred tax assets;

•  Revenue recognition; and

•  Stock-based compensation

Allowance for Doubtful Accounts

Our allowance for doubtful accounts relates to trade accounts receivable. It reflects our estimate of the amount of our outstanding accounts receivable that are not likely to be collected. Most of the Company’s sales are to large OEM equipment manufacturers or to state or local governmental units or authorities, so management expects low losses resulting from insolvency or actual inability to pay. The allowance for doubtful accounts is a periodic estimate prepared by management based upon identification of the collections of specific accounts and the overall condition of the receivable portfolios. When evaluating the adequacy of the allowance for doubtful accounts, we analyze our trade receivables, the customer relationships underlying the receivables, historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in customer payment terms.

Inventory Valuation and Warranty Reserve

We periodically evaluate the carrying amount of inventory based upon current shipping forecasts and warranty and post-warranty component requirements. As a part of the sale, the Company typically extends a warranty term generally ranging from one to five years. We account for this liability through a warranty reserve on the balance sheet. Additionally, in special situations, we may, solely at our discretion, use extended or post-warranty services as a marketing tool. In these instances, such future warranty costs have previously been included in the established warranty reserves. Many of our customers have contractual or legal requirements, which dictate an extended period of time for us to maintain replacement parts. Our evaluation of inventory reserves involves an approach that incorporates both recent historical information and management estimates of trends. Our approach is intended to take into consideration potential excess and obsolescence in relation to our installed base, engineering changes, uses for components in other products, return rights with vendors and end-of-life manufacture. Estimating sales prices, establishing markdown percentages and evaluating the condition of the inventories require judgments and estimates, which may impact the inventory valuation and gross profits. We believe, based on our prior experience of managing and evaluating the recoverability of our slow moving or obsolete inventory, that such established reserves are materially adequate. If actual market conditions and product sales were less favorable than we have projected, additional inventory write-downs may be necessary. The inventory write-down calculations are reviewed periodically and additional write-downs are recorded as deemed necessary.

Intangible Assets and Goodwill

Goodwill is assigned to our reporting units, which are defined as the domestic and international operating segments. We test goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, impairment is indicated. If an impairment is indicated, the impairment is measured as the excess of the recorded goodwill over its fair value, which could materially adversely impact our consolidated financial position and results of operations.

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We performed a goodwill impairment test as of December 31, 2009. We estimated fair value for each reporting unit utilizing two valuation approaches: (1) the income approach and (2) the market approach. The income approach measures the present worth of anticipated future net cash flows generated by the reporting unit. Net cash flows are forecast for an appropriate period and then discounted to present value using an appropriate discount rate. Net cash flow forecasts require analysis of the significant variables influencing revenues, expenses, working capital and capital investment and involves a number of significant assumptions and estimates. The market approach is performed by observing the price at which companies comparable to the reporting unit, or shares of those guideline companies, are bought and sold. Adjustments are made to the data to account for operational and other relevant differences between the reporting unit and the guideline companies. To arrive at estimated fair value of each reporting unit, we assigned an appropriate weighting to the value of the reporting unit calculated under of each of the two valuation approaches. The aggregate weighted fair value under the two valuation approaches is the estimated fair value of the reporting unit. Additional judgments and assumptions are made in allocating assets and liabilities to determine the carrying values for each of our reporting units. We believe the assumptions we use in estimating fair value and in determining the carrying value of our reporting units are reasonable, but are also unpredictable and inherently uncertain. At December 31, 2009, our estimated fair value of the reporting units exceeded carrying value of our reporting units thereby indicating no impairment existed. If our estimated fair value of the reporting units declines at some point in the future, the Company may be required to record an impairment charge. Actual future results may differ from those estimates.

Income Taxes

We are required to pay income taxes in each of the jurisdictions in which we operate. These jurisdictions include the U.S. Government and several states, and a number of foreign countries. Each of these jurisdictions has its own laws and regulations, some of which are quite complex and some of which are the subject of disagreement among experts and authorities as to interpretation and application. The estimation process for preparation of our financial statements involves estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for income tax and accounting purposes. We review our operations and the application of applicable laws and rules to our circumstances. To the extent we believe necessary, we also seek the advice of professional advisers in various jurisdictions.

We record an income tax valuation allowance when, based on the weight of the evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The ultimate realization of the deferred tax asset depends on our ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. In assessing the realization of the deferred tax assets, consideration is given to, among other factors, the trend of historical and projected future taxable income, the scheduled reversal of deferred tax liabilities, the carryforward period for net operating losses and tax credits, as well as tax planning strategies available to us. Certain judgments, assumptions and estimates are required in assessing such factors and significant changes in such judgments and estimates may materially affect the carrying value of the valuation allowance and deferred income tax expense or benefit recognized in our consolidated financial statements.

We account for uncertain tax positions in accordance with ASC Topic 740-10-25. The application of income tax law is inherently complex. As such, we are required to make certain assumptions and judgments regarding our income tax positions and the likelihood whether such tax positions would be sustained if challenged. Penalties related to uncertain tax positions are recorded as a component of operations. There is no interest charged for underpayment of taxes in the jurisdiction to which our uncertain tax positions relate. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in our assumptions and judgments can materially affect amounts recognized in our consolidated balance sheets and statement of operations.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). SAB 104 sets forth guidelines on the timing of revenue

37

recognition based upon factors such as passage of title, purchase agreements, established pricing and defined shipping and delivery terms. We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists; delivery of the products or services has occurred; the selling price is fixed or determinable and collectibility is reasonably assured. Even though the Company receives customer sales orders that may require scheduled product deliveries over several months, sales are only recognized upon physical shipment of the product to the customer, provided that all other criteria of revenue recognition are met.

Multiple element arrangements in 2007 and 2008 — The Company’s transactions sometimes involve multiple element arrangements in which significant deliverables typically include hardware, installation services, and other services. Under a typical multiple element arrangement, the Company delivers the hardware to the customer first, then provides services for the installation of the hardware, followed by system set-up and/or data services. Revenue under multiple element arrangements is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 605-25, “Multiple-Element Arrangements”. ASC Topic 605-25 provides that revenue arrangements with multiple elements should be divided into separate units of accounting if certain criteria are met and provides that fair value of each element is established first by determining if vendor-specific objective evidence exists for that element. Vendor-specific objective evidence includes the price charged when the same element is sold separately or, for an element not yet sold separately, the price established by management with the relevant authority. If vendor-specific objective evidence does not exist, then fair value can be established by third party evidence of the selling price such as competitors’ sales prices for the same or largely interchangeable products or services to similar customers in stand-alone sales. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate elements based on their relative fair values (the relative fair value method). In cases in which there is objective and reliable evidence of the fair value of undelivered items in an arrangement but no such evidence for the delivered items, the amount of consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items (the residual method). In substantially all of our multiple element arrangements, we establish fair value of the hardware elements using vendor-specific objective evidence of sales of such hardware elements when sold separately by the Company. We establish fair value for the installation services element through third party evidence of the sales price charged by competitors and others in our industry for similar services. Certain multiple element arrangements include the delivery of software. For these arrangements, we establish fair value for the software deliverables through third party evidence of the sales price charged by competitors and others in our industry for similar software. We have not been able to establish fair value for system set-up and data services we deliver because we do not have vendor specific objective evidence of such services being sold separately or third party evidence for such services, since we are the only entity that can provide these specific services to our customers. Under the provisions of ASC Topic 605-25, we cannot separate the hardware elements and installation services into separate units of accounting because we are unable to establish fair value for the system set-up and/or data services. Therefore on multiple element arrangements involving system set-up/data services, we defer revenue on delivery of the hardware and installation services until the system set-up/data services are delivered to the customer.

Revenue from more complex or time-spanning projects within which there are multiple deliverables including products, services, and software are accounted for in accordance with ASC Topic 985-605, “Software Revenue Recognition. Under this standard, revenue is recognized over the life of the project based upon meeting specific delivery or performance criteria.

Multiple element arrangements in 2009 — In October 2009, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2009-13, which amends ASC Topic 605-25 to require companies to allocate the overall consideration in multiple-element arrangements to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor-specific objective evidence or other third-party evidence of the selling price. Additionally, ASU 2009-13 prohibits use of the residual method to allocate arrangement consideration among units of accounting. ASU 2009-13 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. However early adoption of ASU 2009-13 is permitted and the Company has elected

38

to adopt the provisions of ASU 2009-13 as of January 1, 2009 on a prospective basis. Under the provisions of ASU 2009-13, we are able to use best estimate of selling price for the system set-up/data services to be delivered to our customers in a multiple element arrangement, for which vendor-specific objective evidence or other third party evidence is not available. As a result, we are able to separate the hardware and installation services elements into separate units of accounting and recognize revenue on these elements when they are delivered to the customer. In determining the best estimate of selling price for the system set-up/data services, we primarily consider the costs incurred by the Company in providing these services and our profit objective in providing these services. We assume that if we were to sell these services separately, we would price these services to achieve a profit similar to the profit we generally realize on the overall multiple element arrangements we enter into on a regular basis.

In October 2009, the FASB also issued ASU 2009-14, which amends ASC Topic 985-605 to exclude from its requirements (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. Under ASU 2009-14, if a multiple element arrangement includes a tangible product with both essential and nonessential software components, the arrangement consideration should first be allocated to the software and nonsoftware components based on the relative selling price method under ASC 605-25 as amended by ASU 2009-13. An entity then must apply the amended separation, measurement and allocation guidance in ASC Topic 605-25 to determine whether the nonsoftware items can be further separated and if so, how to allocate the nonsoftware consideration to those units of accounting. An entity must apply the guidance in ASC Topic 985-605 to determine whether the software components can be further separated and if so, how to allocate and recognize revenue for the units of accounting. ASU 2009-14 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. However, early adoption of ASU 2009-14 is permitted and the Company has elected to adopt the provisions of ASU 2009-14 as of January 1, 2009 on a prospective basis.

During the year ended December 31, 2009, the Company’s only multiple element projects for which revenue recognition is impacted by the provisions of ASU 2009-14 include sales of postcontract customer support. On these projects, the arrangement consideration is first allocated to the software and nonsoftware components based on the relative selling price method under ASC 605-25, as amended by ASU 2009-13. The hardware and installation services are considered nonsoftware components and are separated, measured and allocated under the provisions of ASC Topic 605-25, as amended by ASU 2009-13, as described above, while the software components are separated, measured and allocated under the provision of ASC 985-605, which provides that vendor-specific objective evidence must exist to establish fair value of all undelivered elements, including the postcontract customer support. We have not been able to establish fair value of postcontract customer support through the existence of vendor-specific objective evidence. Under the provisions of ASC 985-605, for contracts where postcontract customer support is sold, we are required to defer revenue on the software components delivered and recognize such revenue and the postcontract customer support revenue over the postcontract customer support period. The Company generally does not sell postcontract customer support in multiple element arrangements and only one such arrangement in 2009 included the sale of postcontract customer support.

The impact of the adoption of ASU 2009-13 and ASU 2009-14 as of January 1, 2009 on our consolidated financial statements is more fully described in Note 1 to the accompanying consolidated financial statements.

Service revenues are recognized upon completion of the services and include product repair not under warranty, city route mapping, product installation, training, consulting to transit authorities and funded research and development projects. Service revenues were less than 3% of total revenue for 2009, 2008, and 2007.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718-20, “Stock Compensation Awards Classified as Equity”. Under ASC Topic 718-20, the Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The fair value is then amortized on a

39

straight-line basis over the requisite service period of the award, which is generally the option vesting term. This option pricing model requires the input of highly subjective assumptions, including an option’s expected life and the expected volatility of the Company’s Common Stock.

Off-Balance Sheet Arrangements

DRI does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors. We do, however, have warrants to acquire shares of our Common Stock outstanding at varied exercise prices. Other than lease commitments, legal contingencies incurred in the normal course of business and employment contracts of key employees, we do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned subsidiaries or any interests in or relationships with any special-purpose entities that are not included in the consolidated financial statements.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 105, “Generally Accepted Accounting Principles”, (formerly referred to as SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”). ASC Topic 105 establishes the ASC as the source of authoritative principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. ASC Topic 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASC Topic 105 did not have a material impact on our consolidated financial statements for the year ended December 31, 2009.

On February 12, 2008, the FASB issued ASC Topic 820-10-15, “Fair Value Measurements and Disclosures”, (formerly referred to as FASB Staff Position (“FSP”) No. FAS 157-2, “Effective date of FASB Statement No. 157”), which delayed the effective date of ASC Topic 820-10, (formerly referred to as SFAS No. 157), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until 2009. The Company adopted the provisions of ASC Topic 820-10 for nonfinancial assets and nonfinancial liabilities effective January 1, 2009. The adoption of ASC Topic 820-10 with respect to nonfinancial assets and nonfinancial liabilities did not have a significant impact on our results of operations or financial condition.

In December 2007, the FASB issued ASC Topic 805-10, “Business Combinations”, (formerly referred to as SFAS No. 141(R)). ASC Topic 805-10 retains the underlying concepts of prior guidance in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting; but ASC Topic 805-10 changed the method of applying the acquisition method in a number of significant aspects. ASC Topic 805-10 requires companies to recognize, with certain exception, 100% of the fair value of the assets acquired, liabilities assumed and non-controlling interest in acquisitions of less than 100% controlling interest when the acquisition constitutes a change in control; measure acquirer shares issued as consideration for a business combination at fair value on the date of the acquisition; recognize contingent consideration arrangements at their acquisition date fair value, with subsequent change in fair value generally reflected in earnings; recognition of reacquisition loss and gain contingencies at their acquisition date fair value; and expense, as incurred, acquisition related transaction costs. We adopted the provisions of ASC Topic 805-10 effective January 1, 2009 and accounted for the acquisition of the remaining 50% interest in Mobitec Brazil Ltda under the provisions of ASC Topic 805-10 (see Note 2 to the accompanying consolidated financial statements for further discussion of this acquisition).

In December 2007, the FASB issued ASC Topic 810-10-65, “Consolidation”, (formerly referred to as SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51”). ASC Topic 810-10-65 establishes new standards that govern the accounting for and reporting of (1) noncontrolling interest in partially-owned consolidated subsidiaries and (2) loss of control of subsidiaries. ASC

40

Topic 810-10-65 requires that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interest of the noncontrolling owners separately within the consolidated statement of position within equity, but separate from the parent’s equity and separately on the face of the consolidated income statement. Further, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary should be initially measured at fair value. We adopted the provisions of ASC Topic 810-10-65 effective January 1, 2009 and accounted for the acquisition of the remaining 50% interest in Mobitec Brazil Ltda under the provisions of ASC Topic 810-10-65 (see Note 2 to the accompanying consolidated financial statements for further discussion of this acquisition). The adoption of ASC Topic 810-10-65 impacted the accompanying consolidated financial statements for all periods presented as follows:

•  The noncontrolling interests in our subsidiaries of which we have less than 100% ownership 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 our subsidiaries of which we have less than 100% ownership.

•  Consolidated comprehensive income (loss) has been adjusted to include the comprehensive income (loss) attributed to the noncontrolling interest in our subsidiaries of which we have less than 100% ownership.

•  We have disclosed for each reporting period the amounts of consolidated income (loss) attributed to the Company and the noncontrolling interest in our subsidiaries of which we have less than 100% ownership. 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 our subsidiaries of which we have less than 100% ownership.

In March 2008, the FASB issued ASC Topic 815-10, “Derivatives and Hedging”, (formerly referred to as SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133”), which is effective on a prospective basis for fiscal years and interim periods beginning after November 15, 2008. ASC Topic 815-10 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand such effects on financial position, financial performance and cash flow. We adopted the provisions of ASC Topic 815-10 effective January 1, 2009. The adoption of ASC Topic 815-10 did not have a material impact on our results of operations or financial condition.

In April 2008, the FASB issued ASC Topic 350-30-65, “Intangibles-Goodwill and Other”, (formerly referred to as FSP FAS 142-3,“Determination of the Useful Life of Intangible Assets”) ASC Topic 350-30-65 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC Topic 350-30-65 is effective for fiscal years beginning after December 15, 2008. We adopted the provisions of ASC Topic 350-30-65 effective January 1, 2009. The adoption of ASC Topic 350-30-65 did not have a material impact on our results of operations or financial condition.

In June 2008, the FASB issued ASC Topic 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”, (formerly referred to as Emerging Issues Task Force (“EITF”) Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”). ASC Topic 815-40 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under ASC Topic 815-10-15 (formerly referred to as SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”). ASC Topic 815-40 is effective for financial statements issued for fiscal years beginning after December 15, 2008. In conjunction with a loan agreement pursuant to which a $5.0 million term loan was obtained in June 2008, the Company issued the lender warrants to purchase up to 350,000 shares of our Common Stock. These warrants were determined to be a derivative instrument based on the clarification within ASC Topic 815-40. As of January 1, 2009, the fair value of these warrants was reclassified from equity to a current liability and a cumulative effect adjustment to

41

retained earnings was recorded for the change in the fair value of the warrants. During the period in which the warrants are classified as a liability, the fair value of the warrants will be periodically remeasured with any changes in value recognized in other income (loss) in the consolidated financial statements. See the “Fair Value of Assets and Liabilities” section of Note 1 to the accompanying consolidated financial statements for further discussion of accounting treatment of these warrants.

In May 2009, the FASB issued ASC Topic 855-10, “Subsequent Events”, (formerly referred to as SFAS No. 165, “Subsequent Events”) which was amended in February 2010. ASC Topic 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855-10 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of ASC Topic 855-10, as amended, did not have an impact on our consolidated financial statements for the year ended December 31, 2009, as it is our continuing policy to evaluate subsequent events through the date our financial statements are issued. For the year ended December 31, 2009, we have evaluated subsequent events through April 15, 2010, which is the date our financial statements were issued and filed with the SEC.

Impact of Inflation

We believe that inflation has not had a material impact upon our results of operations for each of our fiscal years in the three-year period ended December 31, 2009. However, there can be no assurance that future inflation will not have an adverse impact upon our operating results and financial condition.

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Item 8.   Financial Statements and Supplementary Data

DRI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Section	Page
Report of Independent Registered Public Accounting Firm — Grant Thornton LLP		44
Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		45
Consolidated Balance Sheets — December 31, 2009 and 2008		46
Consolidated Statements of Operations — Years Ended December 31, 2009, 2008 and 2007		47
Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 2009, 2008 and 2007		48
Consolidated Statements of Cash Flows — Years Ended December 31, 2009, 2008 and 2007		49
Notes to Consolidated Financial Statements		50

43

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

DRI Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of DRI Corporation (a North Carolina Corporation) and Subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DRI Corporation and Subsidiaries as of December 31, 2009 and 2008 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As disclosed in Note 1 to the consolidated financial statements, effective January 1, 2009, the Company adopted new accounting guidance related to the accounting for and financial statement presentation of multiple element revenue arrangements, noncontrolling equity interests in consolidated subsidiaries and financial instruments indexed to the Company’s own stock.

/s/ GRANT THORNTON LLP

Raleigh, North Carolina

April 15, 2010

44

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of DRI Corporation:

In our opinion, the consolidated statement of operations, shareholders’ equity and comprehensive income (loss) and cash flows for the year ended December 31, 2007 present fairly, in all material respects, the results of their operations and their cash flows for the year ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 16 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2007.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has insufficient cash resources to satisfy its debt obligations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ PricewaterhouseCoopers LLP

March 31, 2008

Raleigh, North Carolina

45

DRI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2009			2008
	(In thousands, except shares and per share amounts)
ASSETS
Current Assets
Cash and cash equivalents	$	1,800		$	598
Trade accounts receivable, net		18,192			12,403
Current portion of note receivable		86			86
Stock subscription receivable		670			—
Other receivables		1,645			431
Inventories, net		13,042			10,662
Prepaids and other current assets		1,844			427
Deferred tax assets, net		250			94
Total current assets		37,529			24,701
Property and equipment, net		5,266			3,607
Long-term portion of note receivable		86			172
Goodwill		9,793			9,034
Intangible assets, net		728			790
Other assets		890			1,157
Total assets	$	54,292		$	39,461
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Lines of credit	$	7,200		$	3,743
Loans payable		463			719
Current portion of long-term debt		960			193
Current portion of foreign tax settlement		561			386
Accounts payable		10,099			5,347
Accrued expenses and other current liabilities		6,459			4,359
Preferred stock dividends payable		20			16
Total current liabilities		25,762			14,763
Long-term debt and capital leases, net		6,572			5,149
Foreign tax settlement, long-term		294			528
Deferred tax liabilities, net		338			137
Liability for uncertain tax positions		380			300
Commitments and contingencies (Notes 8, 9, 10, 19, and 20)
Shareholders’ Equity
Series K Redeemable, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 325 shares authorized; 299 and 0 shares issued and outstanding at December 31, 2009, and December 31, 2008, respectively; redeemable at the discretion of the Company at any time		1,341			—
Series 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 December 31, 2009, and December 31, 2008; redeemable at the discretion of the Company at any time		337			337
Series G Redeemable, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 600 shares authorized; 480 and 444 shares issued and outstanding at December 31, 2009, and December 31, 2008, respectively; redeemable at the discretion of the Company after five years from date of issuance		2,118			1,938
Series H Redeemable, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 600 shares authorized; 69 and 64 shares issued and outstanding at December 31, 2009, and December 31, 2008, respectively; redeemable at the discretion of the Company after five years from date of issuance		297			272
Series J Redeemable, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 250 shares authorized; 0 and 90 shares issued and outstanding at December 31, 2009, and December 31, 2008, respectively; redeemable at the discretion of the Company at any time		—			388
Series 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 December 31, 2009, and December 31, 2008; redeemable at the discretion of the Company at any time		830			830
Common stock, $.10 par value, 25,000,000 shares authorized; 11,746,327 and 11,466,606 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively		1,175			1,147
Additional paid-in capital		30,393			32,706
Accumulated other comprehensive income — foreign currency translation		1,976			512
Accumulated deficit		(18,276	)		(20,398	)
Total DRI shareholders’ equity		20,191			17,732
Noncontrolling interests
Noncontrolling interests — Mobitec Brazil Ltda.		—			596
Noncontrolling interests — Castmaster Mobitec India Private Limited		755			256
Total noncontrolling interests		755			852
Total shareholders’ equity		20,946			18,584
Total liabilities and shareholders’ equity	$	54,292		$	39,461

See accompanying notes to consolidated financial statements.

46

DRI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2009			2008			2007
	(In thousands, except share and per share amounts)
Net sales	$	82,285		$	70,559		$	57,932
Cost of sales		57,489			46,671			39,311
Gross profit		24,796			23,888			18,621
Operating expenses
Selling, general and administrative		20,402			19,000			15,216
Research and development		552			974			1,149
Total operating expenses		20,954			19,974			16,365
Operating income		3,842			3,914			2,256
Other income (loss)		(101	)		188			103
Foreign currency gain		531			558			210
Interest expense		(1,460	)		(1,433	)		(1,197	)
Total other income and expense		(1,030	)		(687	)		(884	)
Income from continuing operations before income tax expense		2,812			3,227			1,372
Income tax expense		(836	)		(1,096	)		(291	)
Income from continuing operations, net of tax		1,976			2,131			1,081
Loss from discontinued operations (Note 3)		—			—			(219	)
Net income		1,976			2,131			862
Less: Net income attributable to noncontrolling interests, net of tax		(146	)		(635	)		(188	)
Net income attributable to DRI Corporation		1,830			1,496			674
Provision for preferred stock dividends		(319	)		(303	)		(294	)
Net income applicable to common shareholders of DRI Corporation	$	1,511		$	1,193		$	380
Net income (loss) per share — basic
Continuing operations	$	0.13		$	0.11		$	0.06
Discontinued operations	$	0.00		$	0.00		$	(0.02	)
Income per share applicable to common shareholders	$	0.13		$	0.11		$	0.04
Net income (loss) per share — diluted
Continuing operations	$	0.13		$	0.10		$	0.05
Discontinued operations	$	0.00		$	0.00		$	(0.02	)
Income per share applicable to common shareholders	$	0.13		$	0.10		$	0.03
Weighted average number of common shares and common share equivalent outstanding
Basic		11,548,403			11,333,984			10,751,220
Diluted		11,715,807			11,492,473			11,146,107

See accompanying notes to consolidated financial statements.

47

DRI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	DRI Shareholders’ Equity
	Preferred Stock						Common Stock										Accumulated
	Number						Number				Additional			Accum-			Other			Total DRI						Total
	of Shares			Book			of Shares		Par		Paid-in			ulated			Comprehensive			Shareholders’			Noncontrolling			Shareholders’
	Issued			Value			Issued		Value		Capital			Deficit			Income (Loss)			Equity			Interests			Equity
Balance as of December 31, 2006		898		$	3,691			10,045,675	$	1,004	$	31,517		$	(22,414	)	$	3,397		$	17,195		$	234		$	17,429
Issuance of common stock		—			—			648,540		65		201									266						266
Issuance of Series G Preferred Stock dividend		31			155			—		—		—									155						155
Issuance of Series H Preferred Stock dividend		5			25			—		—		—									25						25
Issuance of Series J Preferred Stock, net of issuance costs		90			411			—		—		—									411						411
Conversion of Series AAA Preferred Stock		(6	)		(30	)		5,454		1		29									—						—
Conversion of Series E Preferred Stock, net of issuance costs		(98	)		(411	)		163,324		16		395									—						—
Conversion of Series I Preferred Stock, net of discount		(104	)		(471	)		325,000		33		438									—						—
Adjustment for prior period Series E Conversions					271							(271	)								—						—
Issuance of warrants					(23	)						23									—						—
Preferred stock dividends												(294	)								(294	)					(294	)
Stock-based compensation expense												41									41						41
Adjustment for prior year liability for uncertain tax positions															(154	)					(154	)					(154	)
Comprehensive income:
Net income															674						674			188			862
Translation adjustment																		1,173			1,173						1,173
Balance as of December 31, 2007		816		$	3,618			11,187,993	$	1,119	$	32,079		$	(21,894	)	$	4,570		$	19,492		$	422		$	19,914
Issuance of common stock		—			—			37,553		3		83									86						86
Issuance of Series G Preferred Stock dividend		34			170			—		—		—									170						170
Issuance of Series H Preferred Stock dividend		5			25			—		—		—									25						25
Conversion of Series AAA Preferred Stock		(6	)		(30	)		5,454		1		29									—						—
Conversion of Series E Preferred Stock, net of issuance costs		(5	)		(18	)		8,333		1		17									—						—
Conversion of Convertible Subordinated Debenture								227,273		23		227									250						250
Amortization of convertible subordinated debenture beneficial
conversion feature												54									54						54
Issuance of warrants												333									333						333
Preferred stock dividends												(303	)								(303	)					(303	)
Dividends paid to noncontrolling interests																								(205	)		(205	)
Stock-based compensation expense												187									187						187
Comprehensive loss:
Net income															1,496						1,496			635			2,131
Translation adjustment																		(4,058	)		(4,058	)					(4,058	)
Balance as of December 31, 2008		844		$	3,765			11,466,606	$	1,147	$	32,706		$	(20,398	)	$	512		$	17,732		$	852		$	18,584
Cumulative effect of reclassification of warrants as a result of a new accounting requirement												(333	)		292						(41	)					(41	)
Balance as of January 1, 2009, as adjusted		844		$	3,765			11,466,606	$	1,147	$	32,373		$	(20,106	)	$	512		$	17,691		$	852		$	18,543
Issuance of common stock								80,641		8		93									101						101
Issuance of Series G Preferred Stock dividend		36			180																180						180
Issuance of Series H Preferred Stock dividend		5			25																25						25
Issuance of Series K Preferred Stock, net of issuance costs		299			1,341																1,341						1,341
Conversion of Series J Preferred Stock, net of issuance costs		(90	)		(388	)		199,080		20		368									—						—
Reclassification of warrants												207									207						207
Modification of warrants												31									31						31
Preferred stock dividends												(319	)								(319	)					(319	)
Stock-based compensation expense												347									347						347
Purchase of noncontrolling interest												(2,707	)								(2,707	)		(243	)		(2,950	)
Comprehensive Income:
Net income															1,830						1,830			146			1,976
Translation adjustment																		1,464			1,464						1,464
Balance as of December 31, 2009		1,094		$	4,923			11,746,327	$	1,175	$	30,393		$	(18,276	)	$	1,976		$	20,191		$	755		$	20,946

See accompanying notes to consolidated financial statements.

48

DRI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Cash flows from operating activities
Net income	$	1,976		$	2,131		$	862
Loss from discontinued operations		—			—			(219	)
Income from continuing operations		1,976			2,131			1,081
Adjustments to reconcile net income to net cash provided by operating activities
Deferred income taxes		46			106			(243	)
Change in liability for uncertain tax positions		37			63			149
Depreciation and amortization of property and equipment		1,054			933			1,070
Amortization of intangible assets		115			151			138
Amortization of deferred financing costs		478			344			279
Amortization of debt discount		111			170			245
Amortization of beneficial conversion feature		—			54			—
Change in fair value of warrant liability		110			—			—
Loan termination fee accrual		243			123			—
Bad debt expense		180			176			26
Stock issued in lieu of cash compensation		101			86			76
Stock-based compensation expense		347			187			41
Write-down of inventory for obsolescence		197			156			141
Loss (gain) on sale of fixed assets		20			15			(3	)
Other, primarily effect of foreign currency gain and bank fees		(324	)		(412	)		(274	)
Changes in operating assets and liabilities
Increase in trade accounts receivable		(4,592	)		(2,454	)		(1,037	)
(Increase) decrease in other receivables		(394	)		3			(272	)
Increase in inventories		(1,697	)		(2,330	)		(200	)
(Increase) decrease in prepaids and other current assets		(1,350	)		39			(49	)
Increase in other assets		(6	)		(11	)		—
Increase (decrease) in accounts payable		4,063			(416	)		450
Increase in accrued expenses		1,184			1,231			530
Decrease in foreign tax settlement		(334	)		(327	)		(208	)
Net cash provided by continuing operations		1,565			18			1,940
Net cash used in discontinued operations		—			—			(68	)
Net cash provided by operating activities		1,565			18			1,872
Cash flows from investing activities
Proceeds from sale of fixed assets		4			4			66
Purchases of property and equipment		(218	)		(489	)		(296	)
Investments in software development		(2,123	)		(1,551	)		(669	)
Acquisition of noncontrolling interest		(1,000	)		—			—
Proceeds from sale of DAC		—			—			1,100
Net cash provided by (used in) investing activities		(3,337	)		(2,036	)		201
Cash flows from financing activities
Proceeds from bank borrowings and lines of credit		96,610			88,658			66,531
Principal payments on bank borrowings and lines of credit		(94,435	)		(85,032	)		(69,025	)
Issuance of common stock		—			3			189
Proceeds from issuance of Preferred stock, net of costs		825			—			411
Payment of debt issuance costs		—			(1,304	)		—
Payment of loan amendment fees		(79	)		—			—
Payment of dividends to noncontrolling interest		—			(205	)		—
Payment of dividends on Preferred stock		(111	)		(110	)		(118	)
Net cash provided by (used in) financing activities		2,810			2,010			(2,012	)
Effect of exchange rate changes on cash and cash equivalents		164			(123	)		57
Net increase (decrease) in cash and cash equivalents		1,202			(131	)		118
Cash and cash equivalents at beginning of period		598			729			611
Cash and cash equivalents at end of period	$	1,800		$	598		$	729
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	1,108		$	896		$	682
Cash paid during the period for income taxes	$	415		$	799		$	370
Supplemental disclosures of non-cash investing and financing activities:
Conversion of preferred stock to common stock	$	450		$	55		$	1,040
Fair value of warrants issued in connection with new term loan	$	—		$	333		$	—
Fair value of warrants issued in connection with sale of preferred stock	$	—		$	—		$	23
Increase in fair value of warrants due to modification	$	88		$	—		$	—
Acquisition of noncontrolling interest under short and long-term debt obligations	$	2,950		$	—		$	—
Note receivable in connection with sale of DAC	$	—		$	—		$	344
Conversion of convertible subordinated debenture	$	—		$	250		$	—
Amortization of convertible subordinated debenture beneficial conversion feature	$	—		$	54		$	—
Purchase of equipment under capital lease obligation	$	27		$	21		$	—
Preferred stock dividends	$	205		$	195		$	180

See accompanying notes to consolidated financial statements.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   Organization and Summary of Significant Accounting Policies

Organization and Liquidity

DRI Corporation (“DRI”, “Company”, “we”, “our”, or “us”) was incorporated in 1983 as Digital Recorders, Inc. and became a public company through an initial public offering in November 1994. In June 2007, our shareholders approved changing the Company’s name to DRI Corporation. DRI’s common stock, $.10 par value per share (the “Common Stock”), trades on the NASDAQ Capital Market^® under the symbol “TBUS.”

Through its business units and wholly owned subsidiaries, DRI manufactures, sells, and services information technology and surveillance technology products either directly or through manufacturers’ representatives or distributors. DRI has historically operated within two business segments: (1) the transportation communications segment, and (2) the law enforcement and surveillance segment. In April, 2007, the Company’s Digital Audio Corporation subsidiary (“DAC”), which comprised all of the operations of the law enforcement and surveillance segment, was divested and is presented in the accompanying consolidated financial statements and notes as discontinued operations. Accordingly, the Company’s continuing operations consist of one operating segment. Customers include municipalities, regional transportation districts, federal, state and local departments of transportation, and original equipment manufacturers. The Company markets primarily to customers located in North and South America, Far East, Middle East, Asia, Australia, and Europe.

Our liquidity is primarily measured by the borrowing availability on our domestic and international revolving lines of credit and is determined, at any point in time, by comparing our borrowing base (generally, eligible accounts receivable and/or inventory) to the balances of our outstanding lines of credit. Borrowing availability on our domestic and international lines of credit is driven by several factors, including the timing and amount of orders received from customers, the timing and amount of customer billings, the timing of collections on such billings, lead times and amounts of inventory purchases, and the timing of payments to vendors, primarily on payments to vendors from whom we purchase inventory. In addition to these factors, in fiscal year 2010, we expect revenue growth in our domestic and international markets and increased production efforts to meet such growth to impact the borrowing availability on our domestic and international lines of credit and may require us to seek additional financing to support the working capital and capital expenditure needs of our operations during fiscal year 2010. Historically, the Company has secured financing through lending agreements with banks and other lenders, including amending or extending existing lending agreements, and through offerings of its equity securities. If additional financing is required in fiscal year 2010, we believe we will be able to secure financing through one of these sources on commercially reasonable terms, though we can give no assurances of such.

Our consolidated financial statements as of and for the year ended December 31, 2007 were prepared on a going concern basis. At December 31, 2007, we had an outstanding note payable with a principal balance of $500,000 which had a maturity date of April 30, 2008. In addition, the Company also had a revolving line of credit agreement for its domestic operations that matured on June 30, 2008. On the date our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 was filed with the SEC, the Company anticipated that it would not have sufficient cash resources available to make payment in full on the outstanding balance on the revolving line of credit. As discussed in Note 9, on June 30, 2008, the revolving line of credit was replaced with a line of credit and a term loan, both maturing June 30, 2011.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The Company’s operations are affected by numerous factors including, but not limited to, changes in laws, governmental regulations, and technological advances. The Company cannot predict if any of these factors might have a significant impact upon the transportation communications industry in the future, nor can it predict what impact, if any, the occurrence of these or other events might have upon the Company’s operations and cash flows. Significant estimates and assumptions made by management are used for, but not limited to, revenue recognition, the allowance for doubtful accounts, the obsolescence of certain inventory, the estimated useful lives of long-lived and intangible assets, the recoverability of such assets by their estimated future undiscounted cash flows, the fair value of reporting units and indefinite life intangible assets, the fair value of equity instruments and warrants, the provision for income taxes, uncertain tax positions, valuation allowances on deferred tax assets, and the allowance for warranty claim reserves.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At times, the Company places temporary cash investments with high credit quality financial institutions in amounts that may be in excess of FDIC insurance limits. During 2009, temporary cash investments were as high as $1.9 million.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). SAB 104 sets forth guidelines on the timing of revenue recognition based upon factors such as passage of title, purchase agreements, established pricing and defined shipping and delivery terms. We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists; delivery of the products or services has occurred; the selling price is fixed or determinable and collectibility is reasonably assured. Even though the Company receives customer sales orders that may require scheduled product deliveries over several months, sales are only recognized upon physical shipment of the product to the customer, provided that all other criteria of revenue recognition are met.

Multiple element arrangements in 2007 and 2008 — The Company’s transactions sometimes involve multiple element arrangements in which significant deliverables typically include hardware, installation services, and other services. Under a typical multiple element arrangement, the Company delivers the hardware to the customer first, then provides services for the installation of the hardware, followed by system set-up and/or data services. Revenue under multiple element arrangements is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 605-25, “Multiple-Element Arrangements”. ASC Topic 605-25 provides that revenue arrangements with multiple elements should be divided into separate units of accounting if certain criteria are met and provides that fair value of each element is established first by determining if vendor-specific objective evidence exists for that element. Vendor-specific objective evidence includes the price charged when the same element is sold separately or, for an element not yet sold separately, the price established by management with the relevant authority. If vendor-specific objective evidence does not exist, then fair value can be established by third party evidence of the selling price such as competitors’ sales prices for the same or largely interchangeable products or services to similar customers in stand-alone sales. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate elements based on their relative fair values (the relative fair value method). In cases in which there is objective and reliable evidence of the fair value of undelivered items in an arrangement but no such evidence for the delivered items, the amount of consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items (the residual method). In substantially all of our multiple element arrangements, we establish fair value of the hardware elements using vendor-specific objective evidence of sales of such hardware elements when

51

sold separately by the Company. We establish fair value for the installation services element through third party evidence of the sales price charged by competitors and others in our industry for similar services. Certain multiple element arrangements include the delivery of software. For these arrangements, we establish fair value for the software deliverables through third party evidence of the sales price charged by competitors and others in our industry for similar software. We have not been able to establish fair value for system set-up and data services we deliver because we do not have vendor-specific objective evidence of such services being sold separately or third party evidence for such services, since we are the only entity that can provide these specific services to our customers. Under the provisions of ASC Topic 605-25, we cannot separate the hardware elements and installation services into separate units of accounting because we are unable to establish fair value for the system set-up and/or data services. Therefore on multiple element arrangements involving system set-up/data service we defer revenue on delivery of the hardware and installation services until the system set-up/data services are delivered to the customer.

Revenue from more complex or time-spanning projects within which there are multiple deliverables including products, services, and software are accounted for in accordance with ASC Topic 985-605, “Software Revenue Recognition”. Under this standard revenue is recognized over the life of the project based upon meeting specific delivery or performance criteria.

Multiple element arrangements in 2009 — In October 2009, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2009-13, which amends ASC Topic 605-25 to require companies to allocate the overall consideration in multiple-element arrangements to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor-specific objective evidence or other third-party evidence of the selling price. Additionally, ASU 2009-13 prohibits use of the residual method to allocate arrangement consideration among units of accounting. ASU 2009-13 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. However early adoption of ASU 2009-13 is permitted and the Company has elected to adopt the provisions of ASU 2009-13 as of January 1, 2009 on a prospective basis. Under the provisions of ASU 2009-13, we are able to use best estimate of selling price to establish fair value for the system set-up/data services to be delivered to our customers in a multiple element arrangement, for which vendor-specific objective evidence or other third party evidence is not available. As a result, we are able to separate the hardware and installation services elements into separate units of accounting and recognize revenue on these elements when they are delivered to the customer. In determining the best estimate of selling price for the system set-up/data services, we primarily consider the costs incurred by the Company in providing these services and our profit objective in providing these services. We assume that if we were to sell these services separately, we would price these services to achieve a profit similar to the profit we generally realize on the overall multiple element arrangements we enter into on a regular basis.

In October 2009, the FASB also issued ASU 2009-14, which amends ASC Topic 985-605 to exclude from its requirements (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. Under ASU 2009-14, if a multiple element arrangement includes a tangible product with both essential and nonessential software components, the arrangement consideration should first be allocated to the software and nonsoftware components based on the relative selling price method under ASC 605-25 as amended by ASU 2009-13. An entity then must apply the amended separation, measurement and allocation guidance in ASC Topic 605-25 to determine whether the nonsoftware items can be further separated and if so, how to allocate the nonsoftware consideration to those units of accounting. An entity must apply the guidance in ASC Topic 985-605 to determine whether the software components can be further separated and if so, how to allocate and recognize revenue for the units of accounting. ASU 2009-14 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. However, early adoption of ASU 2009-14 is permitted and the Company has elected to adopt the provisions of ASU 2009-14 as of January 1, 2009 on a prospective basis.

During the year ended December 31, 2009, the Company’s only multiple element projects for which revenue recognition is impacted by the provisions of ASU 2009-14 include sales of postcontract customer

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support. On these projects, the arrangement consideration is first allocated to the software and nonsoftware components based on the relative selling price method under ASC 605-25, as amended by ASU 2009-13. The hardware and installation services are considered nonsoftware components and are separated, measured and allocated under the provisions of ASC Topic 605-25, as amended by ASU 2009-13, as described above. While the software components are separated, measured and allocated under the provisions of ASC 985-605, which provides that vendor-specific objective evidence must exist to establish fair value of all undelivered elements, including the postcontract customer support. We have not been able to establish fair value of postcontract customer support through the existence of vendor-specific objective evidence. Under the provisions of ASC 985-605, for contracts where postcontract customer support is sold, we are required to defer revenue on the software components delivered and recognize such revenue and the postcontract customer support revenue over the postcontract customer support period. The Company generally does not sell postcontract customer support in multiple element arrangements and only one such arrangement in 2009 included the sale of postcontract customer support.

The impact of adoption of the provisions of ASU 2009-13 and ASU 2009-14 as of January 1, 2009 on each of the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 previously reported is set forth below:

	Three Months Ended
	March 31, 2009						June 30, 2009				September 30, 2009
	As			As			As		As		As		As
	Reported			Adjusted			Reported		Adjusted		Reported		Adjusted
	(In thousands, except per share amounts)
	(Unaudited)
Net sales	$	13,265		$	13,202		$	21,514	$	21,514	$	21,606	$	21,555
Income (loss) from continuing operations before income tax expense		(1,270	)		(1,333	)		1,004		1,004		1,336		1,298
Net income (loss) attributable to DRI Corporation		(1,010	)		(1,073	)		1,153		1,153		960		922
Net income (loss) per basic share applicable to common shareholders	$	(0.09	)	$	(0.10	)	$	0.09	$	0.09	$	0.08	$	0.07
Net income (loss) per diluted share applicable to common shareholders	$	(0.09	)	$	(0.10	)	$	0.09	$	0.09	$	0.07	$	0.07
	Six Months Ended						Nine Months Ended
	June 30, 2009						September 30, 2009
	As			As			As		As
	Reported			Adjusted			Reported		Adjusted
	(In thousands, except per share amounts)
	(Unaudited)
Net sales	$	34,779		$	34,716		$	56,385	$	56,271
Income (loss) from continuing operations before income tax expense		(266	)		(329	)		1,070		969
Net income (loss) attributable to DRI Corporation		143			80			1,103		1,002
Net income (loss) per basic share applicable to common shareholders	$	(0.00	)	$	(0.00	)	$	0.08	$	0.06
Net income (loss) per diluted share applicable to common shareholders	$	(0.00	)	$	(0.00	)	$	0.08	$	0.06

During the fourth quarter, within the performance of our year-end financial reporting process, we identified certain adjusting journal entries that impact the amounts previously reported during the first three quarters of 2009. These entries relate to (1) revenue recognized on multiple element arrangements prior to the adoption of ASU 2009-13 and ASU 2009-14, described above, as well as (2) certain revenue recognition and

53

foreign currency translation items in Mobitec Brazil Ltda. Following is a summary of the impact of these entries on previously reported interim periods:

	Three Months Ended												Three Months Ended
	March 31, 2009												June 30, 2009
				Multiple											Multiple
	As			Element			Mobitec			As			As		Element			Mobitec			As
	Reported			Revenue			Brazil Ltda.			Adjusted			Reported		Revenue			Brazil Ltda.			Adjusted
				(In thousands) (Unaudited)											(In thousands) (Unaudited)
Net sales	$	13,265		$	(388	)	$	(22	)	$	12,855		$	21,514	$	(154	)	$	(9	)	$	21,351
Income (loss) from continuing operations before income tax expense		(1,270	)		(98	)		91			(1,277	)		1,004		(98	)		(54	)		852

	Three Months Ended
	September 30, 2009
			Multiple
	As		Element			Mobitec			As
	Reported		Revenue			Brazil Ltda.			Adjusted
			(In thousands) (Unaudited)
Net sales	$	21,606	$	(115	)	$	(110	)	$	21,381
Income (loss) from continuing operations before income tax expense		1,336		(268	)		(129	)		939

	Six Months Ended												Nine Months Ended
	June 30, 2009												September 30, 2009
				Multiple											Multiple
	As			Element			Mobitec			As			As		Element			Mobitec			As
	Reported			Revenue			Brazil Ltda.			Adjusted			Reported		Revenue			Brazil Ltda.			Adjusted
				(In thousands) (Unaudited)											(In thousands) (Unaudited)
Net sales	$	34,779		$	(542	)	$	(31	)	$	34,206		$	56,385	$	(657	)	$	(141	)	$	55,587
Income (loss) from continuing operations before income tax expense		(266	)		(196	)		37			(425	)		1,070		(464	)		(92	)		514

Revenue recognized under multiple element arrangements was 4.8% of consolidated revenue in 2009. As described above, the Company adopted new guidance related to multiple element revenue recognition, effective January 1, 2009. We believe the presentation of 2009 interim period results under the previous accounting guidance, reflecting the adjustments above is not meaningful. Additionally, we have concluded the impact of adopting this new guidance does not result in operating results that are materially different from those previously reported, either individually or when combined with the impact of the Mobitec Brazil Ltda. items.

Service revenues are recognized upon completion of the services and include product repair not under warranty, city route mapping, product installation, training, consulting to transit authorities, and funded research and development projects. Service revenues were less than 3% of total revenue for 2009, 2008, and 2007.

We generate a significant portion of our sales from a relatively small number of key customers, the composition of which may vary from year to year. Historically, such key customers have been transit bus original equipment manufacturers. In 2009, 2008 and 2007, our top five customers accounted for 36.0%, 33.4%, and 21.3%, respectively, of total annual sales. As of and for the year ended December 31, 2009, there were no customers to whom net sales comprised at least 10% of consolidated net sales or who had accounts receivable balances greater than 10% of consolidated accounts receivable. For the year ended December 31, 2008, there was one customer, a transit bus original equipment manufacturer, to whom net sales comprised 10.8% of consolidated net sales. Two customers had accounts receivable balances representing 17.2% and

54

11.8%, respectively, of consolidated accounts receivable at December 31, 2008. For the year ended December 31, 2007, there were no customers to whom net sales comprised at least 10% of consolidated net sales. Because we sell our products to a limited set of customers, we can experience concentration of revenue with related credit risk, both of which are a function of the orders we receive in any given period of time. Loss of one or more of these key customers could have an adverse impact, possibly material, on the Company.

Sales Taxes

Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and, as such, are excluded from revenues.

Trade Accounts Receivable

The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade receivable credit risk exposure is limited. Trade receivables are carried at original invoice amount less an estimate provided for doubtful receivables, based upon a review of all outstanding amounts on a monthly basis. An allowance for doubtful accounts is provided for known and anticipated credit losses, as determined by management in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer’s financial condition and credit history, as well as current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. No interest is charged on customer accounts.

Inventories

Inventories are valued at the lower of cost or market, using standard costs, which approximates the first-in, first-out (FIFO) method. Our evaluation of inventory obsolescence involves an approach that incorporates both recent historical information and management estimates of trends. Our approach is intended to take into consideration potential excess and obsolescence in relation to our installed base, engineering changes, uses for components in other products, return rights with vendors and end-of-life manufacture.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Property and equipment subject to capital leases are depreciated over the lesser of the term of the lease or the estimated useful life of the asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to income. Repair and maintenance costs are expensed as incurred.

Goodwill and Indefinite Life Intangible Assets

Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the assets might be impaired. Management has determined the Company does not have indefinite life intangible assets, other than goodwill.

For goodwill, the impairment evaluation includes a comparison of the carrying value of the reporting unit (including goodwill) to that reporting unit’s fair value. If the reporting unit’s estimated fair value exceeds the reporting unit’s carrying value, no impairment of goodwill exists. If the fair value of the reporting unit does not exceed the unit’s carrying value, then an additional analysis is performed to allocate the fair value of the reporting unit to all of the assets and liabilities of that unit as if that unit had been acquired in a business combination. If the implied fair value of the reporting unit goodwill is less than the carrying value of the unit’s goodwill, an impairment charge is recorded for the difference. To date, management has determined that no impairment of goodwill exists.

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Intangible Assets

Intangible assets consist primarily of a listing of customer relationships recorded as part of the acquisition of Mobitec. Intangible assets are amortized using a straight-line method over 15 years. The Company periodically evaluates the recoverability of its intangible assets. If facts and circumstances suggest that the intangible assets will not be recoverable, as determined based upon the undiscounted cash flows expected to be generated, the carrying value of the intangible assets will be reduced to its fair value (estimated discounted future cash flows). To date, management has determined that no impairment of intangible assets exists.

Research and Development Costs

Research and development costs relating principally to product development are charged to operations as incurred. Research and development costs were $552,000, $974,000 and $1.1 million in 2009, 2008, and 2007 respectively. Upon the establishment of technological feasibility, the Company capitalizes salaries and related costs of certain engineering personnel incurred in the development of software. In addition, the Company capitalizes material interest costs incurred during the period of software development. The amounts capitalized were $2.1 million, $1.5 million and $669,000 in 2009, 2008 and 2007, respectively. These amounts include interest costs of $71,000 and $77,000 in 2009 and 2008, respectively. No interest costs were capitalized in 2007.

Advertising Costs

Advertising costs are charged to operations as incurred. Advertising costs were $463,000, $223,000 and $218,000 in 2009, 2008, and 2007, respectively.

Shipping and Handling Fees and Costs

The Company includes in net sales all shipping and handling fees billed to customers. Shipping and handling costs associated with outbound freight are included in cost of sales and totaled $1.3 million, $1.1 million and $827,000 in 2009, 2008, and 2007, respectively.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. Stock-based compensation costs for stock options are recognized on a straight-line basis.

Foreign Currency

The local currency of each of the countries of the operating foreign subsidiaries is considered to be the functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rate prevailing throughout the year. The effects of unrealized exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated as the cumulative translation adjustment included in accumulated comprehensive income (loss) in shareholders’ equity. Realized gains and losses on foreign currency transactions, if any, are included in operating results for the period.

These gains and losses resulted from trade and intercompany accounts receivable and accounts payable denominated in foreign currencies and foreign loans and notes payable denominated in U.S. dollars. The amounts of gains for the years ended December 31, 2009, 2008, and 2007 were $531,000, $558,000, and $210,000, respectively.

Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the

56

reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes a tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, management initially and subsequently measure the tax benefit as the largest amount that they judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.

Fair Value of Assets and Liabilities

In September 2006, the FASB issued ASC Topic 820-10, which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. The Company adopted ASC Topic 820-10 beginning January 1, 2008 with the exception of the application of the statement to non-recurring non-financial assets and non-financial liabilities. Under the provisions of ASC Topic 820-10-15, the Company adopted ASC Topic 820-10 as it relates to non-financial assets and liabilities on January 1, 2009. ASC Topic 820-10 defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels which distinguish between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The level in the fair value hierarchy within which the respective fair value measurement falls is determined based on the lowest level input that is significant to the measurement in its entirety. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities, Level 2 inputs are other than quotable market prices included in Level 1 that are observable for the asset or liability either directly or indirectly through corroboration with observable market data. Level 3 inputs are unobservable inputs for the assets or liabilities that reflect management’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company does not engage in hedging activities and historically has not used derivative instruments. In conjunction with a loan agreement pursuant to which a $5.0 million term loan was obtained in June 2008, the Company issued the lender warrants to purchase up to 350,000 shares of the Company’s Common Stock. These warrants were determined to be a derivative instrument based on the clarification within ASC Topic 815-40. Pursuant to the adoption of new accounting requirements, as of January 1, 2009, the fair value of these warrants was reclassified from equity to a current liability and a cumulative effect adjustment to retained earnings of $292,000 was recorded for the change in the fair value of the warrants. Through June 30, 2009, the fair value of the warrants were periodically remeasured using a Black-Scholes valuation model with Level 1 and Level 2 inputs and changes in fair value of the warrants were recognized in other income (loss) in the consolidated financial statements. Effective July 1, 2009, at which time the warrants had a fair value of $207,000, an amendment was executed to the warrant agreement (see Note 14 for further discussion of this amendment) which resulted in the classification of these warrants changing from a derivative instrument to an equity instrument. Accordingly, at July 1, 2009, the fair value of these warrants was reclassified from accrued expenses and other current liabilities to additional paid-in capital in the accompanying consolidated balance sheet and, as of July 1, 2009, periodic remeasurement of the fair value of the warrants is no longer required. For the year ended December 31, 2009, other income (loss) of approximately ($110,000) was recorded to recognize the change in fair value of these warrants.

The Company’s only non-financial asset evaluated using fair value measurements on a recurring basis is goodwill. This non-financial asset is evaluated for impairment annually on the Company’s measurement date at the reporting unit level using Level 3 inputs. For most assets, including goodwill, ASC Topic 820-10

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requires that the impact of changes resulting from its application be applied prospectively in the year in which the statement is initially applied. The Company’s measurement date for its goodwill is December 31, 2009. As of that date, it was determined no impairment existed and no events have occurred subsequent to December 31, 2009 that would indicate an impairment of goodwill has occurred.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged between willing parties other than in a forced sale or liquidation. We believe the carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their estimated fair values at December 31, 2009 due to their short maturities. We believe the carrying value of our lines of credit and loans payable approximate the estimated fair value for debt with similar terms, interest rates, and remaining maturities currently available to companies with credit ratings similar to the Company at December 31, 2009. As of December 31, 2009, the carrying value and estimated fair value of our long-term debt were $7.3 million and $6.5 million, respectively. The estimate of fair value of our long-term debt is based on debt with similar terms, interest rates, and remaining maturities currently available to companies with similar credit ratings at December 31, 2009.

Product Warranties

The Company provides a limited warranty for its products, generally for periods of one to five years. The Company’s standard warranties require the Company to repair or replace defective products during such warranty period at no cost to the customer. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time product sales are recognized. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

	Year Ended December 31,
	2009			2008			2007
Balance at beginning of period	$	495		$	491		$	384
Additions charged to costs and expenses		399			236			225
Deductions		(156	)		(164	)		(135	)
Foreign exchange translation (gain) loss		67			(68	)		17
Balance at end of period	$	805		$	495		$	491

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 105, “Generally Accepted Accounting Principles”, (formerly referred to as SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”). ASC Topic 105 establishes the ASC as the source of authoritative principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. ASC Topic 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASC Topic 105 did not have a material impact on our consolidated financial statements for the year ended December 31, 2009.

On February 12, 2008, the FASB issued ASC Topic 820-10-15, “Fair Value Measurements and Disclosures”, (formerly referred to as FASB Staff Position (“FSP”) No. FAS 157-2, “Effective date of FASB Statement No. 157”), which delayed the effective date of ASC Topic 820-10, (formerly referred to as SFAS No. 157), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until 2009. The Company adopted the provisions of ASC Topic 820-10 for nonfinancial assets and nonfinancial liabilities effective January 1,

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2009. The adoption of ASC Topic 820-10 with respect to nonfinancial assets and nonfinancial liabilities did not have a significant impact on our results of operations or financial condition.

In December 2007, the FASB issued ASC Topic 805-10, “Business Combinations”, (formerly referred to as SFAS No. 141(R)). ASC Topic 805-10 retains the underlying concepts of prior guidance in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting; but ASC Topic 805-10 changed the method of applying the acquisition method in a number of significant aspects. ASC Topic 805-10 requires companies to recognize, with certain exception, 100% of the fair value of the assets acquired, liabilities assumed and non-controlling interest in acquisitions of less than 100% controlling interest when the acquisition constitutes a change in control; measure acquirer shares issued as consideration for a business combination at fair value on the date of the acquisition; recognize contingent consideration arrangements at their acquisition date fair value, with subsequent change in fair value generally reflected in earnings; recognition of reacquisition loss and gain contingencies at their acquisition date fair value; and expense, as incurred, acquisition related transaction costs. We adopted the provisions of ASC Topic 805-10 effective January 1, 2009 and accounted for the acquisition of the remaining 50% interest in Mobitec Brazil Ltda under the provisions of ASC Topic 805-10 (see Note 2 to the accompanying consolidated financial statements for further discussion of this acquisition).

In December 2007, the FASB issued ASC Topic 810-10-65, “Consolidation”, (formerly referred to as SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51”). ASC Topic 810-10-65 establishes new standards that govern the accounting for and reporting of (1) noncontrolling interest in partially-owned consolidated subsidiaries and (2) loss of control of subsidiaries. ASC Topic 810-10-65 requires that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interest of the noncontrolling owners separately within the consolidated statement of position within equity, but separate from the parent’s equity and separately on the face of the consolidated income statement. Further, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary should be initially measured at fair value. We adopted the provisions of ASC Topic 810-10-65 effective January 1, 2009 and accounted for the acquisition of the remaining 50% interest in Mobitec Brazil Ltda under the provisions of ASC Topic 810-10-65 (see Note 2 to the accompanying consolidated financial statements for further discussion of this acquisition). The adoption of ASC Topic 810-10-65 impacted the accompanying consolidated financial statements for all periods presented as follows:

•  The noncontrolling interests in our subsidiaries of which we have less than 100% ownership 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 our subsidiaries of which we have less than 100% ownership.

•  Consolidated comprehensive income (loss) has been adjusted to include the comprehensive income (loss) attributed to the noncontrolling interest in our subsidiaries of which we have less than 100% ownership.

•  We have disclosed for each reporting period the amounts of consolidated income (loss) attributed to the Company and the noncontrolling interest in our subsidiaries of which we have less than 100% ownership. 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 our subsidiaries of which we have less than 100% ownership.

In March 2008, the FASB issued ASC Topic 815-10, “Derivatives and Hedging”, (formerly referred to as SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133”), which is effective on a prospective basis for fiscal years and interim periods beginning after November 15, 2008. ASC Topic 815-10 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand such effects on financial position, financial performance and cash flow. We adopted the provisions of ASC

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Topic 815-10 effective January 1, 2009. The adoption of ASC Topic 815-10 did not have a material impact on our results of operations or financial condition.

In April 2008, the FASB issued ASC Topic 350-30-65, “Intangibles-Goodwill and Other”, (formerly referred to as FSP FAS 142-3,“Determination of the Useful Life of Intangible Assets”) ASC Topic 350-30-65 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC Topic 350-30-65 is effective for fiscal years beginning after December 15, 2008. We adopted the provisions of ASC Topic 350-30-65 effective January 1, 2009. The adoption of ASC Topic 350-30-65 did not have a material impact on our results of operations or financial condition.

In June 2008, the FASB issued ASC Topic 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”, (formerly referred to as Emerging Issues Task Force (“EITF”) Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”). ASC Topic 815-40 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under ASC Topic 815-10-15 (formerly referred to as SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”). ASC Topic 815-40 is effective for financial statements issued for fiscal years beginning after December 15, 2008. In conjunction with a loan agreement pursuant to which a $5.0 million term loan was obtained in June 2008, the Company issued the lender warrants to purchase up to 350,000 shares of our Common Stock. These warrants were determined to be a derivative instrument based on the clarification within ASC Topic 815-40. As of January 1, 2009, the fair value of these warrants was reclassified from equity to a current liability and a cumulative effect adjustment to retained earnings was recorded for the change in the fair value of the warrants. During the period in which the warrants are classified as a liability, the fair value of the warrants will be periodically remeasured with any changes in value recognized in other income (loss) in the consolidated financial statements. See the “Fair Value of Assets and Liabilities” section of Note 1 to the accompanying consolidated financial statements for further discussion of accounting treatment of these warrants.

In May 2009, the FASB issued ASC Topic 855-10, “Subsequent Events”, (formerly referred to as SFAS No. 165, “Subsequent Events”) which was amended in February 2010. ASC Topic 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855-10 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of ASC Topic 855-10, as amended, did not have an impact on our consolidated financial statements for the year ended December 31, 2009, as it is our continuing policy to evaluate subsequent events through the date our financial statements are issued. For the year ended December 31, 2009, we have evaluated subsequent events through April 15, 2010, which is the date our financial statements were issued and filed with the SEC.

(2)   Mobitec Brazil Ltda

Pursuant to terms of a Quota Purchase Agreement entered into on July 22, 2009 and amended September 17, 2009, (the “Purchase Agreement”) Mobitec EP acquired the remaining fifty percent (50%) of the issued and outstanding interests of Mobitec Brazil for an aggregate consideration of US$2.95 million. Payment of the consideration is separated into (a) US$1.0 million payable within 10 days of the official registration of the transfer of interests to Mobitec EP with the Brazilian governmental Board of Trade and (b) a promissory note for US$1.95 million (the “Promissory Note”). Per terms of the Purchase Agreement, as amended, the acquisition by Mobitec EP of the remaining fifty percent (50%) of the interests of Mobitec Brazil is effective July 1, 2009, the date upon which the Company assumed full control of the business. The official registration of the transfer of interests with the governmental Board of Trade occurred on November 16, 2009 and payment of US$1.0 million under terms of the Purchase Agreement was made on November 19, 2009.

In order to enter into the Purchase Agreement and the related transactions, on August 7, 2009, the Borrowers (as defined in Note 9) and DRI (collectively, the “Loan Parties”), entered into the Third Amendment to the BHC Agreement (the “Loan Amendment”) with BHC. The Loan Amendment, among other

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things, consents to and permits (a) the acquisition of the 50% interests of Mobitec Brazil by Mobitec EP, (b) the conveyance by Mobitec AB to Mobitec EP of the interests of Mobitec Brazil representing fifty percent (50%) of the issued and outstanding interests of Mobitec Brazil owned by Mobitec AB, and (c) the subsequent merger of Mobitec EP with and into Mobitec Brazil.

The Promissory Note is unsecured and obligates Mobitec EP to make twelve (12) successive fixed quarterly principal payments of $162,500 within thirty (30) days after the close of each calendar quarter with the last quarterly principal payment due within thirty (30) days after the close of the quarter ending September 30, 2012. The unpaid principal balance of the Promissory Note bears simple interest at a rate of five percent (5%) per annum, which will be payable quarterly on each date on which a quarterly principal payment is due. Mobitec EP will have the right, at its discretion, with certain interest rate provisions applied, to not make up to two such quarterly principal payments, provided such two quarterly principal payments are not consecutive (with such amounts to bear interest therefrom at a rate of nine percent (9%) per annum) and to defer such quarterly principal payments to the end date of the Promissory Note. The principal balance of $1.95 million outstanding on the Promissory Note at December 31, 2009 is included in long-term debt in the accompanying consolidated balance sheet.

In accordance with ASC Topic 810-10-65, effective July 1, 2009, we recorded the acquisition of the 50% interests in Mobitec Brazil, as described herein, as an equity transaction, whereby the difference between the aggregate consideration of $2.95 million and the carrying value of non-controlling interests in Mobitec Brazil as of July 1, 2009 of $243,000 was recorded as additional paid-in capital.

(3)   Discontinued Operations

On April 30, 2007 (the “Closing Date”), the Company and DAC entered into a Share Purchase Agreement (the “Purchase Agreement”) with Dolphin Direct Equity Partners, LP (“Dolphin”), a Delaware limited partnership, pursuant to which Dolphin acquired all of DAC’s issued and outstanding shares of common stock for an aggregate purchase price of approximately $1.4 million (the “Purchase Price”). Dolphin is an affiliate of Dolphin Offshore Partners, L.P., the beneficial owner of 9.9% of our issued and outstanding Common Stock as of the Closing Date. Dolphin paid $1.1 million of the Purchase Price on the Closing Date. The remainder of the Purchase Price is reflected in a promissory note issued to the Company in the original principal amount of $344,000 (the “Promissory Note”), payable in four equal annual installments of $86,000. Interest on the promissory note is payable semi-annually at the prime rate as published by the Wall Street Journal. The Promissory Note is reflected in the accompanying consolidated balance sheet as a note receivable. Additionally, pursuant to terms of the Purchase Agreement, the Company retained the exclusive right to purchase DAC’s products for resale in the United States for the two-year period following the Closing Date. No gain or loss was recorded by the Company on this transaction.

In accordance with ASC Topic 205-20, “Discontinued Operations”, this segment of the business is reported as discontinued operations and, accordingly, income and losses from discontinued operations have been reported separately from continuing operations. Amounts reported in prior periods have been retroactively adjusted in the accompanying consolidated statements of operations to remove them from their historical classifications to conform with this presentation. Net sales and income (loss) before income tax expense from discontinued operations for the year ended December 31, 2007 was as follows:

	Year Ended
	December 31,
	2007
	(In thousands)
Net sales	$	239
Loss before income tax expense		(219	)

DAC comprised all of the operations of the law enforcement and surveillance segment of the Company. As a result of the divestiture of DAC, the Company has only one business segment, the transportation communications segment.

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(4)   Goodwill and Other Intangible Assets

The Company recorded goodwill in connection with its acquisition of Mobitec. The Company completed its annual goodwill impairment evaluations as of December 31, 2009 and has concluded that no impairment exists. Therefore, as a result of this impairment evaluation and impairment evaluations as of December 31, 2008 and 2007 completed in prior years, no impairment charges were recorded during the years ended December 31, 2009, 2008, and 2007.

The change in the carrying amount of goodwill for the years ended December 31, 2009, 2008, and 2007 is as follows:

	(In thousands)
Balance as of January 1, 2007	$	10,289
Effect of exchange rates		744
Balance as of December 31, 2007		11,033
Effect of exchange rates		(1,999	)
Balance as of December 31, 2008		9,034
Effect of exchange rates		759
Balance as of December 31, 2009	$	9,793

The composition of the Company’s intangible assets and the associated accumulated amortization as of December 31, 2009 and 2008 is as follows:

	Weighted		December 31, 2009						December 31, 2008
	Average		Gross				Net		Gross				Net
	Remaining Life		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(Years)		Amount		Amortization		Amount		Amount		Amortization		Amount
	(In thousands)
Intangible assets subject to amortization:
Patents and development costs		0.0	$	—	$	—	$	—	$	10	$	10	$	—
Customer lists		6.55		1,666		938		728		1,550		769		781
Resale rights to DAC products		0.0		—		—		—		58		49		9
			$	1,666	$	938	$	728	$	1,618	$	828	$	790

The aggregate amount of amortization expense for the years ended December 31, 2009, 2008, and 2007 was $115,000, $151,000, and $138,000, respectively. Amortization expense for the five succeeding years is estimated to be $111,000 for each of the years ending December 31, 2010 through December 31, 2014.

The difference in the gross carrying amount from 2008 to 2009 is due to fluctuations in foreign currencies.

(5)   Accounts Receivable

	December 31,
	2009			2008
	(In thousands)
Trade accounts receivable	$	18,465		$	12,582
Less: allowance for doubtful accounts		(273	)		(179	)
	$	18,192		$	12,403

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(6)   Property and Equipment

	Estimated
	Depreciable	December 31,
	Lives (Years)	2009		2008
		(In thousands)
Leasehold improvements	3 - 10	$	306	$	286
Automobiles	4 - 6		387		13
Computer and telecommunications equipment	2 - 5		1,137		976
Software	5		7,163		4,592
Test equipment	3 - 7		144		124
Furniture and fixtures	2 - 10		2,331		2,490
Software projects in progress			1,245		1,392
			12,713		9,873
Less accumulated depreciation and amortization			7,447		6,266
Total property and equipment, net		$	5,266	$	3,607

The aggregate amount of depreciation and amortization expense for the years ended December 31, 2009, 2008, and 2007 was $1.0 million, $933,000, and $1.1 million, respectively.

The Company has $3.0 million and $1.3 million in unamortized computer software costs as of December 31, 2009 and 2008, respectively. The expense related to the amortization of capitalized computer software costs for the years ended December 31, 2009, 2008, and 2007, which is included in the depreciation and amortization amount above, was $679,000, $524,000, and $622,000, respectively.

(7)   Inventories, net

	December 31,
	2009		2008
	(In thousands)
Raw materials and system components	$	8,924	$	6,803
Work in process		35		243
Finished goods		4,083		3,616
Total inventories	$	13,042	$	10,662

(8)   Leases

The Company leases its premises and certain office equipment under various operating leases that expire at various times through 2017. Rent and lease expense under these operating leases was $994,000, $881,000, and $836,000 for, 2009, 2008, and 2007, respectively. Two agreements under which the Company leases office space and warehouse facilities require escalating payments over the term of the leases. The Company records rent expense under these leases on a straight-line basis.

The Company has capital lease obligations for a truck that expires in 2013 and a copier that expires in 2012.

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At December 31, 2009, future minimum lease payments under the non-cancelable operating leases and the future minimum lease payments and present value of the capital leases are as follows:

	Capital		Operating
	Leases		Leases
	(In thousands)
Year Ending December 31,
2010	$	17	$	1,244
2011		17		924
2012		13		668
2013		1		530
2014		—		332
Thereafter		—		993
Total future minimum lease payments		48	$	4,691
Less amount representing interest (9% Interest)		5
Present value of future minimum capital lease payments		43
Less current portion		15
Long-term portion	$	28

(9)   Lines of Credit and Loans Payable

a)   Domestic lines of credit and loan payable

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”), which terminates June 30, 2011. 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. 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 (as defined in the PNC Agreement, as amended) that the Borrowers have with respect to eligible foreign receivables, 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. If all outstanding obligations under the PNC Agreement are paid before the end of the three-year term, the Borrowers will be obligated to pay an early termination fee of up to $160,000, depending on the time the early termination occurs. At December 31, 2009, the outstanding principal balance on the revolving credit facility was approximately $3.8 million and remaining borrowing availability under the revolving credit facility was approximately $1.5 million.

Pursuant to terms of a loan agreement (the “BHC Agreement”) with BHC Interim Funding III, L.P. (“BHC”), the Borrowers have outstanding a $4.8 million term loan (the “Term Loan”) that matures June 30, 2011. DRI agreed to guarantee the Borrowers’ obligations under the BHC Agreement. The Term Loan bears interest at an annual rate of 12.75% and is secured by substantially all tangible and intangible assets of the

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Company. Additionally, the Term Loan is secured by a pledge of all outstanding common stock of the Borrowers and Robinson Turney International, Inc. and a pledge of 65% of the outstanding common stock of all foreign subsidiaries other than Mobitec Pty, Castmaster Mobitec and Mobitec Far East. The BHC Agreement contains certain covenants and provisions with which we and the Borrowers must comply on a quarterly basis and subjects the Borrowers to a termination fee that escalates over time. The amount of the termination fee due is dependent upon the date of repayment, if any, with the maximum amount due if the Term Loan is not paid until the maturity date.

The PNC Agreement and the BHC Agreement contain certain covenants with which we and our subsidiaries must comply. Among the covenants contained in the PNC Agreement and BHC Agreement are requirements that we and our domestic subsidiaries maintain certain leverage ratios as of the end of each fiscal quarter for the twelve-month period then ending. On March 26, 2009, the PNC Agreement and BHC Agreement were each amended to revise the minimum EBITDA and leverage ratios required to be maintained as of the end of each of the fiscal quarters ending March 31, 2009, June 30, 2009 and September 30, 2009 as set forth below.

Fiscal Quarter Ending:	EBITDA:		Leverage Ratio:
March 31, 2009	$	3,000,000		5.70 to 1.0
June 30, 2009	$	2,500,000		6.25 to 1.0
September 30, 2009	$	4,000,000		4.55 to 1.0

See Note 2 for disclosure of an amendment to the BHC Agreement entered into by the Borrowers and DRI with BHC on August 7, 2009.

On October 1, 2009, the BHC Agreement was amended to, among other things, effect the following:

•  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 EP 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 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.

On October 5, 2009 (the “PNC Effective Date”), the PNC Agreement was amended (the “PNC Amendment”) to, among other things, effect the following:

•  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

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“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 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.

On November 2, 2009, using proceeds from the sale of Series K Preferred Stock, the Borrowers paid $250,000 of the outstanding principal balance of the Term Loan. In addition to the principal payment, pursuant to terms of the BHC Agreement, the Borrowers paid a termination fee of $20,000 to BHC. As a result of the $250,000 principal payment, the maximum termination fee to be paid by the Borrowers under the BHC Agreement was reduced from $735,000 to $698,000. We are recording the maximum termination fee on the Term Loan ratably over the term of the BHC Agreement as interest expense. During the twelve months ended December 31, 2009, we recorded approximately $243,000 of interest expense related to the Term Loan termination fee, all of which is included in long-term debt on the consolidated balance sheet.

For the quarter ended September 30, 2009, we and the Borrowers were not in compliance with the leverage ratio required to be maintained under terms of the PNC Agreement and the BHC Agreement as amended on March 26, 2009. PNC agreed to amend the PNC Agreement to revise the leverage ratio required to be maintained for the quarter ended September 30, 2009 to 5.25 to 1.00. BHC agreed to waive the violation of the leverage ratio covenant for the quarter ended September 30, 2009. On December 29, 2009, the PNC Agreement and BHC Agreement were each amended to revise the minimum leverage ratios required to be maintained as of the end of each fiscal quarter as set forth below.

Fiscal Quarter Ending:	Leverage Ratio:
September 30, 2009		5.25 to 1.0
December 31, 2009		5.00 to 1.0
March 31, 2010		6.75 to 1.0
June 30, 2010		8.25 to 1.0
September 30, 2010		7.00 to 1.0
December 31, 2010 and each fiscal quarter ending thereafter		5.50 to 1.0

With the exception of the leverage ratio for the quarter ended September 30, 2009, as described herein, we were in compliance with all financial loan covenants in 2009. Additionally, PNC and BHC agreed to extend the date for the Company to provide audited 2009 financial statements to April 30, 2010.

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b)   International lines of credit and loans payable

Mobitec AB, the Company’s wholly-owned Swedish subsidiary, has in place agreements with Svenska Handelsbanken AB (“Handelsbanken”) under which working capital credit facilities have been established. On June 16, 2009, Mobitec AB and Handelsbanken entered into amendments to these agreements to, among other things, until April 30, 2010, increase the borrowing capacity on the credit facilities by 3.5 million krona (approximately US$488,000, based on exchange rates as of December 31, 2009) to 27.5 million krona (approximately US$3.8 million, based on exchange rates as of December 31, 2009) and increase the annual interest rate on the credit facilities from Tomorrow Next Stockholm Interbank Offered Rate (“T/N STIBOR”) plus 1.85% to T/N STIBOR plus 3.65%. At December 31, 2009, borrowings due and outstanding under these credit facilities totaled 14.7 million krona (approximately US$2.0 million, based on exchange rates at December 31, 2009) and are reflected as lines of credit in the accompanying consolidated balance sheet. Additional borrowing availability under these agreements at December 31, 2009, amounted to approximately US$1.8 million. These credit agreements renew annually on a calendar-year basis. See Note 24 for disclosure of amendments to these credit agreements.

At December 31, 2009, Mobitec AB had an outstanding principal balance of 1.5 million krona (approximately US$209,000, based on exchange rates at December 31, 2009) due on a term loan under a credit agreement with Handelsbanken (the “Mobitec Term Loan”). On June 16, 2009, Mobitec AB and Handelsbanken entered into an amendment to the Mobitec Term Loan agreement to, among other things, extend the repayment date for the outstanding principal balance of 1.5 million krona from June 30, 2009 to March 31, 2010 and decrease the annual interest rate on the Mobitec Term Loan from 5.80% to 5.55%. The outstanding principal balance due on the Mobitec Term Loan is reflected as a loan payable in the accompanying consolidated balance sheet. See Note 24 for disclosure of amendments to this credit agreement.

At December 31, 2009, Mobitec AB had an outstanding principal balance of 3.4 million krona (approximately US$470,000, based on exchange rates at December 31, 2009) due on an additional term loan under a credit agreement with Handelsbanken (the “Mobitec Loan”) that matures June 30, 2011. On June 16, 2009, Mobitec AB and Handelsbanken entered into an amendment to the Mobitec Loan agreement to, among other things, extend the principal payment of 375,000 krona (approximately US$52,000, based on exchange rates as of December 31, 2009) due on the Mobitec Loan from June 30, 2009 to March 31, 2010; increase the quarterly principal payments due on this term loan from 375,000 krona to 500,000 krona (approximately US$70,000, based on exchange rates as of December 31, 2009) beginning June 30, 2010; and decrease the annual interest rate on the Mobitec Loan from 5.80% to 5.55%. The outstanding principal balance due on the Mobitec Loan is reflected as long-term debt in the accompanying consolidated balance sheet.

Mobitec GmbH, the Company’s wholly-owned subsidiary in Germany, has in place an agreement with Handelsbanken under which a working capital credit facility has been established. On June 25, 2009, Mobitec GmbH and Handelsbanken entered into an amendment to this agreement to, among other things, until April 30, 2010, increase the borrowing capacity on the credit facility by 500,000 Euro (approximately US$717,000, based on exchange rates as of December 31, 2009) to approximately 1.4 million Euro (approximately US$2.0 million, based on exchange rates as of December 31, 2009) and increase the annual interest rate on the credit facility from Euro OverNight Index Average (“EONIA”) plus 1.85% to EONIA plus 3.70%. At December 31, 2009, borrowings due and outstanding under this credit facility totaled 954,000 Euro (approximately US$1.4 million, based on exchange rates at December 31, 2009) and are reflected as lines of credit in the accompanying consolidated balance sheet. Additional borrowing availability under this credit facility at December 31, 2009, amounted to approximately $640,000. The agreement under which this credit facility is extended has an open-ended term.

At December 31, 2009, Mobitec Brazil Ltda has outstanding borrowings from two banks in Brazil of approximately 235,000 Brazilian Real (“BRL”) (approximately US$135,000, based on exchange rates at December 31, 2009). The borrowings are secured by accounts receivable on certain export sales by Mobitec Brazil Ltda, bear interest at annual rates ranging from 7.60% to 9.28%, and have a term of 180 days. These borrowings are included in loans payable on the accompanying consolidated balance sheet.

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At December 31, 2009, Mobitec Brazil Ltda had five loans payable to a bank in Brazil with an aggregate outstanding principal balance of approximately 206,000 BRL (approximately US$119,000, based on exchange rates as of December 31, 2009). One loan has a principal balance of approximately 161,000 BRL (approximately US$93,000, based on exchange rates as of December 31, 2009), bears interest at an annual rate of 4.64%, and matures on April 13, 2010. Four additional loans outstanding with an aggregate outstanding principal balance of approximately 45,000 BRL (approximately US$26,000, based on exchange rates as of December 31, 2009) bear interest at annual rates ranging from 15.12% to 19.41% and have maturity dates ranging from January 17, 2010 to November 16, 2010. The outstanding principal balances due on these loans are included in loans payable in the accompanying consolidated balance sheet.

At December 31, 2009, Mobitec EP had an outstanding balance of $1.95 million due on a promissory note entered into in connection with the execution of the Purchase Agreement for the acquisition of the remaining fifty percent (50%) of the issued and outstanding interests of Mobitec Brazil. See Note 2 for a full description of the terms of this promissory note.

At December 31, 2009, Castmaster Mobitec had two loans payable to HDFC Bank in India with an aggregate outstanding principal balance of approximately 7.2 million Indian rupees (“INR”) (approximately US$154,000, based on exchanges rates as of December 31, 2009). One loan has a principal balance of approximately 6.2 million INR (approximately US$132,000, based on exchange rates as of December 31, 2009), bears interest at an annual rate of 8.0%, and matures on October 7, 2012. The second loan has a principal balance of approximately 1.0 million INR (approximately US$22,000, based on exchange rates as of December 31, 2009), bears interest at an annual rate of 9.51%, and matures on November 7, 2014. The outstanding principal balance due on these notes is included in long-term debt in the accompanying consolidated balance sheet.

Domestic and international lines of credit consist of the following:

	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	$	3,786	$	1,601
Line 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 3.53% and 6.58% in 2009 and 2008, respectively		—		732
Line 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 4.83% and 6.95% in 2009 and 2008, respectively		2,047		573
Line 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 3.48% and 5.62% in 2009 and 2008, respectively		1,367		837
Total lines of credit	$	7,200	$	3,743

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(10)   Long-Term Debt

Long-term debt at December 31, 2009, and 2008 consists of the following:

	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%	$	4,750	$	5,000
Term loan with Svenska Handelsbanken AB, dated June 30, 2008; payable in quarterly installments of $52,000; secured by accounts receivable and inventory of the Swedish subsidiary, Mobitec AB; bears average interest rate of 7.32%		470		483
Term loan with Robert Demore, dated August 31, 2009; payable in quarterly installments of $162,500; unsecured; bears interest rate of 5.0%		1,950		—
Term loan with HDFC Bank, dated October 5, 2009; payable in monthly installments of $4,461; bears interest rate of 8.0%		132		—
Term loan with HDFC Bank, dated November 14, 2009; payable in monthly installments of $481; bears interest rate of 9.51%		22		—
Total long-term debt		7,324		5,483
Term loan termination fee accrual		346		123
Less current portion		960		193
Less debt discount		166		278
		6,544		5,135
Long-term portion of capital leases		28		14
Total long-term debt and capital leases, less current portion	$	6,572	$	5,149

Interest expense was $1.5 million, $1.4 million, and $1.2 million for the years ended December 31, 2009, 2008, and 2007, respectively.

The repayment amounts of long-term debt are due as follows:

Year Ending December 31,	Amount
	(In thousands)
2010	$	960
2011		5,660
2012		698
2013		5
2014		1
Thereafter		—
Total	$	7,324

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(11)   Accrued Expenses and Other Current Liabilities

	December 31,
	2009		2008
	(In thousands)
Salaries, commissions, and benefits	$	2,024	$	1,428
Taxes — payroll, sales, income, and other		1,967		851
Warranties		805		495
Current portion of capital leases		15		19
Interest payable		166		281
Deferred revenue		557		694
Customer rebates and credits		404		165
Other		521		426
Total accrued expenses	$	6,459	$	4,359

(12)   Preferred Stock

Subsequent to December 31, 2009, on February 2, 2010, the Company’s board of directors adopted an amendment to DRI’s Amended and Restated Articles of Incorporation pursuant to which authorized shares of preferred stock of the Company, par value $.10 per share, were designated as follows: 166 shares are designated as Series AAA Redeemable, Nonvoting Preferred Stock (“Series AAA Preferred”), 30,000 shares are designated as Series D Junior Participating Preferred Stock (“Series D Preferred”), 80 shares are designated as Series E Redeemable Nonvoting Convertible Preferred Stock (“Series E Preferred”), 725 shares are designated as Series G Convertible Preferred Stock (“Series G Preferred”), 125 shares are designated as Series H Convertible Preferred Stock (“Series H Preferred”), 500 shares are designated as Series K Senior Convertible Preferred Stock (“Series K Preferred”), and 4,968,404 shares remain undesignated. As of December 31, 2009, we had outstanding 166 shares of Series AAA Preferred, 80 shares of Series E Preferred, 480 shares of Series G Preferred, 69 shares of Series H Preferred, and 299 shares of Series K Preferred. There are no shares of Series D Preferred outstanding.

Series K Preferred

On October 26, 2009 and December 31, 2009, (each date a “Closing Date”), the Company sold an aggregate of 299 shares of Series K Preferred, par value $0.10 per share, to multiple outside investors pursuant to a subscription agreement with each investor. Each share of Series K Preferred has a liquidation preference of $5,000 per share (the “Liquidation Preference”). Gross proceeds to the Company were $1.5 million and have been used for general corporate working capital purposes and applied toward partial payment of the Term Loan with BHC (see Note 9). The Company recorded $154,000 of Series K Preferred issuance costs incurred as of December 31, 2009 as a reduction of the carrying value of the Series K Preferred. In addition to the subscription agreement, the Company entered into a registration rights agreement with each Series K Preferred investor pursuant to which the Company agreed that upon written demand from each Series K Preferred investor, the Company will register the shares of Series K Preferred issued to the Series K Preferred investor pursuant to the subscription agreement (the “Registrable Securities”) for resale by the Series K Preferred investor under the Securities Act of 1933, as amended (the “Securities Act”). The Company also agreed that it will register the Registrable Securities if the Company registers any of its securities under the Securities Act in connection with a public offering of the Company’s Common Stock during the one (1) year period following the Closing Date.

At the option of the holder, any or all outstanding shares of Series K Preferred may be converted into a number of fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock received upon conversion will be determined by multiplying the number of shares of Series K Preferred to be converted by a fraction, the numerator of which is the Liquidation Preference plus all accrued but unpaid dividends on such shares, if any, and the denominator of which is the conversion price then in effect for the

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Series K Preferred (the “Conversion Price”). The Conversion Price is as follows: (i) during the period from October 7, 2009 through October 6, 2011, $1.75 per share; (ii) during the period from October 7, 2011 through October 6, 2013, $2.25 per share; and (iii) on or after October 7, 2013, $3.00 per share. The Conversion Price is subject to adjustments upon the occurrence of stock splits, stock dividends, combinations or consolidations, reclassifications, exchanges and substitutions. The outstanding shares of Series K Preferred will automatically convert to shares of Common Stock if the closing bid price for the Common Stock on The NASDAQ Stock Market (or other exchange or market on which the Common Stock may from time to time be traded) for any consecutive 20-day period exceeds a certain amount (the “Maximum Bid Price”). The Maximum Bid Price is as follows: (i) during the period from October 7, 2009 through October 6, 2011, $4.00 per share; (ii) during the period from October 7, 2011 through October 6, 2013, $4.75 per share; and (iii) on or after October 7, 2013, $5.50 per share.

The holders of Series K Preferred are entitled to receive cumulative quarterly dividends payable in cash or additional shares of Series K Preferred, at the option of the holder, when and if declared by the Board of Directors, at a rate of 9.5% per annum on the Liquidation Preference. The holders of the Series K Preferred are entitled to vote with the holders of the Common Stock as a single class on any matters on which the holders of the Common Stock are entitled to vote and are entitled to a number of votes equal to the quotient obtained by dividing the Liquidation Preference by the then applicable Conversion Price, as defined above. The Company has the right to redeem all or any portion of the outstanding shares of Series K Preferred at its discretion.

On January 5, 2010, the Company sold an additional 11 shares of Series K Preferred to two investors. Gross proceeds of $55,000 were used for general corporate working capital purposes. Additionally, on January 5, 2010, the Company agreed to issue an aggregate of 24 shares of the Series K Preferred to a placement agent as consideration for such agent’s services to the Company in connection with the placement of the shares of Series K Preferred described herein. Upon the issuance of shares to the placement agent, the Company has 334 shares of Series K Preferred issued and outstanding.

Series E Preferred

Series E Preferred is convertible at any time into shares of Common Stock at a conversion price of $3.00 per share of Common Stock, subject to certain adjustments, and, prior to conversion, does not entitle the holders to any voting rights, except as may be required by law. The Company does not have the right to require conversion. Holders of Series E Preferred are entitled to receive cumulative quarterly dividends, when and if declared by the Board of Directors, at the rate of 7% per annum on the liquidation value of $5,000 per share. Series E Preferred is redeemable at the option of the Company at any time, in whole or in part, at a redemption price equal to the liquidation value plus accrued and unpaid dividends, or $400,000 at December 31, 2008. Holders of Series E Preferred do not have the right to require redemption.

Series G Preferred

Series G Preferred is convertible at any time into shares of Common Stock at a conversion price of $2.21 per share of Common Stock, subject to certain adjustments, and entitles the holders to voting rights on any matters on which holders of Common Stock are entitled to vote, based upon the quotient obtained by dividing the liquidation preference by $2.23, excluding any fractional shares. Holders of Series G Preferred are entitled to receive cumulative quarterly dividends payable in additional shares of Series G Preferred, when and if declared by the Board of Directors, at a rate of 8% per annum on the liquidation value of $5,000 per share, subject to certain adjustments upward, and increasing by an additional 6% per annum after five years. The Company has the right to redeem the shares after five years from the issue date of June 23, 2005.

Series H Preferred

Series H Preferred is convertible at any time into shares of Common Stock at a conversion price of $2.08 per share of Common Stock, subject to certain adjustments, and entitles the holders to voting rights on any matters on which holders of Common Stock are entitled to vote, based upon the quotient obtained by dividing

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the liquidation preference by the conversion price, excluding any fractional shares. Holders of Series H Preferred are entitled to receive cumulative quarterly dividends payable in additional shares of Series H Preferred, when and if declared by the Board of Directors, at a rate of 8% per annum on the liquidation value of $5,000 per share, subject to certain adjustments upward, and increasing by an additional 6% per annum after five years. The Company has the right to redeem the shares after five years from the issue date of October 31, 2005.

Series J Preferred

On October 13, 2009, 50 shares of Series J Preferred with a liquidation value of $250,000 were converted into 110,600 shares of the Company’s Common Stock. On October 29, 2009, 40 shares of Series J Preferred with a liquidation value of $200,000 were converted into 88,480 shares of the Company’s Common Stock. As a result of these conversions, there are no shares of Series J Preferred outstanding.

Series AAA Preferred

Series AAA Preferred is convertible at any time into shares of Common Stock at a conversion price of $5.50 per share of Common Stock and, prior to conversion, does not entitle the holders to any voting rights, except as may be required by law. Holders of Series AAA Preferred are entitled to receive quarterly dividends, when and if declared by the Board of Directors, at the rate of 5% per annum on the liquidation value of $5,000 per share. The Company has the right to redeem the Series AAA Preferred at its sole discretion upon providing holders with appropriate written notice.

Liquidation Priority

The Series K Preferred ranks prior and superior to the Company’s Series E Preferred, Series G Preferred, Series H Preferred, Series AAA Preferred, and Common Stock with respect to liquidation. The Series E Preferred, Series G Preferred, Series H Preferred, and Series J Preferred have equal priority with respect to liquidation, and shares of these series have liquidation preferences prior to the Company’s outstanding shares of Series AAA Preferred and Common Stock.

(13)   Comprehensive Income (Loss)

	December 31,
	2009		2008			2007
	(In thousands)
Net Income	$	1,976	$	2,131		$	862
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax		1,464		(4,058	)		1,173
Total other comprehensive income (loss), net of tax		1,464		(4,058	)		1,173
Comprehensive income (loss)		3,440		(1,927	)		2,035
Comprehensive income (loss) attributable to the noncontrolling interest		29		181			(39	)
Comprehensive income (loss) attributable to DRI Corporation	$	3,469	$	(1,746	)	$	1,996

(14)   Common Stock Warrants

In connection with the BHC Agreement, we issued BHC a warrant to purchase up to 350,000 shares of our Common Stock (the “BHC Warrant”) at an exercise price of $2.99 per share. The fair value allocated to the BHC Warrant of $333,000, calculated using the Black-Scholes model, was recorded as a discount to the Term Loan and is being amortized over the three-year term of the BHC Agreement.

On March 26, 2009, in connection with an amendment of the BHC Agreement (as described in Note 9), the BHC Warrant was amended (the “First Warrant Amendment”) to modify the exercise price at which BHC

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is entitled, under the terms of the BHC Warrant, to purchase an aggregate of 350,000 shares of DRI’s Common Stock, par value $0.10 per share. Pursuant to the terms of the First Warrant Amendment, BHC held the right to purchase (i) 200,000 shares of Common Stock at an exercise price equal to $1.00 per share, and (ii) 150,000 shares of Common Stock at an exercise price equal to $2.99 per share. The increase in fair value of the BHC Warrant of $57,000 resulting from the adjustment of the exercise price was recorded as deferred finance cost and is being amortized as interest expense ratably over the remaining term of the Term Loan.

Effective July 1, 2009, DRI and BHC agreed to an amendment of the BHC Warrant (the “Second Warrant Amendment”) which deleted the dilutive issuance provision (the “Provision”) contained in the BHC Warrant. Pursuant to the Provision, if DRI effected a dilutive issuance, as defined in the BHC Warrant, at any time while the BHC Warrant was outstanding, then the exercise price would be adjusted in accordance to the procedures described in the Provision. The Second Warrant Amendment also modified the exercise price at which BHC is entitled, under the terms of the BHC Warrant, as amended, to purchase an aggregate of 350,000 shares of Common Stock. Pursuant to the terms of the Second Warrant Amendment, BHC held the right to purchase (i) 200,000 shares of Common Stock at an exercise price equal to $1.00 per share, and (ii) 150,000 shares of Common Stock at an exercise price equal to $2.50 per share. The increase in fair value of the BHC Warrant of $10,000 resulting from the adjustment of the exercise price was recorded as deferred finance cost and is being amortized as interest expense ratably over the remaining term of the Term Loan.

On December 29, 2009, in connection with an amendment of the BHC Agreement (as described in Note 9), DRI and BHC entered into an amendment to the BHC Warrant (the “Third Warrant Amendment”) to modify the exercise price at which BHC is entitled, under the terms of the BHC Warrant, to purchase an aggregate of 350,000 shares of DRI’s Common Stock, par value $0.10 per share. Pursuant to the terms of the Third Warrant Amendment, BHC now holds the right to purchase (i) 200,000 shares of Common Stock at an exercise price equal to $1.00 per share, and (ii) 150,000 shares of Common Stock at an exercise price equal to $1.75 per share. The increase in fair value of the BHC Warrant resulting from the adjustment of the exercise price of $21,000 was recorded as deferred finance cost and is being amortized as interest expense ratably over the remaining term of the Term Loan.

The Company has issued Common Stock warrants in addition to the BHC Warrant. A summary of outstanding Common Stock Warrants as of December 31, 2009 is as follows:

Outstanding	Exercise		Expiration
Warrants	Price		Date
2,500	$	3.19	January 2010
240,000	$	2.21	June 2010
55,000	$	2.02	October 2010
93,750	$	1.60	March 2011
15,929	$	2.26	June 2012
80,000	$	2.00	April 2013
150,000	$	1.75	June 2013
200,000	$	1.00	June 2013

(15)   Stock-Based Compensation

The Company has two plans under which it has issued and outstanding stock options, the 1993 Incentive Stock Option Plan and the 2003 Stock Option Plan (collectively, the “Stock Option Plans”). Under the Stock Option Plans, options to purchase 2,555,000 shares of Common Stock have been authorized for issuance. As of December 31, 2009, options to purchase 172,183 shares of Common Stock are available for future issuance, all under the 2003 Stock Option Plan. The Company issues new shares of Common Stock upon exercise of stock options.

Stock-based compensation cost is measured at the grant date based on the fair value of the award. The Company recognizes these compensation costs net of a forfeiture rate and recognizes the compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award,

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which is generally the option vesting term. The Company estimated the forfeiture rate based on its historical experience since the inception of the Stock Option Plans.

The Company issues incentive stock options whereby options to purchase Common Stock are granted with exercise prices that are no less than the stock’s estimated fair market value at the date of the grant, vest based on three to four years of continuous service, and have ten year contractual terms. A summary of incentive stock option activity as of December 31, 2009 and changes during the year then ended is presented below:

						Weighted
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 31, 2008		848,765		$	2.63		7.9	$	—
Granted		200,000			1.50
Exercised		—
Expired		(20,459	)		1.95
Forfeited		(6,850	)		2.67
Outstanding at December 31, 2009		1,021,456		$	2.42		7.5	$	47,364
Vested and expected to vest at December 31, 2009		829,968		$	2.43		7.9	$	42,339
Exercisable at December 31, 2009		442,643		$	2.45		5.9	$	19,604

The number of stock options outstanding at December 31, 2008 has been decreased by 500 options from the amount previously reported due to an error in classifying options between incentive stock options and non-qualified stock options in the prior year.

The Company has issued non-qualified stock options to purchase Common Stock, primarily to non-employee members of the Board of Directors, which vest immediately upon grant or over three years and have five to ten year contractual terms. A summary of non-qualified stock option activity as of December 31, 2009 and changes during the year then ended is presented below:

						Weighted
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at December 31, 2008		351,414		$	2.65		3.2	$	—
Granted		157,000			1.51
Exercised		—			—
Expired		(50,000	)		2.90
Outstanding at December 31, 2009		458,414		$	2.23		3.6	$	34,076
Vested and expected to vest at December 31, 2009		407,337		$	2.20		3.7	$	33,389
Exercisable at December 31, 2009		229,770		$	2.45		2.2	$	13,556

The number of stock options outstanding at December 31, 2008 has been increased by 500 options from the amount previously reported due to an error in classifying options between incentive stock options and non-qualified stock options in the prior year.

Shares vested and expected to vest at December 31, 2009 in the tables above represent shares fully vested as of December 31, 2009, plus all non-vested shares as of December 31, 2009, adjusted for the estimated forfeiture rate. The aggregate intrinsic value in the tables above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2009 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had

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all the option holders exercised their options on December 31, 2009. This amount changes based on the fair market value of the Company’s Common Stock.

The aggregate intrinsic value of options exercised during the years ended December 31, 2008 and December 31, 2007 was $1,500, and $37,000, respectively. Cash received from stock option exercises was $2,700 and $134,000 during the years ended December 31, 2008 and December 31, 2007, respectively. There were no options exercised during the year ended December 31, 2009.

Total compensation expense related to the Stock Option Plans was $347,000, $187,000, and $41,000 for the years ended December 31, 2009, 2008, and 2007, respectively, and is included in selling, general and administrative expense in the accompanying consolidated statements of operations.

The fair value of stock option awards for the years ended December 31, 2009, 2008, and 2007, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions and fair values:

	2009			2008			2007
Weighted average fair value of grants	$	0.74		$	1.59		$	1.65
Risk-free interest rate		2.4	%		3.4	%		4.2	%
Expected life		6.3 years			6.8 years			6.9 years
Expected volatility		71	%		70	%		72	%
Expected dividends		None			None			None

A description of each assumption used in calculating the fair value of stock option awards under the Black-Scholes option pricing model is as follows:

Risk-free interest rate.   The Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the option.

Expected life.  The expected life represents the period of time that options granted are expected to be outstanding and was determined based on the average length of time grants have remained outstanding in the past.

Expected volatility.  The Company’s volatility factor was calculated under the Black-Scholes model based on historical volatility of the Company’s Common Stock.

Expected dividends.  The Company has not issued any dividends to date and does not anticipate issuing any dividends in the foreseeable future.

As of December 31, 2009, there was $450,000 and $152,000 of unrecognized stock-based compensation expense related to non-vested incentive and non-qualified stock option grants, respectively. That cost is expected to be recognized over a weighted-average period of 2.5 and 1.9 years, respectively.

The Company has in place a shareholder-approved, equity-based stock compensation plan for members of the Board of Directors and certain key executive managers of the Company. The compensation plan partially compensates members of the Board of Directors and key executive management of the Company in the form of stock of the Company in lieu of cash compensation. The plan is made available on a fully voluntary basis. The plan includes the following provisions:

In regard to compensation to non-employee members of the Board of Directors, the plan provides:

•  Regular monthly retainer fee compensation is paid up to $1,000 in Common Stock and the remainder paid in cash, with shares payable determined as described below.

•  Shares of Common Stock payable under this plan are issued on a quarterly basis.

•  Individual directors may annually (as of each Annual Meeting of Shareholders) elect to opt in or out of the payment-in-stock provision of the plan, effective the following January 1.

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In regard to compensation to key executive managers, the plan provides:

•  Each key executive manager of the Company may make the election to receive up to $1,000 per month of his/her compensation in the form of Common Stock, with shares payable determined as described below.

•  Shares of Common Stock payable under the plan are issued on a quarterly basis.

•  The election to participate will be on a yearly basis, effective January 1 of each year. If the election is made to participate, the commitment is for the full year, unless compelling and extenuating circumstances arise supporting doing otherwise.

The number of shares payable under this plan is determined by dividing the cash value of stock compensation by the higher of (1) the actual closing price on the last trading day of each month, or (2) the book value of the Company on the last day of each month. Fractional shares are rounded up to the next full share amount. During the year ended December 31, 2009, the Company issued 80,641 shares of Common Stock to fourteen individuals under this plan at an average price of $1.25 per share in lieu of approximately $100,750 in cash compensation.

(16)   Income Taxes

On January 1, 2007, the Company adopted ASC Topic 740-10-25. ASC Topic 740-10-25 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under the provisions of ASC Topic 740-10-25, at December 31, 2009, the Company had recorded a liability for unrecognized tax benefits related to transfer pricing on intercompany sales of $380,000, which included accrued interest and penalties of $152,000 and of which $228,000 would increase the effective tax rate if recognized. While the Company believes that it has adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than the Company’s accrued position. Accordingly, additional provisions could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2009 and 2008 is as follows (in thousands):

	2009			2008
Balance as of January 1	$	264		$	267
Additions for tax positions related to prior years		—			—
Additions for tax positions related to the current year		(62	)		44
Foreign exchange translation gain		26			(47	)
Balance as of December 31	$	228		$	264

The Company files its tax returns as prescribed by the tax laws of the U.S. federal jurisdiction and various states and foreign jurisdictions in which it operates. The Company’s 2005 to 2009 tax years remain open to examination by U.S. taxing authorities. The foreign jurisdictions have open tax years from 2003 to 2009. Potential accrued interest on uncertain tax positions is recorded as a component of interest expense and potential accrued penalties are recorded as selling, general and administrative expenses.

The pretax income (loss) for the years ended December 31, 2009, 2008, and 2007 was taxed by the following jurisdictions:

	Year Ended December 31,
	2009			2008		2007
	(In thousands)
Domestic	$	(360	)	$	444	$	(7	)
Foreign		3,172			2,783		1,160
	$	2,812		$	3,227	$	1,153

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The income tax provision charged (benefit credited) for the years ended December 31, 2009, 2008, and 2007 were as follows:

	Year Ended December 31,
	2009			2008		2007
	(In thousands)
Current
U.S. federal	$	—		$	—	$	2
State		—			2		4
Foreign		861			932		384
		861			934		390
Deferred
U.S. federal		—			—		(247	)
State		—			—		(41	)
Foreign		(25	)		162		189
		(25	)		162		(99	)
	$	836		$	1,096	$	291

The income tax expense (benefit) differs from the expected amount of income tax expense (benefit) determined by applying the U.S. federal income tax rates to the pretax income (loss) for the years ended December 31, 2009, 2008, and 2007 due to the following:

	Year Ended December 31,
	2009						2008						2007
				Percentage						Percentage						Percentage
				of Pretax						of Pretax						of Pretax
	Amount			Earnings (Loss)			Amount			Earnings (Loss)			Amount			Earnings (Loss)
							(In thousands)
Computed “expected” tax expense (benefit)	$	956			34.0	%	$	1,028			34.0	%	$	392			34.0	%
Increase (decrease) in income taxes resulting from:
Nondeductible expenses		99			3.5			72			2.4			33			2.9
(Increase)/decrease in prior year NOL (correction)		(85	)		(3.0	)		(1,127	)		(37.3	)		—			—
Foreign subsidiary losses		—			—			—			—			(10	)		(0.9	)
Higher (lower) rates on earnings of foreign operations		(9	)		(0.3	)		211			7.0			1			0.1
State taxes, net of federal benefit		—			—			6			0.2			(37	)		(3.2	)
Uncertain tax positions		(70	)		(2.5	)		63			2.1			149			12.9
Changes in valuation allowance		(55	)		(2.0	)		843			27.9			(237	)		(20.6	)
	$	836			29.7	%	$	1,096			36.3	%	$	291			25.2	%

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Temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities that give rise to the deferred income taxes as of December 31, 2009 and 2008 are presented below:

	December 31,
	2009			2008
	(In thousands)
Deferred tax assets
Federal and state loss carryforwards	$	6,301		$	5,478
Federal tax credits		305			336
Foreign loss carryforwards		2,259			2,274
Inventory reserve and capitalization		122			114
Intangible assets		1			9
Other accruals and reserves		232			207
Total gross deferred tax assets		9,220			8,418
Less valuation allowance		(8,119	)		(8,175	)
		1,101			243
Deferred tax liabilities
Property and equipment		(851	)		(149	)
Untaxed foreign reserves		(338	)		(137	)
Total deferred tax liabilities		(1,189	)		(286	)
Net deferred tax liabilities	$	(88	)	$	(43	)

The Company reduces its deferred tax assets by a valuation allowance when, based upon the available evidence, it is more likely than not that a significant portion of the deferred tax assets will not be realized. At December 31, 2009, the Company’s deferred tax valuation allowance was attributable to operating loss carryforwards from its various domestic jurisdictions and one of its foreign subsidiaries. It is the Company’s belief that it is more likely than not the deferred tax assets generated by the operating loss carryforwards in these jurisdictions will not be realized in future periods.

The components giving rise to the net deferred tax assets described above have been included in the accompanying consolidated balance sheets as of December 31, 2009 and 2008 as follows:

	December 31,
	2009			2008
	(In thousands)
Current assets	$	250		$	94
Noncurrent assets	$	851		$	149
Noncurrent liabilities		(1,189	)		(286	)
Net noncurrent liabilities	$	(338	)	$	(137	)
Net deferred assets (liabilities)	$	(88	)	$	(43	)

At December 31, 2009, the Company has net operating loss carryforwards for federal income tax purposes of $16.6 million, which are available to offset future federal taxable income, if any, which expire beginning in 2010 through 2029. In addition, two of the Company’s domestic subsidiaries have net economic loss carryforwards for state income tax purposes of $10.3 million, which are available to offset future state taxable income, if any, through 2027 and 2028. Further, one of the Company’s foreign subsidiaries also has loss carryforwards for German tax purposes of $5.9 million, which are available to offset future foreign taxable income.

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The Tax Reform Act of 1986 contains provisions that limit the ability to utilize net operating loss carryforwards in the case of certain events including significant changes in ownership interests. If the net operating loss carryforwards are limited and the Company has taxable income that exceeds the permissible yearly net operating loss, the Company would incur a federal income tax liability even though net operating losses would be available in future years.

The Company also has research and development tax credits for federal income tax purposes of $305,000 at December 31, 2009 that expire in various years from 2010 through 2023.

(17)   Related Party Transactions

As more fully described in Note 12, the Company sold shares of Series K Preferred to multiple investors in October and December 2009. Two of the investors who purchased Series K Preferred in December 2009, John K. Pirotte and Helga Houston, are members of the Company’s board of directors. Mr. Pirotte purchased 10 shares of Series K Preferred with an aggregate liquidation preference of $50,000 and Ms. Houston purchased 4 shares of Series K Preferred with an aggregate liquidation preference of $20,000. Subsequent to December 31, 2009, in January 2010, John D. Higgins, a member of the Company’s board of directors and David L. Turney, the Company’s Chairman of the Board, President and Chief Executive Officer, purchased Series K Preferred. Mr. Higgins purchased 10 shares of Series K Preferred with an aggregate liquidation preference of $50,000 and Mr. Turney purchased 1 share of Series K Preferred with a liquidation preference of $5,000.

(18)   Segment and Geographic Information

Until the divestiture of DAC in April 2007 (see Note 3), DRI conducted its operations in two business segments, (1) the transportation communications segment; and (2) the law enforcement and surveillance segment. The law enforcement and surveillance segment is reflected as discontinued operations in the accompanying consolidated financial statements and is no longer reflected as an operating segment. Accordingly, the accompanying consolidated statements of operations report the results of operations of our only remaining operating segment and no separate disclosure is provided herein.

Geographic information for continuing operations is provided below. Long-lived assets include net property and equipment and other assets.

	2009		2008		2007
	(In thousands)
Net sales — continuing operations
North America	$	32,104	$	30,576	$	27,687
Europe		26,602		20,008		15,899
Asia-Pacific		15,644		8,018		4,839
Middle East		381		948		2,272
South America		7,554		11,009		7,235
	$	82,285	$	70,559	$	57,932
Long-lived assets — continuing operations
North America	$	3,670	$	2,982	$	1,345
Europe		1,948		1,527		1,538
Asia-Pacific		313		46		44
South America		225		209		246
	$	6,156	$	4,764	$	3,173

*	Geographic information regarding net sales was determined based upon sales to each geographic area.
**	Geographic information regarding long-lived assets was determined based upon the recorded value of those assets on the balance sheets of each of the geographic locations.

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(19)   Legal Proceedings

The Company, in the normal course of its operations, is involved in legal actions incidental to the business. In management’s opinion, the ultimate resolution of these matters will not have a material adverse effect upon the current financial position of the Company or future results of operations.

(20)   Foreign Tax Settlement

At December 31, 2006, Mobitec Brazil, recorded a liability for Imposto sobre Produtos Industrializados (Industrialized Products Tax or “IPI Tax”), a form of federal value-added tax in Brazil, and related penalties and interest assessed by Brazil’s Federal Revenue Service (“FRS”) in the amount of $1.5 million, or $750,000 net of the minority ownership in Mobitec Brazil.

The assessment was the result of an audit performed by the FRS in 2006 for the periods January 1, 1999 to June 30, 2006 and varying interpretations of Brazil’s complex tax laws by the FRS and the Company. Prior to the audit conducted by the FRS, the Company, under guidance provided by its Brazilian legal counsel, interpreted certain provisions of Brazil’s tax laws to conclude IPI Tax was suspended on sales of Mobitec Brazil’s products to be used in the manufacture of buses. Upon conclusion of the FRS audit in December 2006, the Company and its Brazilian legal counsel were informed the FRS did not concur with the Company’s assessment that suspension of IPI Tax on Mobitec Brazil’s sales of products to end users to be used in the manufacture of buses was appropriate. The Company reached a settlement with the FRS to pay the assessed amount in monthly installments over a five-year period.

Under the provisions of a new law enacted in Brazil in 2009, the FRS has provided relief to certain Brazilian entities by allowing a partial reduction in the amount of IPI tax obligations and related penalties and interest that have been previously assessed against those entities. Pursuant to the provisions of the new law, the outstanding IPI tax obligations, including penalties and interest, of Mobitec Brazil previously assessed, which are reflected as foreign tax settlement in the accompanying consolidated balance sheet, were reduced by approximately $275,000 (based on exchange rates as of December 31, 2009). Accordingly, in September 2009, we recorded an adjustment to reduce the foreign tax settlement by approximately $275,000, with a corresponding adjustment of $242,000 (based on exchange rates as of December 31, 2009) to reduce selling, general, and administrative expenses. The difference in the amount of the reduction recorded to the liability and the amount of the reduction recorded to expenses arises from different currency exchange rates used to convert transactions reported in Mobitec Brazil’s functional currency to U.S. dollars on the balance sheet and statement of operations, as described in Note 1.

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(21)   Per Share Amounts

The basic net income (loss) per common share has been computed based upon the weighted average shares of Common Stock outstanding. Diluted net income (loss) per common share has been computed based upon the weighted average shares of Common Stock outstanding and shares that would have been outstanding assuming the issuance of Common Stock for all potentially dilutive equities outstanding.

	2009		2008		2007
	(In thousands, except share amounts)
Net income applicable to common shareholders of DRI Corporation	$	1,511	$	1,193	$	380
Effect of dilutive securities on net income of DRI Corporation:
Convertible debt		—		10		—
Convertible preferred stock		11		—		—
Net income applicable to common shareholders of DRI Corporation, assuming conversions	$	1,522	$	1,203	$	380
Weighted average shares outstanding — Basic		11,548,403		11,333,984		10,751,220
Effect of dilutive securities on shares outstanding:
Options		10,898		26,170		73,078
Warrants		71,504		19,925		321,809
Convertible debt		—		112,394		—
Convertible preferred stock		85,002		—		—
Weighted average shares outstanding — Diluted		11,715,807		11,492,473		11,146,107

The calculation of weighted average shares outstanding for the years ended December 31, 2009, 2008 and 2007 excludes preferred stock convertible into 1,695,433, 1,641,729 and 1,566,574 shares of Common Stock, respectively, because they are anti-dilutive, and 2,010,049, 2,533,039 and 1,324,260, respectively, of stock options and warrants because these securities would not have been dilutive for these periods due to the fact that the exercise prices were greater than the average market price of our Common Stock for these periods or the total assumed proceeds under the treasury stock method resulted in negative incremental shares.

(22)   Unaudited Quarterly Financial Data

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2009 and 2008, respectively. Refer to Revenue Recognition in Note 1 for discussion of items impacting unaudited quarterly financial data.

	Year Ended December 31, 2009
	Q1			Q2		Q3		Q4
	(In thousands, except share and per share amounts)
				(Unaudited)
Net sales	$	13,202		$	21,514	$	21,555	$	26,014
Gross profit		3,686			6,670		7,167		7,273
Operating income (loss)		(866	)		1,326		2,007		1,375
Net income (loss) applicable to common shareholders of DRI Corporation		(1,149	)		1,075		842		743
Net income (loss) applicable to common shareholders per common share:
Basic	$	(0.10	)	$	0.09	$	0.07	$	0.06
Diluted	$	(0.10	)	$	0.09	$	0.07	$	0.06
Weighted average number of common shares and common share equivalents outstanding
Basic		11,473,219			11,498,254		11,522,979		11,696,980
Diluted		11,473,219			13,228,690		13,395,830		13,629,129

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	Year Ended December 31, 2008
	Q1		Q2		Q3		Q4
	(In thousands, except share and per share amounts)
			(Unaudited)
Net sales	$	17,025	$	19,103	$	18,794	$	15,637
Gross profit		6,032		6,543		6,500		4,813
Operating income (loss)		1,436		1,492		1,503		(517	)
Net income (loss) applicable to common shareholders of DRI Corporation		648		384		662		(501	)
Net income (loss) applicable to common shareholders per common share
Basic	$	0.06	$	0.03	$	0.06	$	(0.04	)
Diluted	$	0.06	$	0.03	$	0.06	$	(0.04	)
Weighted average number of common shares and common share equivalents outstanding
Basic		11,197,563		11,227,274		11,453,588		11,464,333
Diluted		12,873,397		11,610,692		13,052,316		11,464,333

(23)   Employee Benefit Plan

The Company has a defined contribution plan which covers substantially all of its full-time employees. The employees’ annual contributions are limited to the maximum allowed under the Internal Revenue Code. The Company may elect to match employee contributions and make further discretionary contributions to the plan. For the years ended December 31, 2009, 2008, and 2007, the Company did not elect to contribute to the plan on behalf of the employees.

(24)   Subsequent Events

On March 25, 2010, Mobitec AB modified certain of its existing loan and credit agreements with Handelsbanken to amend its existing credit facility with Handelsbanken to (i) extend, from April 30, 2010 to September 30, 2010, the 3.5 million krona (approximately US$483,000, based on exchange rates as of the date of the modification) increase to Mobitec AB’s borrowing capacity under the credit facilities, which increase was first effected on June 16, 2009, and (ii) increase the annual interest rate on the credit facilities from T/N STIBOR plus 3.65% to T/N STIBOR plus 3.80%.

Also on March 25, 2010, Mobitec AB entered into an amendment to the Mobitec Term Loan to extend the repayment date for the outstanding principal balance of 1.5 million krona (approximately US$207,000, based on exchange rates as of the date of the modification) from March 31, 2010 to September 30, 2010.

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T).   Controls and Procedures

The Company’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2009, the end of the period covered by this annual report on Form 10-K, due to the existence of the material weaknesses described below.

Management’s Report on Internal Control Over Financial Reporting

The management of DRI Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2009 due to the existence of a material weakness discussed below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Our disclosure controls and procedures as well as our internal controls over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures as well as our internal controls over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. The effectiveness of internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Material Weakness — Mobitec Brazil

In 2008, we identified several deficiencies in the design and effectiveness of internal control over financial reporting at our Mobitec Brazil joint venture business unit that, when considered in combination, indicated a material weakness. The control deficiencies identified resulted from inadequate implementation of formal policies and procedures and, where control processes had been implemented, inadequate documentation to provide evidence that such processes were operating effectively. Control deficiencies were identified in the following areas: inventory management, revenue recognition, accounts receivable, accounts payable, billing, order entry, purchasing, financial reporting, and information technology (“IT”). Although these control deficiencies had been identified, management believes it has performed adequate evaluation and analysis of financial information reported by Mobitec Brazil to provide reasonable assurance that no material misstatements entered the accompanying consolidated financial statements.

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Efforts to remediate the internal control deficiencies identified at Mobitec Brazil began in 2008 and, as expected, are still in process. Remediation efforts include the implementation of formal policies and procedures which will include the necessary level of documentation to ensure internal controls are designed and operating effectively at all times. Prior to mid-2009, remediation efforts were impeded as a consequence of the Company having less than complete ownership of Mobitec Brazil. Additionally, there was not a full-time employee at Mobitec Brazil who had experience in U.S. GAAP accounting or an understanding of implementing and managing effective internal control procedures. Effective July 1, 2009, we acquired the remaining 50% of Mobitec Brazil and, on that date, took full control of all operations of Mobitec Brazil. In August 2009 we hired a Financial Controller with experience in U.S. public companies and knowledge of requirements of the Sarbanes-Oxley Act of 2002. The hiring of the Financial Controller has bolstered our efforts to remediate the internal control deficiencies at Mobitec Brazil and we have seen significant progress in this area in the last quarter of 2009 and into 2010. We plan to complete remediation of the internal control deficiencies in 2010 and management is continuing to monitor the progress of the remediation efforts on an on-going basis. Additionally, we will engage a third-party consultant to help with this process in 2010. Further, while remediation efforts are in process and until such time as remediation is complete, management will continue to perform the evaluations and analyses we believe adequate to provide reasonable assurance there are no material misstatements of our financial statements.

Material Weakness — Revenue Recognition

During our 2008 year-end audit, management identified a material weakness in internal controls related to revenue recognition. The Company entered into certain revenue transactions with customers that were unique when compared to contracts executed in prior periods. These contracts contained multiple elements and deliverables, some of which were potentially contingent on each other. Revenue recognition in these types of contracts can be complicated and require thorough evaluation and documentation to ensure revenue is properly accounted for in accordance with GAAP. During our 2008 year-end closing process and related audit, it was determined that adequate evaluation and documentation of certain of these transactions had not occurred and, as a result, errors in our recognition of revenue during the year had occurred. As a result, the Company and the Audit Committee of the Company concluded that restatement of our second quarter 2008 consolidated financial statements was necessary. The Company filed an amended Form 10-Q for the quarterly period ended June 30, 2008 on March 31, 2009.

In connection with the material weakness in internal control related to revenue recognition, the following actions were taken by the Company in 2009:

•  A review of open sales orders is performed on a daily basis by an accounting manager. This review allows us to identify new orders with multiple deliverables as they are received so that we may determine the appropriate revenue accounting method to be applied and begin properly accounting for such orders immediately upon receipt.

•  A separate file of supporting documentation for each identified multiple deliverable order is compiled and organized by an accounting manager. Documentation in the file folder for each order with multiple deliverables includes copies of the contract or purchase order, customer acceptance forms, E-mail correspondence with accounting management, sales management, project management, and customer representatives, as well as support for fair value calculations performed in applying the proper revenue accounting methods. Maintaining separate files with supporting documentation for each multiple deliverable contract allows for an efficient review by management and helps maintain a proper audit trail.

•  Each month, the Corporate Assistant Controller reviews the month-end open sales order report to ensure that all multiple deliverable contracts have been properly identified. In addition, for all contracts identified as containing multiple deliverables, the Corporate Assistant Controller reviews the documentation supporting the fair value calculations including the deliverables and the corresponding fair values, and also reviews the calculation for computational errors.

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•  The Chief Financial Officer reviews all contracts exceeding a set scope to determine the appropriate revenue accounting guidance to be applied. Additionally, the Chief Financial Officer performs a review of the fair value calculations of contracts identified as containing multiple deliverables as well as a review of the appropriateness of the revenue accounting guidance applied to those contracts. This review is secondary to and in addition to the review performed by the Corporate Assistant Controller described above.

Although the above actions were taken during 2009, management has determined that the material weakness in internal control related to revenue recognition had not been remediated and still existed as of December 31, 2009. Management has determined that due to the complexity of interpreting the various provisions of the accounting rules that determine proper revenue recognition on multiple element arrangements entered into by the Company, we do not have the expertise within our current organization to adequately evaluate these arrangements and determine proper revenue recognition for such arrangements. As a result, the Company plans to engage a revenue recognition expert from an independent public accounting firm in fiscal year 2010 to assist the Company in reviewing all multiple element arrangements entered into by the Company and in evaluating such arrangements to determine proper accounting treatment for recognizing revenue under GAAP. We believe the engagement of a revenue recognition expert in conjunction with the actions taken in 2009 as described herein will result in remediation of the material weakness in internal control related to revenue recognition in 2010, though we can give no assurance of such.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information

None.

PART III

Certain information required by Part III is incorporated by reference to the Company’s definitive Proxy Statement pursuant to Regulation 14A relating to the annual meeting of shareholders for 2009, which shall be filed with the SEC no later than April 30, 2010 (the “Proxy Statement”). Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference.

Item 10.   Directors, Executive Officers and Corporate Governance

The information called for by this item is incorporated herein by reference to the Proxy Statement.

Item 11.   Executive Compensation

The information called for by this item is incorporated herein by reference to the Proxy Statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information called for by this item is incorporated herein by reference to the Proxy Statement.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information called for by this item is incorporated herein by reference to the Proxy Statement.

Item 14.   Principal Accountant Fees and Services

The information called for by this item is incorporated herein by reference to the Proxy Statement.

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PART IV

Item 15.   Exhibits

(1)(2) Financial Statements

See the Index to Consolidated Financial Statements in Part II, Item 8.

(3)   Exhibits

The following documents are filed herewith or have been included as exhibits to previous filings with the SEC and are incorporated herein by this reference:

Exhibit
No.			Document
	3	.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	.1.1	Articles of Amendment to the Articles of Incorporation of the Company 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	.1.2	Articles of Amendment to Articles of Incorporation of the Company, dated February 2, 2010, amending and restating the Company’s Preferred Stock capitalization (filed herewith)
	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 Redeemable 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 Convertible Preferred Stock (incorporated herein by reference to the Company’s Report on Form 8-K filed on June 28, 2005)
	3	.5.1	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 Convertible Preferred Stock (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended June 30, 2005)
	3	.6	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	.7	Articles of Amendment to Articles of Incorporation of the Company containing Amended and Restated 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	.8	Articles of Amendment to Articles of Incorporation of the Company containing Certificate of Designation of Series D Junior Participating Preferred Stock (incorporated herein by reference to the Company’s Registration Statement on Form 8-A filed with the SEC on December 17, 1999)
	3	.8.1	Amendment No. 1 to Certificate of Designation of 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	.8.2	Amendment No. 2 to Certificate of Designation of Series D Junior Participating Preferred Stock (incorporated herein by reference to the Company’s Registration Statement on Form 8-A filed with the SEC on October 2, 2006)

86

Exhibit
No.			Document
	3	.9	Articles of Amendment to Articles of Incorporation of the Company containing Amended and Restated Certificate of Designation of Series J Convertible Preferred Stock (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended June 30, 2007)
	3	.10	Articles of Amendment to Articles of Incorporation of the Company containing Certificate of Designation of Series K Senior Convertible Preferred Stock (incorporated herein by reference to the Company’s Report on Form 8-K filed with the SEC on October 15, 2009)
	3	.10.1	Articles of Amendment to Articles of Incorporation of the Company containing Certificate of Designation of Series K Senior Convertible Preferred Stock (incorporated herein by reference to the Company’s Report on Form 8-K filed with the SEC on November 12, 2009)
	3	.10.2	Articles of Amendment to Articles of Incorporation of the Company containing Certificate of Designation of Series K Senior Convertible Preferred Stock, dated December 29, 2009 (filed herewith)
	3	.10.3	Amendment to Certificate of Designation of Series K Senior Convertible Preferred Stock, dated January 5, 2010 (filed herewith)
	3	.11	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	.11.1	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	Form of specimen certificate for Common Stock of the Company (incorporated herein by reference from the Company’s Registration Statement on Form SB-2, filed with the SEC (SEC File No. 33-82870-A)
	4	.2	Form of Underwriter’s Warrants issued by the Company to the Underwriter (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on April 22, 2004)
	4	.3	Warrant Agreement between the Company and Continental Stock Transfer & Trust Company (incorporated herein by reference from the Company’s Registration Statement on Form SB-2, filed with the SEC (SEC File No. 33-82870-A))
	4	.4	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 Securities and Exchange Commission on October 2, 2006)
	4	.4.1	Amendment No. 2 to Rights Agreement, dated July 8, 2004, between Digital Recorders, Inc. and Continental Stock Transfer & Trust Company (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on July 8, 2004)
	4	.5	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	.6	Amended and Restated Secured Term Note dated as of January 10, 2007, effective December 31, 2006, by and between the Company, TwinVision of North America, Inc., Digital Audio Corporation, Robinson-Turney International, Inc., and Laurus Master Fund, Ltd. (incorporated herein by reference to the Company’s Report on Form 8-K filed with the SEC on January 16, 2007)
	4	.7	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)

87

Exhibit
No.			Document
	4	.8	Warrant, dated as of June 30, 2008, issued by the Company 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	.8.1	First Amendment to Warrant, dated March 26, 2009, by and between the Company and BHC Interim Funding III, L.P. (incorporated by reference to the Company’s Report on Form 10-K filed with the SEC on March 31, 2009)
	4	.8.2	Second Amendment to Warrant, dated September 30, 2009, by and between the Company and BHC Interim Funding III, L.P. (incorporated by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2009)
	4	.8.3	Third Amendment to Warrant, dated December 29, 2009, by and between the Company and BHC Interim Funding III, L.P., (filed herewith)
	4	.9	Stock Purchase Warrant, dated as of October 13, 2003, issued by the Company to Dolphin Offshore Partners, L.P. (terminated) (incorporated herein by reference to the Company’s Report on Form 8-K, , filed with the SEC on November 12, 2003)
	4	.10	Warrant Agreement, dated March 23, 2004, between Digital Recorders, Inc. and Fairview Capital Ventures LLC (incorporated herein by reference to the Company’s Registration Statement on Form S-3, filed with the SEC on April 16, 2004)
	4	.11	Form of Warrant dated as of April 21, 2004, issued by Digital Recorders, Inc. to each of the Investors named in the Securities Purchase Agreement filed as Exhibit 10.16 hereto (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on April 22, 2004)
	4	.12	Warrant, dated April 26, 2004, issued by the Company to Roth Capital Partners, LLC (incorporated herein by reference to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004)
	4	.12.1	Amended and Restated Warrant, dated October 6, 2004, issued by the Company to Roth Capital Partners, LLC (incorporated herein by reference the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2004)
	4	.13	Warrant, dated October 6, 2004, issued by the Company to Riverview Group, LLC (incorporated herein by reference to the Company’s Report on Form 8-K, filed with SEC on October 7, 2004)
	4	.14	Stock Purchase Warrant, dated June 23, 2005, issued by the Company to Dolphin Offshore Partners, L.P. (incorporated herein by reference to the Company’s Report on Form 8-K filed on June 28, 2005)
	4	.15	Form of Stock Purchase Warrant between John D. Higgins and the Company (incorporated herein by reference to the Company’s Report on Form 8-K filed on November 4, 2005)
	4	.16	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)
	4	.17	Stock Purchase Warrant issued by the Company to 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)
	4	.18	Common Stock Purchase Warrant issued by the Company to Laurus Master Fund, Ltd., dated as of April 28, 2006 (incorporated herein by reference to the Company’s Report on Form 8-K filed on May 4, 2006)
	10	.1	Form of Office Lease Agreement, between the Company and Sterling Plaza Limited Partnership (incorporated herein by reference from the Company’s Form 10-KSB/A, filed with the SEC on May 21, 2001)
	10	.1.1	First Amendment to Lease Agreement, between the Company and Sterling Plaza Limited Partnership, d/b/a Dallas Sterling Plaza Limited Partnership, dated August 25, 2003 (incorporated herein by reference to the Company’s Registration Statement of Form S-1, filed with the SEC on January 4, 2005)

88

Exhibit
No.			Document
	10	.1.2	Second Amendment to Lease Agreement between the Company and Sterling Plaza Limited Partnership, d/b/a Dallas Sterling Plaza Limited Partnership, dated September 17, 2004 (incorporated herein by reference to the Company’s Registration Statement of Form S-1, filed with the SEC on January 4, 2005)
	10	.2	Lease Agreement, between the Company and The Prudential Savings Bank, F.S.B., dated December 18, 1998 (incorporated herein by reference from the Company’s Form 10-KSB/A, filed with the SEC on June 6, 2001)
	10	.2.1	First Lease Amendment, between the company and Property Reserve, Inc., f/k/a The Prudential Savings Bank, F.S.B., dated December 11, 2002 (incorporated herein by reference to the Company’s Registration Statement of Form S-1, filed with the SEC on January 4, 2005)
	10	.2.2	Second Lease Amendment, between the Company and Property Reserve, Inc., f/k/a The Prudential Savings Bank, F.S.B., dated August 21, 2003 (incorporated herein by reference to the Company’s Registration Statement of Form S-1, filed with the SEC on January 4, 2005)
	10	.2.3	Third Lease Amendment, between the Company and Property Reserve, Inc., f/k/a The Prudential Savings Bank, F.S.B., dated August 21, 2003 (incorporated herein by reference to the Company’s Registration Statement of Forms S-1, filed with the SEC on January 4, 2005)
	10	.2.4	Fourth Lease Amendment, between the Company and Property Reserve, Inc., f/k/a The Prudential Savings Bank, F.S.B., dated September 8, 2003 (incorporated herein by reference to the Company’s Registration Statement of Form S-1, filed with the SEC on January 4, 2005)
	10	.3	Form of Loan Agreement dated as of August 26, 2002, between the Company and John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.4	Form of Digital Recorders, Inc., 8% Convertible Debenture, dated August 26, 2002, issued to John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.5	Form of Security Agreement, dated August 26, 2002, between the Company and John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.6	Form of Pledge Agreement, dated August 26, 2002, between the Company and John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.7	Form of Subsidiary Guarantee, dated August 26, 2002, by Subsidiaries of the Company in favor of John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.8	Form of Subsidiary Security Agreement, dated August 26, 2002, among the Company, TwinVision of North America Inc., and John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on August 30, 2002)
	10	.9	Share Purchase Agreement, dated as of October 13, 2003, by and between Dolphin Offshore Partners, L.P. and the Company (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on November 12, 2003)
	10	.10	Securities Purchase Agreement, dated November 5, 2003, by and between the Company, as seller, and BFSUS Special Opportunities Trust PLC and Renaissance US Growth & Investment Trust PLC, collectively as purchasers (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on November 12, 2003)
	10	.11	Loan and Security Agreement, dated as of November 6, 2003, by and between LaSalle Business Credit, LLC, as lender, and the Company, as borrower (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on November 12, 2003)
	10	.11.1	Waiver, Consent and Fourth Amendment Agreement between the Company and LaSalle Business Credit, LLC, dated March 6, 2006 (incorporated herein by reference to the Company’s Report on Form 1-K filed with the SEC on April 17, 2006)

89

Exhibit
No.			Document
	10	.12	Amended and Restated Registration Rights Agreement, dated as of April 1, 2004, by and between the Company and Dolphin Offshore Partners, L.P. (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on April 14, 2004)
	10	.13	Securities Purchase Agreement dated as of April 21, 2004, among Digital Recorders, Inc. and the investors named therein (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on April 22, 2004)
	10	.14	Registration Rights Agreement, dated as of April 21, 2004, among Digital Recorders, Inc. and the investors named therein (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on April 22, 2004)
	10	.15	Securities Purchase Agreement, dated October 5, 2004, between the Company and Riverview Group LLC (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on October 7, 2004)
	10	.16	Registration Rights Agreement, dated October 5, 2004, between the Company and Riverview Group LLC (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on October 7, 2004)
	10	.17	Share Purchase Agreement, dated June 23, 2005, by and between the Company and Dolphin Offshore Partners, L.P. (incorporated herein by reference to the Company’s Report on Form 8-K, filed on June 28, 2005)
	10	.18	Registration Rights Agreement, dated June 23, 2005, by and between the company and Dolphin Offshore Partners, L.P. (incorporated herein by reference to the Company’s Report on Form 8-K, filed on June 28, 2005)
	10	.19	Promissory Note, dated July 25, 2005, between the Company to Roth Capital Partners, LLC (incorporated herein by reference to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004)
	10	.20	Share Purchase Agreement, dated October 31, 2005, between John D. Higgins and the Company (incorporated herein by reference to the Company’s Report on Form 8-K, filed on November 4, 2005)
	10	.21	Form of Registration Rights Agreement between John D. Higgins and the Company (incorporated herein by reference to the Company’s Report on Form 8-K filed on November 4, 2005)
	10	.22	Form of 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)
	10	.23	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	.24	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	.25	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	.26	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	.27	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	.27.1	Amended and Restated Registration Rights Agreement dated as of April 28, 2006, by and between Digital Recorders, Inc. and Laurus Master Fund, Ltd., dated (incorporated herein by reference to the Company’s Report on Form 8-K filed on May 4, 2006)

90

Exhibit
No.			Document
	10	.28	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	.29	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	.30	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	.30.1	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	.31	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	.32	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	.33	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	.34	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	.35	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	.36	Agreement, dated as of June 30, 2008, by and between the Company and John D. Higgins (incorporated herein by reference to the Company’s Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.37	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.37.1	Amendment No. 2 to Revolving Credit and Security Agreement, dated September 29, 2008, by and between Digital Recorders, Inc., TwinVision of North America, Inc. and DRI Corporation, and PNC Bank, National Association (incorporated by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2008)
	10	.37.2	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. and DRI Corporation, 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	.37.3	Amendment No. 4 to Revolving Credit and Security Agreement, dated as of July 30, 2009, by and between Digital Recorders, Inc., TwinVision of North America, Inc., and DRI Corporation, 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)

91

Exhibit
No.			Document
	10	.37.4	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., and DRI Corporation, and PNC Bank, National Association (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2009
	10	.37.5	Amendment No. 6 to Revolving Credit and Security Agreement, dated as of December 29, 2009, by and among Digital Recorders, Inc., TwinVision of North America, Inc., and DRI Corporation, and PNC Bank, National Association (filed herewith)
	10	.38	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.39	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.39.1	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.39.2	Second Amendment to the Loan and Security Agreement, dated as of March 26, 2009, 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 Report on Form 10-K filed with the SEC on March 31, 2009)
	10	.39.3	Letter Agreement, dated as of July 21, 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. (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.39.3.1	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 Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.39.4	Third Amendment to Loan and Security Agreement, dated as of August 18, 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-Q for the quarter ended June 30, 2009)
	10	.39.5	Letter of Amendment to Loan and Security Agreement, dated as of August 18, 2009, by and between DRI Corporation and BHC Interim Funding III, L.P. (incorporated herein by reference to the Company’s Report on From 8-K filed with the SEC on August 24, 2009
	10	.39.6	Fourth Amendment Loan and Security Agreement, dated as of October 1, 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-Q for the quarter ended September 30, 2009)
	10	.39.7	Fifth Amendment to Loan and Security Agreement, dated as of December 29, 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 (filed herewith)
	10	.40	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.41	Continuing Unconditional Guaranty, dated as of June 30, 2008, granted by the Company in favor of 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)

92

Exhibit
No.			Document
	10	.42	Stock Pledge Agreement, dated as of June 30, 2008, by and between the Company and BHC Interim Funding III, L.P. (incorporated herein by reference to the Company’s Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.43	Trademark Security Agreement, dated as of June 30, 2008, by and between the Company and BHC Interim Funding III, L.P. (incorporated herein by reference to the Company’s Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.44	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.45	Trademark and 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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.46	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.47	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.48	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.49	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.49.1	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 Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.49.2	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 Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.49.3	Undertaking Concerning Loan Payment for purposes other than personal consumption, dated March 25, 2010, by and between Handelsbanken and Mobitec AB (English translation) (filed herewith)
	10	.50	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 Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.51	Factoring Agreement by and between Handelsbanken and Mobitec AB (English translation) (incorporated herein by reference to the Company’s Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.52	EURO Short Term Loan Facility by and between Handelsbanken and Mobitec GmbH (incorporated herein by reference to the Company’s Report on Form 8-K/A, filed with the SEC on August 14, 2008)
	10	.52.1	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	.53	Executive Employment Agreement, dated January 1, 1999, between the Company and Larry Hagemann (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)
	10	.54	Executive Employment Agreement, between the Company and David N. Pilotte, dated October 25, 2004 (incorporated herein by reference to the Company’s Report on Form 8-K, filed with the SEC on October 22, 2004)

93

Exhibit
No.			Document
	10	.55	Executive Employment Agreement, dated November 15, 2007, between Mobitec GmbH and Mobitec AB and Oliver Wels (incorporated herein by reference from the Company’s Report on Form 10-Q for the quarter ended March 31, 2008)
	10	.56	Executive Employment Agreement, dated December 31, 2007, between the Company and Lawrence A. Hagemann (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 10, 2008)
	10	.57	Executive Employment Agreement, dated December 31, 2007, between the Company and Stephen P. Slay (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 10, 2008)
	10	.58	Executive Employment Agreement, dated December 31, 2007, between the Company and Rob R. Taylor (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 10, 2008)
	10	.59	Executive Employment Agreement, effective December 31, 2007, between the Company and Tanya Lind Johnson (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 18, 2008)
	10	.60	Executive Employment Agreement, effective December 31, 2007, between the Company and William F. Fay, Jr. (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 18, 2008)
	10	.61	Executive Employment Agreement, effective January 1, 2008, between the Company and David L. Turney (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on January 18, 2008)
	10	.62	Extension Agreement, dated as of April 30, 2008 by and between DRI Corporation and Digital Audio Corporation (incorporated herein by reference from the Company’s Report on Form 8-K, filed with the SEC on May 6, 2008)
	10	.62.1	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	.63	General Pledging, dated June 16, 2009, by and between Handelsbanken and Mobitec AB (English translation) (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.64	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 Report on Form 10-Q for the quarter ended June 30, 2009)
	10	.64.1	Contract A Supplementary Overdraft Facility for purposes other than personal consumption, dated March 25, 2010, by and between Handelsbanken and Mobitec AB (English translation) (filed herewith)
	10	.65	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 Report on Form 10-Q for the quarter ended June 30, 2009) (confidential treatment requested for specific portions of this agreement)
	10	.65.1	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 Demore, JADI Itinerários Eletrônicos Ltda, Mobitec AB and Mobitec Brasil Ltda. (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2009) (confidential treatment requested for specific portions of this agreement)
	10	.66	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 Report on Form 10-Q for the quarter ended June 30, 2009) (confidential treatment requested for specific portions of this agreement)

94

Exhibit
No.			Document
	10	.66.1	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 (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2009) (confidential treatment requested for specific portions of this agreement)
	10	.67	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 Report on Form 10-Q for the quarter ended June 30, 2009) (confidential treatment requested for specific portions of this agreement)
	10	.67.1	Promissory Note, dated August 31, 2009, by Mobitec AB, issued to Roberto Juventino Demore in the principal amount of $1,950,000 (incorporated herein by reference to the Company’s Report on Form 10-Q for the quarter ended September 30, 2009) (confidential treatment requested for specific portions of this agreement)
	10	.68	Form of Subscription Agreement, 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 Report on Form 8-K filed with the SEC on October 30, 2009)
	10	.68.1	Form of Subscription Agreement by and between DRI Corporation and holder of Series K Senior Convertible Preferred Stock of DRI Corporation (filed herewith)
	10	.69	Form of Registration Rights Agreement 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 Report on Form 8-K filed with the SEC on October 30, 2009)
	10	.69.1	Form of Registration Rights Agreement by and between DRI Corporation and holder of Series K Senior Convertible Preferred Stock of DRI Corporation (filed herewith)
	21	.1	Listing of Subsidiaries of the Company (filed herewith)
	23	.1	Consent of Grant Thornton LLP (filed herewith)
	23	.2	Consent of PricewaterhouseCoopers LLP (filed herewith)
	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)

95

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DRI CORPORATION

By:  /s/  DAVID L. TURNEY

David L. Turney

Chairman of the Board, Chief Executive

Officer and President (Principal Executive Officer)

Date: April 15, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  DAVID L. TURNEY David L. Turney	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	April 15, 2010
/s/  STEPHEN P. SLAY Stephen P. Slay	Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)	April 15, 2010
/s/  HUELON ANDREW HARRISON Huelon Andrew Harrison	Director	April 15, 2010
/s/  JOHN D. HIGGINS John D. Higgins	Director	April 15, 2010
/s/  HELGA HOUSTON Helga Houston	Director	April 15, 2010
/s/  C. JAMES MEESE JR. C. James Meese Jr.	Director	April 15, 2010
/s/  STEPHANIE L. PINSON Stephanie L. Pinson	Director	April 15, 2010
/s/  JOHN K. PIROTTE John K. Pirotte	Director	April 15, 2010
/s/  JULIANN TENNEY Juliann Tenney	Director	April 15, 2010

96

EX-3.1.2

Exhibit 3.1.2

ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
DRI CORPORATION

     The undersigned Corporation hereby executes these Articles of Amendment for the purpose of amending its Amended and Restated Articles of Incorporation.

     1. The name of the Corporation is DRI Corporation.

     2. The text of the amendment adopted is as follows:

     The first paragraph of Paragraph II (Preferred Stock) of Article IV of the Amended and Restated Articles of Incorporation is hereby amended and restated in its entirety as follows:

          (II) PREFERRED STOCK

     The Preferred Stock of the Corporation shall consist of (i) One Hundred Sixty-Six (166) shares of Series AAA Redeemable Nonvoting Preferred Stock, par value $.10 per share (“Series AAA Preferred Stock”), the powers, preferences, rights, qualifications, limitations and restrictions (the “Terms”) of which are set forth below, (ii) Thirty Thousand (30,000) shares of Series D Junior Participating Preferred Stock, par value $.10 per share (“Series D Preferred Stock”), the Terms of which are set forth below, (iii) Eighty (80) shares of Series E Redeemable Nonvoting Convertible Preferred Stock, par value $.10 per share (“Series E Preferred Stock”), the Terms of which are set forth in the Certificate of Designation filed with the Secretary of State of North Carolina on July 2, 2003, (iv) Seven Hundred Twenty Five (725) shares of Series G Convertible Preferred Stock, par value $.10 per share (“Series G Preferred Stock”), the Terms of which are set forth in the Certificate of Designation filed with the Secretary of State of North Carolina on June 28, 2005, (v) One Hundred Twenty Five (125) shares of Series H Convertible Preferred Stock, par value $.10 per share (“Series H Preferred Stock”), the Terms of which are set forth in the Certificate of Designation filed with the Secretary of State of North Carolina on March 1, 2006,(vi) Five Hundred (500) shares of Series K Senior Convertible Preferred Stock, par value $.10 per share (the “Series K Preferred Stock”), the Terms of which are set forth in the

Certificate of Designation filed with the Secretary of State of North Carolina on January 6, 2010, and (vii) Four Million Nine Hundred Sixty-Eight Thousand Four Hundred Four (4,968,404) shares of Preferred Stock, par value $.10 per share, for which the Board of Directors of the Corporation shall have the power to fix by resolution or resolutions the Terms, including dividing the Preferred Stock into one or more classes or series having the same or different Terms.

     3. These Articles of Amendment do not effect an exchange, reclassification or cancellation of issued shares of the Corporation.

     4. The date of the adoption of these Articles of Amendment by the Board of Directors was February 2, 2010.

     Dated this 2nd day of February, 2010.

DRI CORPORATION
 

/s/ David L. Turney

David L. Turney,
President 

EX-3.10.2

Exhibit 3.10.2

CERTIFICATE OF DESIGNATION
OF
SERIES K SENIOR CONVERTIBLE PREFERRED STOCK
OF
DRI CORPORATION

DRI Corporation (hereinafter called the “Corporation”), a corporation organized and existing under the Business Corporation Act of the State of North Carolina, hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 55-6-02 of the Business Corporation Act by a unanimous written consent in lieu of a meeting, dated December 29, 2009.

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Articles of Incorporation of the Corporation (“Articles of Incorporation”), the Board of Directors hereby certifies in their entirety the terms and provisions of the Series K Senior Convertible Preferred Stock, par value $.10 per share, shall have the designation and number of shares, and the relative rights, preferences, and limitations thereof as follows:

Section 1. Designation and Amount. The shares of this series shall be designated as “Series K Senior Convertible Preferred Stock” (the “Series K Preferred Stock”) and the number of shares constituting the Series K Preferred Stock shall be 325 shares. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series K Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series K Preferred Stock.

Section 2. Dividends and Distributions.

     (a) The holders of shares of Series K Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, consistent with applicable law and out of funds legally available therefor, dividends during the period commencing on October 7, 2009 (the “Commencement Date”) and continuing for as long as any of the shares of Series K Preferred Stock remain outstanding. Dividends shall accrue quarterly at the rate of nine and one-half percent (9-1/2%) per annum on the Liquidation Preference (as hereinafter defined), shall compound quarterly, and shall be paid on December 15, March 15, June 15 and September 15 of each year (each, a “Payment Date”) (except that if any such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday); provided, however, that the first payment of dividends following the Commencement Date shall be made on December 15, 2009. Each such dividend shall be payable in arrears to the holders of record of shares of Series K Preferred Stock, as they appear on the stock records of the Corporation, at the close of business on the date that is fifteen (15) days preceding the Payment Date thereof, provided, however,

1

that the Board of Directors may fix a different record date for any dividend payment, which date shall be not less than ten (10) days nor more than sixty (60) days preceding the Payment Date thereof. Dividends on shares of Series K Preferred Stock shall accrue (whether or not declared) on a daily basis from and including the Commencement Date. Accrued dividends for each Dividend Period (as hereinafter defined) shall be cumulative (whether or not such dividends are declared) and shall compound on each Payment Date. Such dividends shall accumulate to the extent not paid on the Payment Date occurring on the last day of the Dividend Period for which they accrue, and any such accrued and unpaid dividends for any past Dividend Period may be declared and paid at any time, without reference to any regular Payment Date, to holders of record on such date, not more than forty-five (45) days preceding the Payment Date thereof, as may be fixed by the Board of Directors. For purposes of this Section 2, a “Dividend Period” shall mean a quarterly dividend period commencing on the calendar day immediately following the Commencement Date and immediately following each subsequent Payment Date and ending on and including the next following Payment Date. The Series K Preferred Stock shall rank prior and superior to the Series AAA Preferred Stock (“Series AAA Preferred Stock”), the Series E Redeemable Nonvoting Convertible Preferred Stock (“Series E Preferred Stock” and together with the Series AAA Preferred Stock, the “Tier 3 Preferred Stock”) and prior and superior to the shares of preferred stock of the Corporation that are senior to the Tier 3 Preferred Stock, comprising the Series G Preferred Stock (“Series G Preferred Stock”), the Series H Preferred Stock (“Series H Preferred Stock”) and the Series J Preferred Stock (“Series J Preferred Stock”, and together with the Series G Preferred Stock, Series H Preferred Stock and Series J Preferred Stock, the “Tier 2 Preferred Stock” and together with the Tier 3 Preferred Stock, the “Existing Preferred Stock”) and the common stock, par value $0.10 per share (the “Common Stock” and together with the Existing Preferred Stock and any other class or series of stock ranking junior to the Existing Preferred Stock with respect to dividends and payments upon liquidation, dissolution and winding up are referred to, collectively, as the “Junior Stock”), of the Corporation with respect to the payment of dividends. In the event any new shares of Series K Preferred Stock are issued during any Dividend Period or any shares of Series K Preferred Stock are redeemed by the Corporation or converted during any Dividend Period, the accrued dividends shall be prorated in proportion to the number of days during that Dividend Period during which such shares were outstanding. All accrued but unpaid dividends shall be paid upon redemption or conversion of the shares of Series K Preferred Stock.

     (b) Such dividends shall be payable in cash or additional shares of Series K Preferred Stock, at the Series K Preferred Stock holder’s option, which shall be designated in writing on an annual basis before December 1^st of each year and, in any event, if not otherwise designated, shall be payable in cash. In the event that any payment of dividends would require shareholder approval under the NASDAQ listing requirements, the Corporation agrees to seek such approval, together with approval of all future issuances of Series K Preferred Stock payable as dividends on the outstanding shares of Series K Preferred Stock (if legally

2

permissible), at the next regularly scheduled meeting of shareholders after it has been determined that shareholder approval would be required for the issuance of any shares as dividends on the next scheduled Payment Date, if such shareholder approval shall not have previously been sought. Dividends, if in cash, shall be paid out of funds legally available therefor on any Payment Date(s) that may arise between the date of such determination and the meeting of shareholders at which the shareholders vote on such authorization, the Series K Preferred Stock holder agreeing to recuse itself from this vote. In the event the shareholders reject such authorization, such dividends will be paid in shares of Series K Preferred Stock to the maximum extent that they may be so paid without violating the limitations set forth in the second sentence of this paragraph (b), and thereafter, such dividends shall be paid in cash out of funds legally available therefor, commencing on the next Payment Date.

     (c) The number of shares of Series K Preferred Stock (or fraction thereof) issuable on each whole or fractional share of Series K Preferred Stock on each Payment Date shall be equal to the quotient (rounded to four decimal places) obtained by dividing (i) the dollar value of the dividend to be paid thereon by (ii) the Liquidation Preference thereof.

Section 3. Voting Rights. In addition to any voting rights provided by law, the holders of Series K Preferred Stock shall be entitled to vote with the holders of Common Stock, voting together as a single class, on any matters on which holders of Common Stock are entitled to vote, and the holder of each outstanding whole or fractional share of Series K Preferred Stock shall be entitled to a number of votes equal to the quotient obtained by dividing the Liquidation Preference thereof by the then applicable Conversion Price as determined by Section 6. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all whole and fractional shares of Series K Preferred Stock held by each holder) shall be adjusted downward to the nearest whole number.

Section 4. Liquidation.

     (a) The liquidation preference for the Series K Preferred Stock (the “Liquidation Preference”) shall equal Five Thousand Dollars ($5,000.00) per share. The Series K Preferred Stock shall rank prior and superior to the Junior Stock.

     (b) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (collectively, a “Liquidating Event”), the Corporation shall pay or make adequate provision for the payment of all indebtedness and other obligations of the Corporation. Thereafter, the remaining assets of the Corporation shall be used to pay, prior to any distribution of any of the assets of the Corporation to the holders of Junior Stock by reason of the ownership thereof, an amount equal to the Liquidation Preference per share of the

3

Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any.

     (c) After all such Liquidation Preferences shall have been paid in full to each holder of Series K Preferred Stock (including accrued but unpaid dividends), each holder of Junior Stock other than Common Stock shall be entitled to be paid from the remaining assets of the Corporation such amounts, if any, and in such order of priority to which such holder may be entitled under any other provision of these Articles of Incorporation prior to any distribution of any of the assets of the Corporation to the holders of Common Stock.

     (d) Any assets of the Corporation remaining after the payments specified in paragraphs (b) and (c) above shall be distributed pro rata with respect to the outstanding shares of Common Stock.

     (e) If upon any Liquidating Event, the assets of the Corporation shall be insufficient to pay all the holders of any class or series of capital stock the full amount to which they are entitled pursuant to this Section 4, then the following rules shall apply: (i) each holder of shares of the class or series shall be paid his pro rata share, which shall equal the product determined by multiplying the aggregate amount to be paid to all holders of that class or series by a fraction (x) whose numerator equals the number of shares of that class or series owned by the shareholder, and (y) whose denominator equals the number of issued and outstanding shares of that class or series, and (ii) in any case in which the owner of two or more series or classes of capital stock shall have equal priority to any distribution, each holder shall be paid his pro rata share, which shall equal the product determined by multiplying the aggregate amount available for payment to all holders of the series or classes with equal priority, by a fraction (x) whose numerator equals the amount such shareholder would receive if the Corporation had adequate funds to pay the Liquidation Preferences of the shares of the series or classes having equal priorities owned by the shareholder, and (y) whose denominator equals the aggregate Liquidation Preferences of all issued and outstanding shares of the series or classes having equal priorities.

     (f) For the purposes of this Section 4, any merger or consolidation of the Corporation into or with any other corporation or entity, or a sale, conveyance, mortgage, transfer, license, pledge, lease or other disposition of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation unless (i) the shareholders of the Corporation immediately prior to the consummation of such event shall, immediately thereafter, hold as a group the right to cast at least a majority of the votes of all holders of voting securities of the resulting or surviving corporation or entity on any matter on which any such holders of voting securities shall be entitled to vote; or (ii) the holders of Series K Preferred Stock shall determine, by vote of the holders of a majority of the outstanding shares of such series, voting as a separate class, that it shall not be so deemed.

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     (g) For purposes of this Section 4, if any asset distributed to shareholders upon liquidation of the Corporation consists of property other than cash, the amount of such distribution shall be deemed to be the fair market value thereof at the time of such distribution, as determined in good faith by the Board of Directors of the Corporation.

     (h) Written notice of any Liquidating Event stating a payment date, the place where such payment shall be made, the amount of each payment in liquidation and the amount of accrued dividends to be paid, shall be given by first class mail, postage prepaid, not less than ten (10) days prior to the payment date stated therein, to each shareholder of record (whether or not the shareholder is to receive any payment) at such shareholder’s address as shown in the records of the Corporation.

Section 5. Redemption.

     (a) The holders of the Series K Preferred Stock shall not have the right to cause the Corporation to redeem shares of their Series K Preferred Stock at any time.

     (b) The Corporation shall have the right, but not the obligation, exercisable at any time and from time to time, to redeem all or any portion of the outstanding shares of Series K Preferred Stock. All redemptions of fewer than all outstanding shares of Series K Preferred Stock shall be affected on a pro rata basis.

     (c) The redemption price to be paid by the Corporation for any shares of Series K Preferred Stock shall equal the Liquidation Preference for those shares, plus an amount equal to the cash value of all accrued but unpaid dividends thereon. Upon payment of such redemption price, the Corporation shall have no further obligation with respect to payment of accrued and unpaid dividends with respect to the shares so redeemed.

     (d) At least thirty (30) days prior to any redemption, the Corporation will provide to the holders of shares to be redeemed written notice (the “Redemption Notice”) of the number of shares to be redeemed (the “Redemption Shares”), the redemption price and the redemption date (the “Redemption Date”). Such notice shall be sent to the address for each holder of Series K Preferred Stock on the records of the Corporation. Upon receipt of any Redemption Notice, holders of Series K Preferred Stock shall send to the Corporation stock certificate(s) duly endorsed for transfer representing the Redemption Shares as provided in the Redemption Notice for receipt by the Corporation on or before the Redemption Date. Upon receipt of stock certificate(s) representing the Redemption Shares endorsed as provided above (but not prior to the Redemption Date), the Corporation will send to the holders of the Redemption Shares payment of the redemption price as stated in the Redemption Notice, and if not all the shares represented by the stock certificate(s) provided to the Corporation are to be

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redeemed, stock certificate(s) representing the shares that have not been redeemed.

     The Corporation shall have no obligation to make any payment for Redemption Shares until the owner of the Redemption Shares complies in full with the procedures set forth above. Notwithstanding failure by any shareholder to comply with the procedures set forth in the preceding paragraph and the consequent failure by the Corporation to pay the redemption price for the Redemption Shares, the Redemption Shares shall, from and after the Redemption Date stated in the Redemption Notice, cease to be issued and outstanding shares of capital stock of the Corporation and the former owner shall not be entitled to vote, receive dividends or exercise any other rights of a shareholder on account of the Redemption Shares. From and after the Redemption Date the sole obligation of the Corporation on account of the Redemption Shares shall be to pay the redemption price stated in the Redemption Notice, together with interest at the rate equal to the dividend rate in effect on the Redemption Date in the event of late payment.

     (e) Holders of outstanding shares of Series K Preferred Stock shall have the right to convert such shares into shares of Common Stock in accordance with Section 6 hereof at any time before the close of business on the fifth Business Day preceding the Redemption Date specified for such shares. Without limiting any rights of the Corporation, the Corporation may reduce the number of shares that it has elected to redeem as specified in a Redemption Notice by a number equivalent to the number of shares of Series K Preferred Stock converted into Common Stock during the period beginning on the date of the Redemption Notice and ending on the Redemption Date.

     (f) All shares of the Series K Preferred Stock that shall have been redeemed as herein provided shall no longer be deemed to be outstanding. Any shares of Series K Preferred Stock so redeemed shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series K Preferred Stock accordingly.

Section 6. Conversion of Series K Preferred Stock. Each holder of shares of Series K Preferred Stock shall have the right to convert all or any portion of such shares as such holder desires to convert, and in certain circumstances such shares shall be automatically converted, into shares of the Common Stock of the Corporation, as follows:

     (a) Optional Conversion. Subject to and in compliance with the provisions of this Section 6, any or all shares of Series K Preferred Stock, at the option of the holder, may be converted at any time or from time to time prior to the fifth Business Day preceding any Redemption Date established for such shares, if any, into a number of fully paid and nonassessable shares (calculated as to each conversion to the largest whole share) of Common Stock determined by

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multiplying the number of whole and fractional shares of Series K Preferred Stock to be converted by a fraction, the numerator of which is the Liquidation Preference of a share of Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any, and the denominator of which is the conversion price then in effect for the Series K Preferred Stock (the “Conversion Price”). The Conversion Price shall increase periodically as follows: (i) during the period from the Commencement Date through October 6, 2011, the Conversion Price shall equal $1.75 per share; (ii) during the period from October 7, 2011 through October 6, 2013, the Conversion Price shall equal $2.25 per share; and (iii) on or after October 7, 2013, the Conversion Price shall equal $3.00 per share. The Conversion Price shall be subject to adjustment in accordance with the provisions in Section 6(d) below.

     (b) Automatic Conversion. The outstanding shares of Series K Preferred Stock shall automatically convert to shares of Common Stock in the circumstances described in the following subparagraph, as follows:

If the closing bid price for the Common Stock on The Nasdaq Stock Market (or other exchange or market on which the Common Stock may from time to time be traded) for any period of twenty (20) consecutive trading days exceeds the following, then all outstanding shares of Series K Preferred Stock shall automatically convert: (i) during the period from the Commencement Date through October 6, 2011, $4.00 per share; (ii) during the period from October 7, 2011 through October 6, 2013, $4.75 per share; and (iii) on or after October 7, 2013, $5.50 per share. Upon the occurrence of the above, the outstanding shares of Series K Preferred Stock, at the close of the market on the last trading day in such period, shall convert into a number of fully paid and nonassessable shares (calculated to the largest whole share) of Common Stock determined by multiplying the number of shares of Series K Preferred Stock then outstanding by a fraction, the numerator of which is the Liquidation Preference of a share of Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any, and the denominator of which is the then applicable Conversion Price, provided that the resale of the shares issuable upon conversion shall have been registered or shall be subject to available exemption under applicable securities laws.

     (c) Mechanics of Conversion. Before any holder of Series K Preferred Stock shall be entitled to convert the same into full shares of Common Stock, unless the conversion is an automatic conversion, the holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the office of the Corporation or any transfer agent of the Corporation and shall give written notice to the Corporation at such office that he elects to convert the same, such notice to state the name or names and addresses to which certificates for Common Stock will be issued. No fractional shares of Common Stock shall be issued upon conversion of Series K Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to

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such fraction multiplied by the then-effective Conversion Price. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series K Preferred Stock, or to a third party such holder may designate in writing, a certificate or certificates for the number of whole shares of Common Stock to which he shall be entitled and a check payable to the holder in the amount of any cash amounts payable in lieu of fractional shares as aforesaid, and if less than all the shares of Series K Preferred Stock represented by such certificates are converted, a certificate representing the shares of Series K Preferred Stock not converted. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series K Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

     (d) Adjustments to Conversion Price.

     (i) Adjustments for Subdivisions, Common Stock Dividends, Combinations or Consolidations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided or increased by stock split or stock dividend, into a greater number of shares of Common Stock, the Conversion Price then in effect shall concurrently with the effectiveness of such subdivision or payment of such stock dividend, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price then in effect shall concurrently with the effectiveness of such combination or consolidation, be proportionately increased.

     (ii) Adjustments for Reclassification, Exchange and Substitution. If the Common Stock issuable upon conversion of the Series K Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), the Series K Preferred Stock shall thereafter be convertible into, in lieu of the shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock that would have been obtainable in exchange for the shares of Common Stock that were issuable upon conversion of the Series K Preferred Stock immediately before that change.

     (e) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 6(d), the Corporation at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series K Preferred Stock a certificate setting forth such adjustment or

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readjustment in accordance with the terms hereof and furnish to each holder of Series K Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series K Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series K Preferred Stock.

     (f) No Impairment. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution or issuance or sale of securities or any other voluntary action (other than actions taken in good faith), avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all the provisions of this Section 6 and in taking all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series K Preferred Stock against impairment.

     (g) Reservation of Stock. The Corporation shall, at all times when any shares of the Series K Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, (i) for the purpose of effecting the conversion of the Series K Preferred Stock pursuant to Section 6, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series K Preferred Stock and (ii) for the purpose of paying accrued dividends in the form of shares of Series K Preferred Stock, such number of its duly authorized shares of Series K Preferred Stock as shall from time to time be sufficient to pay such dividends.

     (h) Cancellation of Series K Preferred Stock. All shares of the Series K Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding. Any shares of the Series K Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized shares of Series K Preferred Stock accordingly.

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EX-3.10.3

Exhibit 3.10.3

CERTIFICATE OF DESIGNATION
OF
SERIES K SENIOR CONVERTIBLE PREFERRED STOCK
OF
DRI CORPORATION

DRI Corporation (hereinafter called the “Corporation”), a corporation organized and existing under the Business Corporation Act of the State of North Carolina, hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 55-6-02 of the Business Corporation Act by a unanimous written consent in lieu of a meeting, dated January 5, 2010.

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Articles of Incorporation of the Corporation (“Articles of Incorporation”), the Board of Directors hereby certifies in their entirety the terms and provisions of the Series K Senior Convertible Preferred Stock, par value $.10 per share, shall have the designation and number of shares, and the relative rights, preferences, and limitations thereof as follows:

Section 1. Designation and Amount. The shares of this series shall be designated as “Series K Senior Convertible Preferred Stock” (the “Series K Preferred Stock”) and the number of shares constituting the Series K Preferred Stock shall be 335 shares. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series K Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series K Preferred Stock.

Section 2. Dividends and Distributions.

     (a) The holders of shares of Series K Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, consistent with applicable law and out of funds legally available therefor, dividends during the period commencing on October 7, 2009 (the “Commencement Date”) and continuing for as long as any of the shares of Series K Preferred Stock remain outstanding. Dividends shall accrue quarterly at the rate of nine and one-half percent (9-1/2%) per annum on the Liquidation Preference (as hereinafter defined), shall compound quarterly, and shall be paid on December 15, March 15, June 15 and September 15 of each year (each, a “Payment Date”) (except that if any such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday); provided, however, that the first payment of dividends following the Commencement Date shall be made on December 15, 2009. Each such dividend shall be payable in arrears to the holders of record of shares of Series K Preferred Stock, as they appear on the stock records of the Corporation, at the close of business on the date that is fifteen (15) days preceding the Payment Date thereof, provided, however,

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that the Board of Directors may fix a different record date for any dividend payment, which date shall be not less than ten (10) days nor more than sixty (60) days preceding the Payment Date thereof. Dividends on shares of Series K Preferred Stock shall accrue (whether or not declared) on a daily basis from and including the Commencement Date. Accrued dividends for each Dividend Period (as hereinafter defined) shall be cumulative (whether or not such dividends are declared) and shall compound on each Payment Date. Such dividends shall accumulate to the extent not paid on the Payment Date occurring on the last day of the Dividend Period for which they accrue, and any such accrued and unpaid dividends for any past Dividend Period may be declared and paid at any time, without reference to any regular Payment Date, to holders of record on such date, not more than forty-five (45) days preceding the Payment Date thereof, as may be fixed by the Board of Directors. For purposes of this Section 2, a “Dividend Period” shall mean a quarterly dividend period commencing on the calendar day immediately following the Commencement Date and immediately following each subsequent Payment Date and ending on and including the next following Payment Date. The Series K Preferred Stock shall rank prior and superior to the Series AAA Preferred Stock (“Series AAA Preferred Stock”), the Series E Redeemable Nonvoting Convertible Preferred Stock (“Series E Preferred Stock” and together with the Series AAA Preferred Stock, the “Tier 3 Preferred Stock”) and prior and superior to the shares of preferred stock of the Corporation that are senior to the Tier 3 Preferred Stock, comprising the Series G Preferred Stock (“Series G Preferred Stock”), the Series H Preferred Stock (“Series H Preferred Stock”) and the Series J Preferred Stock (“Series J Preferred Stock”, and together with the Series G Preferred Stock, Series H Preferred Stock and Series J Preferred Stock, the “Tier 2 Preferred Stock” and together with the Tier 3 Preferred Stock, the “Existing Preferred Stock”) and the common stock, par value $0.10 per share (the “Common Stock” and together with the Existing Preferred Stock and any other class or series of stock ranking junior to the Existing Preferred Stock with respect to dividends and payments upon liquidation, dissolution and winding up are referred to, collectively, as the “Junior Stock”), of the Corporation with respect to the payment of dividends. In the event any new shares of Series K Preferred Stock are issued during any Dividend Period or any shares of Series K Preferred Stock are redeemed by the Corporation or converted during any Dividend Period, the accrued dividends shall be prorated in proportion to the number of days during that Dividend Period during which such shares were outstanding. All accrued but unpaid dividends shall be paid upon redemption or conversion of the shares of Series K Preferred Stock.

     (b) Such dividends shall be payable in cash or additional shares of Series K Preferred Stock, at the Series K Preferred Stock holder’s option, which shall be designated in writing on an annual basis before December 1^st of each year and, in any event, if not otherwise designated, shall be payable in cash. In the event that any payment of dividends would require shareholder approval under the NASDAQ listing requirements, the Corporation agrees to seek such approval, together with approval of all future issuances of Series K Preferred Stock payable as dividends on the outstanding shares of Series K Preferred Stock (if legally

2

permissible), at the next regularly scheduled meeting of shareholders after it has been determined that shareholder approval would be required for the issuance of any shares as dividends on the next scheduled Payment Date, if such shareholder approval shall not have previously been sought. Dividends, if in cash, shall be paid out of funds legally available therefor on any Payment Date(s) that may arise between the date of such determination and the meeting of shareholders at which the shareholders vote on such authorization, the Series K Preferred Stock holder agreeing to recuse itself from this vote. In the event the shareholders reject such authorization, such dividends will be paid in shares of Series K Preferred Stock to the maximum extent that they may be so paid without violating the limitations set forth in the second sentence of this paragraph (b), and thereafter, such dividends shall be paid in cash out of funds legally available therefor, commencing on the next Payment Date.

     (c) The number of shares of Series K Preferred Stock (or fraction thereof) issuable on each whole or fractional share of Series K Preferred Stock on each Payment Date shall be equal to the quotient (rounded to four decimal places) obtained by dividing (i) the dollar value of the dividend to be paid thereon by (ii) the Liquidation Preference thereof.

Section 3. Voting Rights. In addition to any voting rights provided by law, the holders of Series K Preferred Stock shall be entitled to vote with the holders of Common Stock, voting together as a single class, on any matters on which holders of Common Stock are entitled to vote, and the holder of each outstanding whole or fractional share of Series K Preferred Stock shall be entitled to a number of votes equal to the quotient obtained by dividing the Liquidation Preference thereof by the then applicable Conversion Price as determined by Section 6. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all whole and fractional shares of Series K Preferred Stock held by each holder) shall be adjusted downward to the nearest whole number.

Section 4. Liquidation.

     (a) The liquidation preference for the Series K Preferred Stock (the “Liquidation Preference”) shall equal Five Thousand Dollars ($5,000.00) per share. The Series K Preferred Stock shall rank prior and superior to the Junior Stock.

     (b) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (collectively, a “Liquidating Event”), the Corporation shall pay or make adequate provision for the payment of all indebtedness and other obligations of the Corporation. Thereafter, the remaining assets of the Corporation shall be used to pay, prior to any distribution of any of the assets of the Corporation to the holders of Junior Stock by reason of the ownership thereof, an amount equal to the Liquidation Preference per share of the

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Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any.

     (c) After all such Liquidation Preferences shall have been paid in full to each holder of Series K Preferred Stock (including accrued but unpaid dividends), each holder of Junior Stock other than Common Stock shall be entitled to be paid from the remaining assets of the Corporation such amounts, if any, and in such order of priority to which such holder may be entitled under any other provision of these Articles of Incorporation prior to any distribution of any of the assets of the Corporation to the holders of Common Stock.

     (d) Any assets of the Corporation remaining after the payments specified in paragraphs (b) and (c) above shall be distributed pro rata with respect to the outstanding shares of Common Stock.

     (e) If upon any Liquidating Event, the assets of the Corporation shall be insufficient to pay all the holders of any class or series of capital stock the full amount to which they are entitled pursuant to this Section 4, then the following rules shall apply: (i) each holder of shares of the class or series shall be paid his pro rata share, which shall equal the product determined by multiplying the aggregate amount to be paid to all holders of that class or series by a fraction (x) whose numerator equals the number of shares of that class or series owned by the shareholder, and (y) whose denominator equals the number of issued and outstanding shares of that class or series, and (ii) in any case in which the owner of two or more series or classes of capital stock shall have equal priority to any distribution, each holder shall be paid his pro rata share, which shall equal the product determined by multiplying the aggregate amount available for payment to all holders of the series or classes with equal priority, by a fraction (x) whose numerator equals the amount such shareholder would receive if the Corporation had adequate funds to pay the Liquidation Preferences of the shares of the series or classes having equal priorities owned by the shareholder, and (y) whose denominator equals the aggregate Liquidation Preferences of all issued and outstanding shares of the series or classes having equal priorities.

     (f) For the purposes of this Section 4, any merger or consolidation of the Corporation into or with any other corporation or entity, or a sale, conveyance, mortgage, transfer, license, pledge, lease or other disposition of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation unless (i) the shareholders of the Corporation immediately prior to the consummation of such event shall, immediately thereafter, hold as a group the right to cast at least a majority of the votes of all holders of voting securities of the resulting or surviving corporation or entity on any matter on which any such holders of voting securities shall be entitled to vote; or (ii) the holders of Series K Preferred Stock shall determine, by vote of the holders of a majority of the outstanding shares of such series, voting as a separate class, that it shall not be so deemed.

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     (g) For purposes of this Section 4, if any asset distributed to shareholders upon liquidation of the Corporation consists of property other than cash, the amount of such distribution shall be deemed to be the fair market value thereof at the time of such distribution, as determined in good faith by the Board of Directors of the Corporation.

     (h) Written notice of any Liquidating Event stating a payment date, the place where such payment shall be made, the amount of each payment in liquidation and the amount of accrued dividends to be paid, shall be given by first class mail, postage prepaid, not less than ten (10) days prior to the payment date stated therein, to each shareholder of record (whether or not the shareholder is to receive any payment) at such shareholder’s address as shown in the records of the Corporation.

Section 5. Redemption.

     (a) The holders of the Series K Preferred Stock shall not have the right to cause the Corporation to redeem shares of their Series K Preferred Stock at any time.

     (b) The Corporation shall have the right, but not the obligation, exercisable at any time and from time to time, to redeem all or any portion of the outstanding shares of Series K Preferred Stock. All redemptions of fewer than all outstanding shares of Series K Preferred Stock shall be affected on a pro rata basis.

     (c) The redemption price to be paid by the Corporation for any shares of Series K Preferred Stock shall equal the Liquidation Preference for those shares, plus an amount equal to the cash value of all accrued but unpaid dividends thereon. Upon payment of such redemption price, the Corporation shall have no further obligation with respect to payment of accrued and unpaid dividends with respect to the shares so redeemed.

     (d) At least thirty (30) days prior to any redemption, the Corporation will provide to the holders of shares to be redeemed written notice (the “Redemption Notice”) of the number of shares to be redeemed (the “Redemption Shares”), the redemption price and the redemption date (the “Redemption Date”). Such notice shall be sent to the address for each holder of Series K Preferred Stock on the records of the Corporation. Upon receipt of any Redemption Notice, holders of Series K Preferred Stock shall send to the Corporation stock certificate(s) duly endorsed for transfer representing the Redemption Shares as provided in the Redemption Notice for receipt by the Corporation on or before the Redemption Date. Upon receipt of stock certificate(s) representing the Redemption Shares endorsed as provided above (but not prior to the Redemption Date), the Corporation will send to the holders of the Redemption Shares payment of the redemption price as stated in the Redemption Notice, and if not all the shares represented by the stock certificate(s) provided to the Corporation are to be

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redeemed, stock certificate(s) representing the shares that have not been redeemed.

     The Corporation shall have no obligation to make any payment for Redemption Shares until the owner of the Redemption Shares complies in full with the procedures set forth above. Notwithstanding failure by any shareholder to comply with the procedures set forth in the preceding paragraph and the consequent failure by the Corporation to pay the redemption price for the Redemption Shares, the Redemption Shares shall, from and after the Redemption Date stated in the Redemption Notice, cease to be issued and outstanding shares of capital stock of the Corporation and the former owner shall not be entitled to vote, receive dividends or exercise any other rights of a shareholder on account of the Redemption Shares. From and after the Redemption Date the sole obligation of the Corporation on account of the Redemption Shares shall be to pay the redemption price stated in the Redemption Notice, together with interest at the rate equal to the dividend rate in effect on the Redemption Date in the event of late payment.

     (e) Holders of outstanding shares of Series K Preferred Stock shall have the right to convert such shares into shares of Common Stock in accordance with Section 6 hereof at any time before the close of business on the fifth Business Day preceding the Redemption Date specified for such shares. Without limiting any rights of the Corporation, the Corporation may reduce the number of shares that it has elected to redeem as specified in a Redemption Notice by a number equivalent to the number of shares of Series K Preferred Stock converted into Common Stock during the period beginning on the date of the Redemption Notice and ending on the Redemption Date.

     (f) All shares of the Series K Preferred Stock that shall have been redeemed as herein provided shall no longer be deemed to be outstanding. Any shares of Series K Preferred Stock so redeemed shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series K Preferred Stock accordingly.

Section 6. Conversion of Series K Preferred Stock. Each holder of shares of Series K Preferred Stock shall have the right to convert all or any portion of such shares as such holder desires to convert, and in certain circumstances such shares shall be automatically converted, into shares of the Common Stock of the Corporation, as follows:

     (a) Optional Conversion. Subject to and in compliance with the provisions of this Section 6, any or all shares of Series K Preferred Stock, at the option of the holder, may be converted at any time or from time to time prior to the fifth Business Day preceding any Redemption Date established for such shares, if any, into a number of fully paid and nonassessable shares (calculated as to each conversion to the largest whole share) of Common Stock determined by

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multiplying the number of whole and fractional shares of Series K Preferred Stock to be converted by a fraction, the numerator of which is the Liquidation Preference of a share of Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any, and the denominator of which is the conversion price then in effect for the Series K Preferred Stock (the “Conversion Price”). The Conversion Price shall increase periodically as follows: (i) during the period from the Commencement Date through October 6, 2011, the Conversion Price shall equal $1.75 per share; (ii) during the period from October 7, 2011 through October 6, 2013, the Conversion Price shall equal $2.25 per share; and (iii) on or after October 7, 2013, the Conversion Price shall equal $3.00 per share. The Conversion Price shall be subject to adjustment in accordance with the provisions in Section 6(d) below.

     (b) Automatic Conversion. The outstanding shares of Series K Preferred Stock shall automatically convert to shares of Common Stock in the circumstances described in the following subparagraph, as follows:

If the closing bid price for the Common Stock on The Nasdaq Stock Market (or other exchange or market on which the Common Stock may from time to time be traded) for any period of twenty (20) consecutive trading days exceeds the following, then all outstanding shares of Series K Preferred Stock shall automatically convert: (i) during the period from the Commencement Date through October 6, 2011, $4.00 per share; (ii) during the period from October 7, 2011 through October 6, 2013, $4.75 per share; and (iii) on or after October 7, 2013, $5.50 per share. Upon the occurrence of the above, the outstanding shares of Series K Preferred Stock, at the close of the market on the last trading day in such period, shall convert into a number of fully paid and nonassessable shares (calculated to the largest whole share) of Common Stock determined by multiplying the number of shares of Series K Preferred Stock then outstanding by a fraction, the numerator of which is the Liquidation Preference of a share of Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any, and the denominator of which is the then applicable Conversion Price, provided that the resale of the shares issuable upon conversion shall have been registered or shall be subject to available exemption under applicable securities laws.

     (c) Mechanics of Conversion. Before any holder of Series K Preferred Stock shall be entitled to convert the same into full shares of Common Stock, unless the conversion is an automatic conversion, the holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the office of the Corporation or any transfer agent of the Corporation and shall give written notice to the Corporation at such office that he elects to convert the same, such notice to state the name or names and addresses to which certificates for Common Stock will be issued. No fractional shares of Common Stock shall be issued upon conversion of Series K Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to

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such fraction multiplied by the then-effective Conversion Price. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series K Preferred Stock, or to a third party such holder may designate in writing, a certificate or certificates for the number of whole shares of Common Stock to which he shall be entitled and a check payable to the holder in the amount of any cash amounts payable in lieu of fractional shares as aforesaid, and if less than all the shares of Series K Preferred Stock represented by such certificates are converted, a certificate representing the shares of Series K Preferred Stock not converted. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series K Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

     (d) Adjustments to Conversion Price.

     (i) Adjustments for Subdivisions, Common Stock Dividends, Combinations or Consolidations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided or increased by stock split or stock dividend, into a greater number of shares of Common Stock, the Conversion Price then in effect shall concurrently with the effectiveness of such subdivision or payment of such stock dividend, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price then in effect shall concurrently with the effectiveness of such combination or consolidation, be proportionately increased.

     (ii) Adjustments for Reclassification, Exchange and Substitution. If the Common Stock issuable upon conversion of the Series K Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), the Series K Preferred Stock shall thereafter be convertible into, in lieu of the shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock that would have been obtainable in exchange for the shares of Common Stock that were issuable upon conversion of the Series K Preferred Stock immediately before that change.

     (e) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 6(d), the Corporation at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series K Preferred Stock a certificate setting forth such adjustment or

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readjustment in accordance with the terms hereof and furnish to each holder of Series K Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series K Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series K Preferred Stock.

     (f) No Impairment. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution or issuance or sale of securities or any other voluntary action (other than actions taken in good faith), avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all the provisions of this Section 6 and in taking all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series K Preferred Stock against impairment.

     (g) Reservation of Stock. The Corporation shall, at all times when any shares of the Series K Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, (i) for the purpose of effecting the conversion of the Series K Preferred Stock pursuant to Section 6, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series K Preferred Stock and (ii) for the purpose of paying accrued dividends in the form of shares of Series K Preferred Stock, such number of its duly authorized shares of Series K Preferred Stock as shall from time to time be sufficient to pay such dividends.

     (h) Cancellation of Series K Preferred Stock. All shares of the Series K Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding. Any shares of the Series K Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized shares of Series K Preferred Stock accordingly.

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EX-4.8.3

Exhibit 4.8.3

THIRD AMENDMENT TO WARRANT

     THIRD AMENDMENT dated effective as of December 29, 2009 (this “Amendment”), between DRI CORPORATION, a North Carolina corporation (“DRI”), and BHC INTERIM FUNDING III, L.P. (“Holder”) to that certain Warrant dated as of June 30, 2008 (as amended, modified, supplemented or restated from time to time, the “Warrant”).

     WHEREAS, DRI sold the Warrant to Holder, in which Holder purchased certain Capital Stock of DRI in connection with that certain Loan and Security Agreement dated as of June 30, 2008, among DRI, Digital Recorders Inc., a North Carolina corporation, TwinVision of North America, Inc., a North Carolina corporation, and Holder, as lender (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”). Capitalized terms used without further definition herein shall have the respective meanings set forth in the Loan Agreement and the Loan Documents;

     WHEREAS, in consideration of and as a condition precedent to that certain Fifth Amendment to the Loan and Security Agreement dated as of the date hereof, DRI and Holder have agreed to amend the Warrant on the terms and subject to satisfaction of the conditions contained herein.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

     Section 1. Amendment to Warrant.

          (a) Paragraph (A). Paragraph (A) of the Warrant is hereby deleted in its entirety and the following is hereby substituted therefor:

     THIS IS TO CERTIFY THAT, for value received, BHC INTERIM FUNDING III, L.P., a Delaware limited partnership, or its registered assigns, (the “Holder”) is entitled to purchase from DRI CORPORATION, a North Carolina corporation (the “Company”), at any time on or after the date hereof and before 5:00 p.m. (New York time) on June 30, 2013, (i) Two Hundred Thousand (200,000) fully paid and non-assessable shares of the Company’s common stock, $0.10 par value per share (the “A Common Stock”) at a price (the “A Exercise Price”) equal to $1.00 per share, and (ii) One Hundred Fifty Thousand (150,000) fully paid and non-assessable shares of the Company’s common stock, $0.10 par value per share (the “B Common Stock” and, together with the A Common Stock, the “Common Stock”) at a price (the “B Exercise Price” and, together with the A Exercise Price, the “Exercise Price”) equal to $1.75 per share, payable as provided below and subject to adjustment pursuant to Article III hereof. The shares of Common Stock issuable upon exercise of this Warrant are herein called the “Warrant Shares.”

     Section 2. Representations and Warranties by DRI. DRI warrants and represents to Holder that:

          (a) all of the representations and warranties contained in the Warrant and each other Loan Document to which DRI is a party continue to be true and correct in all material respects as of the date hereof, as if repeated as of the date hereof, except for such representations and warranties which, by their terms, are expressly made only as of a previous date;

          (b) the execution, delivery and performance of this Amendment by DRI is within its corporate powers, has been duly authorized by all necessary corporate action on its part, and DRI has received all necessary consents and approvals (if any are required) for the execution and delivery of this Amendment;

          (c) the Organizational Documents of DRI previously delivered to Holder by DRI have not been amended or modified in any respect as of the date hereof;

          (d) upon its execution, this Amendment shall constitute the legal, valid and binding obligation of DRI, enforceable against DRI in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights generally and (ii) general principles of equity;

          (e) except as set forth herein or as DRI or its representatives shall have notified Holder of in writing, DRI is not in default under any indenture, mortgage, deed of trust, or other material agreement or material instrument to which it is a party or by which it may be bound which could have a Material Adverse Effect;

          (f) neither the execution and delivery of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will (i) violate any law or regulation applicable to DRI, (ii) cause a violation by DRI of any order or decree of any court or government instrumentality applicable to them, (iii) conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or other material agreement or material instrument to which DRI is a party or by which it may be bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon any property of DRI, except in favor of Holder, to secure the Obligations;

          (g) no Default or Event of Default has occurred and is continuing;

          (h) since the date of the Loan Parties’ most recent financial statements delivered to Holder, no change or event has occurred which has had, or is reasonably likely to have, a Material Adverse Effect; and

          (i) this Amendment and any assignment or other instrument, document or agreement executed and delivered in connection herewith, will be valid, binding and

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enforceable in accordance with their respective terms.

     Section 3. Miscellaneous.

          (a) This Amendment shall become effective on the date on which Lender shall have received this Amendment duly executed by DRI and Lender shall have received an amendment fee in the amount of $5,000.

          (b) The provisions of this Amendment are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect.

          (c) This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same respective agreement. Signature by facsimile shall also bind the parties hereto.

          (d) This Amendment is a Loan Document.

          (e) The headings of this Amendment are for the purposes of reference only and shall not affect the construction of this Amendment.

          (f) THIS AMENDMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

          (g) DRI FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO HOLDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT SHALL BE LITIGATED IN SUCH COURTS. DRI FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AMENDMENT. DRI FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH PERSON AT SUCH PERSON’S ADDRESS AS SET FORTH IN SECTION 8.6

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OF THE LOAN AGREEMENT OR AS MOST RECENTLY NOTIFIED BY SUCH PERSON IN WRITING PURSUANT TO SECTION 8.6 OF THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID.

          (h) DRI FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND HOLDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT. DRI FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND HOLDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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     Dated effective as of the date and year first written above.

DRI CORPORATION
By:	/s/ David L. Turney
	David L. Turney
	CEO, President and Chairman

Accepted as of the day and year first above written:

BHC INTERIM FUNDING III, L.P.
By: BHC Interim Funding Management III, L.P., its General Partner
By: BHC Investors III, L.L.C., its Managing Member
By: GHH Holdings III, L.L.C.

By:	/s/ Gerald H. Houghton
	Gerald H. Houghton
	Managing Member

SIGNATURE PAGE TO SECOND AMENDMENT TO WARRANT

EX-10.37.5

Exhibit 10.37.5

AMENDMENT NO. 6
TO REVOLVING CREDIT AND SECURITY AGREEMENT

     THIS AMENDMENT NO. 6 (this “Agreement”) is entered into as of December 29, 2009, by and between DIGITAL RECORDERS, INC. (“DR”), TWINVISION OF NORTH AMERICA, INC. (“TVna”, collectively with DR, each a “Borrower”, and collectively the “Borrowers”), DRI CORPORATION (“DRI”, DRI and the Borrowers, each a “Loan Party, and collectively, the “Loan Parties”), the financial institutions party hereto (collectively, the “Lenders” and individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

BACKGROUND

     Loan Parties, Lenders and Agent are parties to that certain Revolving Credit and Security Agreement dated June 30, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) pursuant to which Agent and Lenders provide Borrowers with certain financial accommodations.

     Loan Parties have requested that Agent and Lenders amend certain provisions of the Loan Agreement as hereafter provided, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

     NOW, THEREFORE, in consideration of any loan or advance or grant of credit heretofore or hereafter made to or for the account of Borrowers by Agent or Lenders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

     1. Definitions. All capitalized terms not otherwise defined or amended herein shall have the meanings given to them in the Loan Agreement.

     2. Amendment. Subject to the satisfaction of Section 3 below, the Loan Agreement is hereby amended as follows:

          (a) The table appearing in Section 6.5(b) of the Loan Agreement is hereby amended to read in its entirety as set forth below:

Fiscal Quarter Ending:	Leverage Ratio:
September 30, 2009		5.25 to 1.0
December 31, 2009		5.00 to 1.0
March 31, 2010		6.75 to 1.0
June 30, 2010		8.25 to 1.0
September 30, 2010		7.00 to 1.0
December 31, 2010 and each fiscal quarter ending thereafter		5.50 to 1.0

     3. Conditions of Effectiveness. This Agreement shall become effective when Agent shall have received (x) four (4) copies of this Agreement executed by the Required Lenders and each Loan Party, (y) an amendment fee of $15,000, which may be charged to Borrowers’ Account as a Revolving Advance and (z) an executed copy of an amendment to the Subordinated Loan Documentation in form and substance satisfactory to Agent.

     4. Representations, Warranties and Covenants. Each Loan Party hereby represents, warrants and covenants as follows:

     (a) This Agreement, the Loan Agreement and the Other Documents constitute legal, valid and binding obligations of such Loan Party and are enforceable against such Loan Party in accordance with their respective terms.

     (b) Upon the effectiveness of this Agreement, each Loan Party hereby reaffirms all covenants, representations and warranties made in the Loan Agreement and the Other Documents to the extent the same are not amended hereby and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Agreement.

     (c) The execution, delivery and performance of this Agreement and all other documents in connection therewith has been duly authorized by all necessary corporate action, and does not contravene, violate or cause the breach of any agreement, judgment, order, law or regulation applicable to any Loan Party

     (d) No Event of Default or Default has occurred and is continuing or would exist after giving effect to this letter amendment.

     (e) No Loan Party has any defense, counterclaim or offset with respect to the Loan Agreement or the Obligations.

     5. Effect on the Loan Agreement.

     (a) Upon the effectiveness of this Agreement, each reference in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Loan Agreement as amended hereby. Except as specifically amended herein, the Loan Agreement, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. This Agreement shall constitute an “Other Document” for all purposes under the Loan Agreement.

     (b) The execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of Agent or any Lender, nor constitute a waiver of any provision of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered under or in connection therewith.

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     6. Release. The Loan Parties hereby acknowledge and agree that: (a) neither they nor any of their Affiliates have any claim or cause of action against Agent or any Lender (or any of Agent’s or any Lender’s Affiliates, officers, directors, employees, attorneys, consultants or agents) and (b) Agent and each Lender have heretofore properly performed and satisfied in a timely manner all of their respective obligations to the Loan Parties under the Loan Agreement and the Other Documents. Notwithstanding the foregoing, Agent and each Lender wish (and the Loan Parties agree) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of Agent’s or such Lender’s rights, interests, security and/or remedies under the Loan Agreement and the Other Documents. Accordingly, for and in consideration of the agreements contained in this Agreement and other good and valuable consideration, the Loan Parties (for themselves and their Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (each a “Releasor” and collectively, the “Releasors”) does hereby fully, finally, unconditionally and irrevocably release and forever discharge Agent, each Lender and each of their respective Affiliates, officers, directors, employees, attorneys, consultants and agents (each a “Released Party” and collectively, the “Released Parties”) from any and all debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent of fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the date hereof arising out of, connected with or related in any way to this Agreement, the Loan Agreement or any Other Document, or any act, event or transaction related or attendant thereto, or Agent’s or any Lender’s agreements contained therein, or the possession, use, operation or control of any of the assets of agreements contained therein, or the possession, use, operation or control of any of the assets of the Loan Parties, or the making of any advance, or the management of such advance or the Collateral.

     7. Governing Law. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York (other than those conflict of law rules that would defer to the substantive law of another jurisdiction).

     8. Cost and Expenses. Loan Parties hereby agree to pay the Agent, on demand, all costs and reasonable expenses (including reasonable attorneys’ fees and legal expenses) incurred in connection with this Agreement and any instruments or documents contemplated hereunder.

     9. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

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     10. Counterparts; Facsimile Signatures. This Agreement may be executed by the parties hereto in one or more counterparts of the entire document or of the signature pages hereto, each of which shall be deemed an original and all of which taken together shall constitute one and the same agreement. Any signature received by facsimile or electronic transmission shall be deemed an original signature hereto.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first written above.

PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By:	/s/ John Trieu
	Name:	John Trieu
	Title:	VP
DRI CORPORATION
By:	/s/ David L. Turney
	Name:	David L. Turney
	Title:	President, CEO, Chairman
DIGITAL RECORDERS, INC.
By:	/s/ David L. Turney
	Name:	David L. Turney
	Title:	President, CEO, Chairman
TWINVISION OF NORTH AMERICA, INC.
By:	/s/ David L. Turney
	Name:	David L. Turney
	Title:	President, CEO, Chairman

[Signature Page to Amendment No. 6]

EX-10.39.7

Exhibit 10.39.7

FIFTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT

     THIS FIFTH AMENDMENT is entered into as of December 29, 2009 (this “Amendment”) among DIGITAL RECORDERS, INC., a North Carolina corporation (“Digital”), TWINVISION OF NORTH AMERICA, INC., a North Carolina corporation (“TwinVision” and, together with Digital, the “Borrowers”), DRI CORPORATION, a North Carolina corporation (“Guarantor” and, together with the Borrowers, the “Loan Parties”), and BHC INTERIM FUNDING III, L.P., a Delaware limited partnership (“Lender”), to that certain Loan and Security Agreement dated as of June 30, 2008 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”) among the Loan Parties and Lender. Terms which are capitalized in this Amendment and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement.

     WHEREAS, the Loan Parties have requested that Lender agree to modify certain terms of the Loan Agreement, and the Lender is willing to do so, on the terms and subject to the satisfaction of the conditions contained herein.

     NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Loan Parties and Lender hereby agree as follows:

     Section One. Definitions. Terms which are capitalized in this Amendment and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement as amended by this Amendment.

     Section Two. Amendment to Loan Agreement. Effective upon satisfaction of the conditions precedent set forth in Section Four hereof, the Loan Agreement is hereby amended as follows:

     (a) Section 6.18(A) (Aggregate Indebtedness) of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted therefor:

          Aggregate Indebtedness. The aggregate principal amount of all Indebtedness of Parent and its consolidated Subsidiaries, including the Obligations, shall not exceed at any time during or at the end of each fiscal quarter $19,000,000 (or the equivalent thereof in any foreign currency); provided, that, the aggregate principal amount of all Subsidiaries of the Foreign Subsidiaries shall not exceed at any time during or at the end of (i) each fiscal quarter, other than the fiscal quarter ending on December 31, 2009, $6,000,000 (or the equivalent thereof in any foreign currency) and (ii) the fiscal quarter ending on December 31, 2009, $6,200,000 (or the equivalent thereof in any foreign currency); provided, further, that, in addition thereto (i) Mobitec AB shall be permitted to issue to the seller of the fifty percent (50%) of Mobitec Brazil that Mobitec AB does not own as of the date hereof a promissory note in a principal amount not to exceed $1,950,000 (or the equivalent thereof in a foreign currency) if such note is unsecured and subordinated to the Obligations on terms and conditions satisfactory to Lender in its sole discretion and (ii) Mobitec Australia

shall be permitted to enter into a working capital facility in a principal amount not to exceed $1,000,000 (or the equivalent thereof in a foreign currency) on terms and conditions satisfactory to Lender in its sole discretion.

     (b) Section 6.18(D) (Leverage Ratio) of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted therefor:

     (D) Leverage Ratio. Loan Parties shall maintain as of the end of each fiscal quarter set forth below a ratio of (i) Funded Debt of the Loan Parties on a Consolidated Basis outstanding on the last day of such fiscal quarter to (ii) EBITDA of the Loan Parties on a Consolidated Basis for the twelve month period ending on the last day of such fiscal quarter of not greater than the ratio set forth below opposite the last day of such fiscal quarter:

Fiscal Quarter Ending:	Leverage Ratio:
September 30, 2009		5.25:1.0
December 31, 2009		5.0:1.0
March 31, 2010		6.75:1.0
June 30, 2010		8.25:1.0
September 30, 2010		7.0:1.0
December 31, 2010 and each fiscal quarter ending thereafter		5.5:1.0

     Section Three. Representations and Warranties. To induce Lender to enter into this Amendment, the Loan Parties hereby warrant and represent to Lender as follows:

     (a) all of the representations and warranties contained in the Loan Agreement and each other Loan Document to which the Loan Parties are a party continue to be true and correct in all material respects as of the date hereof, as if repeated as of the date hereof, except for such representations and warranties which, by their terms, are expressly made only as of a previous date;

     (b) the execution, delivery and performance of this Amendment by each of the Loan Parties is within their corporate powers, has been duly authorized by all necessary corporate action on their part, and each of the Loan Parties has received all necessary consents and approvals (if any are required) for the execution and delivery of this Amendment;

     (c) the Organizational Documents of Borrowers and Guarantor previously delivered to Lender by the Loan Parties have not been amended or modified in any respect as of the date hereof; except that the Organizational Document of Guarantor have been modified by the Articles of Amendment to Articles of Incorporation of DRI;

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     (d) upon execution of this Amendment, the Loan Agreement as amended by this Amendment shall constitute the legal, valid and binding obligation of the Loan Parties, enforceable against the Loan Parties in accordance with their terms as so amended, except as such enforceability may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights generally and (ii) general principles of equity;

     (e) except as set forth herein or as the Loan Parties or their representatives shall have notified Lender of in writing, none of the Loan Parties are in default under any indenture, mortgage, deed of trust, or other material agreement or material instrument to which they are a party or by which they may be bound which could have a Material Adverse Effect;

     (f) neither the execution and delivery of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will (i) violate any law or regulation applicable to any of the Loan Parties, (ii) cause a violation by any of the Loan Parties of any order or decree of any court or government instrumentality applicable to them, (iii) conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or other material agreement or material instrument to which any of the Loan Parties is a party or by which they may be bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon any property of any of the Loan Parties, except in favor of Lender, to secure the Obligations;

     (g) no Default or Event of Default has occurred and is continuing; and

     (h) since the date of the Loan Parties’ most recent financial statements delivered to Lender, no change or event has occurred which has had, or is reasonably likely to have, a Material Adverse Effect.

     Section Four. Conditions Precedent. This Amendment shall become effective on the date on which the following conditions precedent are satisfied, as determined by Lender in its sole discretion:

     (a) Lender shall have received this Amendment, in form and substance satisfactory to Lender, duly executed by the Loan Parties;

     (b) Lender shall have received that certain Consent and Amendment No. 6 to the Senior Lien Financing Agreement, duly executed by the parties thereto;

     (c) the Loan Parties shall have paid all amounts outstanding on or prior to the date of this Amendment, including reimbursement or payment of all out-of-pocket expenses (including the legal fees and expenses of Blank Rome LLP), incurred in connection with this Amendment, the Loan Documents and the transactions contemplated hereby and thereby;

     (d) Lender shall have received a certificate of the secretary of Guarantor certifying the true and correct copy of Articles of Amendment to its Articles of Incorporation, which shall be in full force and effect as of the date of such certificate; and

     (e) no Default or Event of Default shall have occurred be continuing, and no event or development which has had or is reasonably likely to have a Material Adverse Effect shall have

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occurred, in each case, since the date of the Loan Parties’ most recent financial statements delivered to Lender.

     Section Five. Release. The Loan Parties hereby acknowledge and agree that: (a) neither they nor any of their Affiliates have any claim or cause of action against Lender (or any of Lender’s Affiliates, officers, directors, employees, attorneys, consultants or agents) and (b) Lender has heretofore properly performed and satisfied in a timely manner all of its obligations to the Loan Parties under the Loan Agreement and the other Loan Documents. Notwithstanding the foregoing, Lender wishes (and the Loan Parties agree) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of Lender’s rights, interests, security and/or remedies under the Loan Agreement and the other Loan Documents. Accordingly, for and in consideration of the agreements contained in this Amendment and other good and valuable consideration, the Loan Parties (for themselves and their Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (each a “Releasor”) do hereby fully, finally, unconditionally and irrevocably release and forever discharge Lender and each of its Affiliates, officers, directors, employees, attorneys, consultants and agents (each a “Released Party”) from any and all debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent of fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the date hereof arising out of, connected with or related in any way to this Amendment, the Loan Agreement or any other Loan Document, or any act, event or transaction related or attendant thereto, or Lender’s agreements contained therein, or the possession, use, operation or control of any of the assets of agreements contained therein, or the possession, use, operation or control of any of the assets of the Loan Parties, or the making of any advance, or the management of such advance or the Collateral.

     Section Six. General Provisions.

     (a) Except as herein expressly amended, each of the Loan Agreement and all of the other Loan Documents are ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms.

     (b) All references to the Loan Agreement in the Loan Agreement and each other Loan Document shall mean such Loan Agreement as amended as of the effective date hereof, and as amended hereby and as hereafter amended, supplemented and modified from time to time.

     (c) This Amendment embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, commitments, arrangements, negotiations or understandings, whether written or oral, of the parties with respect thereto.

     (d) Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

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     (e) THIS AMENDMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     (f) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT SHALL BE LITIGATED IN SUCH COURTS. EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AMENDMENT. IF ANY LOAN PARTY OR ANY SUBSIDIARY PRESENTLY IS, OR IN THE FUTURE BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH PERSON AT SUCH PERSON’S ADDRESS AS SET FORTH IN SECTION 8.6 OF THE LOAN AGREEMENT OR AS MOST RECENTLY NOTIFIED BY SUCH PERSON IN WRITING PURSUANT TO SECTION 8.6 OF THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID.

     (g) EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT. EACH LOAN PARTY FOR ITSELF AND ON BEHALF OF ITS SUBSIDIARIES AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

     (h) This Amendment is a Loan Document.

     (i) Nothing contained in this Amendment shall operate as a waiver of any right, power, or remedy to which Lender may be entitled, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents, or any other documents, instruments or agreements executed and/or delivered under or in connection therewith.

     (j) This Amendment may be executed by the parties hereto in one or more counterparts, each of which when so executed shall be deemed an original; and such counterparts

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taken together shall constitute one and the same agreement. Any signatures delivered by a party by facsimile or electronic transmission shall be deemed an original signature hereto.

(This space intentionally left blank — signature page follows.)

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     IN WITNESS WHEREOF, Loan Parties and Lender have signed below to indicate their agreement with the foregoing and their intent to be bound thereby.

LENDER:	BHC INTERIM FUNDING III, L.P.
	By:	BHC Interim Funding Management III, L.P., its General Partner
	By:	BHC Investors III, L.L.C., its Managing Member
	By:	GHH Holdings III, L.L.C.
	By:	/s/ Gerald H. Houghton
		Gerald H. Houghton
		Managing Member
BORROWERS:	DIGITAL RECORDERS, INC.
	By:	/s/ David L. Turney
		David L. Turney
		CEO, President
	TWINVISION OF NORTH AMERICA, INC.
	By:	/s/ David L. Turney
		David L. Turney
		CEO, President
GUARANTOR:	DRI CORPORATION
	By:	/s/ David L. Turney
		David L. Turney
		CEO, President

Signature Page to Fifth Amendment to Loan and Security Agreement

Consented to and Acknowledged by: DRI EUROPA AKTIEBOLAG
By:	/s/ David L. Turney
	David L. Turney
	Chairman
MOBITEC AB
By:	/s/ Stephen P. Slay
	Stephen P. Slay
	Director

Acknowledgement to Fifth Amendment to Loan and Security Agreement

EX-10.49.3

EXHIBIT 10.49.3

Undertaking concerning loan payment
— for purposes other than personal consumption

Handelsbanken

Branch
Frölunda

	Loan number
Borrower	Customer number
MOBITEC AKTIEBOLAG

Provided that Svenska Handelsbanken AB (publ)/Stadshypotek AB grants extension of the loan period, at least the below amount must be amortised each...

Other terms for the loan remain unchanged

From
2010-03-31 Amount
0 þ SEK EUR From
2010-09-30 Amount
1,500,000 þ SEK EUR

In addition to this, interest due must be paid each time the loan period is extended.

Other comments

Automatic payment

Account number	If an account number is stated, it implies an agreement that amounts due are paid by the bank debiting the account on the due date. The agreed due date will apply even if it is not a business day. The borrower is responsible for the required amount being available on the account on the due date.
Signature
Date	Signature of borrower
2010-03-25	MOBITEC AB
	/s/ Agne Axelsson
Approval by guarantor and/or pledger who is not the borrower if the amortisation plan is changed
Date	Signature of borrower/pledger
Date	Signature of borrower/pledger
Date	Signature of borrower/pledger
Date	Signature of borrower/pledger
Date	Signature of borrower/pledger

Signature of branch manager or equivalent	The documentation is correct		The change has been registered for the loan
	Date	Signature	Date	Signature

EX-10.64.1

Exhibit 10.64.1

Handelsbanken	CONTRACT A		Page
	SUPPLEMENTARY OVERDRAFT FACILITY		1 of 1
Branch Frölunda	For purposes other than personal consumption	Facility no. 258 631 988

Borrower	Name	Civic reg. no/Business org. no.
	MOBITEC AKTIEBOLAG

Normal overdraft facility	Amount granted	Contract date
	7 000 000,00	2001-08-28

Amount of supplementary facility	SEK (in words)
	THREE MILLION FIVE HUNDRED THOUSAND KRONOR
	SEK (in figures)
	3 500 000,00

Overdraft period As from — to, inclusive (year, month, day)
2010-05-01—2010-09-30 In accordance with section 8 of the “General Terms” for the facility, the Bank can suspend utilisation of the facility during the overdraft period and/or terminate the facility.

Interest	Utilisation interest rate, currently % The interest rate is subject to special terms relating to money market accounts	Contract interest rate, currently %	The interest is payable as contract interest on the full overdraft amount and as utilisation interest on the borrower’s debt. Contract interest is payable in advance at the commencement of the facility period.
	STIBOR T/N + 3,80	0, 50
	Due dates for utilisation interest every (month, day) 0630, 0930

The Bank’s undertaking

In addition to the above-mentioned normal overdraft facility, Svenska Handelsbanken AB (publ) allows the borrower to utilise a supplementary overdraft facility up to the above-mentioned facility amount on the terms and conditions set out in this contract.

The borrower’s undertaking

The Borrower shall comply with the terms and conditions of this contract, some of which are set out in the “General terms” for the facility. On expiry of the agreed overdraft period, the borrower shall immediately repay his/her debt pursuant to the contract. When the borrower’s right to utilise the normal overdraft facility and/or supplementary facility has expired, the borrower must immediately return unused cheques and any other instruments used for operation of the account.

Signature	I/We confirm that I/we have read all pages of the contract including the “General terms” for the facility.
	Date 2010-03-25	Date 2010-03-25
	Borrower Mobitec AB	Svenska Handelsbanken AB (publ)
	/s/ Agne Axelsson	/s/ Catarina Berntsson
	Agne Axelsson	Catarina Berntsson

Handelsbanken Page 1 of 3

GENERAL TERMS CONTRACT A — Supplementary credit for purposes other than personal consumption, applying from 21 December 2009

1.	General terms for accounts held with Handelsbanken
	The borrower disposes of the account in accordance with the terms applying to the account to which the overdraft facility is linked. The Bank may withdraw funds from the account if the borrower has ordered this or has approved that the account may be debited.
	The Bank may also debit the account with amounts corresponding to interest, charges and costs which are associated with the account. In addition, the Bank may debit the account with amounts corresponding to charges, costs and outlays for orders effected on behalf of the borrower and for payment of other due claims which the Bank has on the borrower.
	When the Bank is entitled to debit the account as stated in the previous paragraph, this may also be done as at a day which is a public holiday or equivalent day. It is the duty of the borrower to ensure that a sufficiently large amount is available on the account when the debit occurs. If the borrower dies during the contract period, the estate of the deceased may not increase the debt on the account without the consent of the Bank.
2.	Interest
	The borrower shall pay utilisation interest to the Bank at an annual rate computed on the overdraft amount outstanding at any time, plus contract interest on the granted overdraft amount. The utilisation interest is calculated at the interest rate and on the grounds which the Bank applies to this type of facility from time to time. The interest rates applying when the facility was provided are set out in the contract. If different interest rates are applied for utilisation interest in different ranges of the overdraft amount, this is indicated on page one with the interest rates applying when the contract was entered into.
	In the event of an extension of the facility, additional contract interest is payable for each period of extension, this being payable in advance for the period concerned.
	The borrower is liable for contract interest for the period until the end of the overdraft period set out in the contract, without any obligation for the Bank to make a refund if the contract should be terminated before then.
3.	Overdrafts
	If the borrower’s debt to the Bank under this contract exceeds the amount granted, the borrower shall upon demand pay the difference. In this case, the borrower shall also pay interest on the overdrawn amount at the rate and on the grounds applied by the Bank at any time, as well as an unauthorised overdraft fee as set out in section 5 below.
	Unauthorised overdrafts also entitle the Bank to terminate the facility for repayment and/or suspend utilisation of the facility in advance. In this case the provisions in section 8 will apply.
4.	Penalty interest
	If payment of principal, interest and/or charges is not effected when due, the borrower shall pay special annual penalty interest on the overdue amount until payment is made. On amounts not overdue, the usual interest rate continues to apply.
	Penalty interest is calculated at the utilisation interest rate applying to the facility, plus five percentage points or, when the entire facility is overdue, one percentage point.
5.	Charges and costs
	The account is subject to charges according to the terms generally applied from time to time by the Bank. Particulars of current charges are available at any of the Bank’s branches.
	The borrower shall reimburse the Bank for the costs and work associated with obtaining, maintaining and utilising the security agreed upon, as well as with the lodging of proof and collection of the Bank’s claim on the borrower or on any other party liable for payment thereof. The Bank’s written payment reminders shall thus also be reimbursed.
6.	Order of debt settlement
	When payment is made, the Bank is entitled to deduct the charges, costs and interest due on the facility before settling the principal amount.
7.	Facility period
	The facility period for the supplementary overdraft facility is set out in the contract and will not be extended. If the Bank does not grant an extension of the normal overdraft facility or if the normal overdraft facility is terminated for payment in advance, the supplementary overdraft facility shall be due for payment at the same time as the normal overdraft facility irrespective of whether the agreed facility period for the supplementary overdraft facility is longer or the supplementary overdraft facility has not been subject to separate notice of termination.
8.	The Bank’s right to terminate the facility and/or suspend utilisation of the facility
	The Bank may terminate the facility for payment immediately or at any time determined by the Bank and suspend utilisation of the overdraft facility, if any of the following circumstances should apply:

• the borrower has failed to meet his obligations under this contract or otherwise to the Bank,

• the borrower has used the account improperly in a manner set out under Section 3,

• the collateral for the loan or for other obligations of the borrower towards the Bank is no longer satisfactory,

• there is reasonable cause to assume that the borrower will not meet his payment obligations to the Bank.

	If any of the circumstances set out above are present, the Bank is entitled, regardless of whether termination has been made, to immediately suspend the right to utilise the facility further. If the Bank has terminated the facility in accordance with this section, the borrower shall immediately return unused cheques and other instruments for operating the account.
9.	Closing bill and refund
	When the agreed overdraft period has expired or when the facility is payable in advance pursuant to section 3, 7 or 8, the Bank shall prepare a closing bill.
	The borrower must immediately pay the debt according to the closing bill.
10.	Definition of a pledge, etc.
	‘Pledge’ also refers to property that is included in a floating charge on assets. The term ‘pledger’ also refers to an assignor of floating charge, ‘pledging’ also refers to assignment of the floating charge and ‘pledge deed’ also refers to deeds associated with a floating charge and pledge claims.
11.	The Bank’s right to sell pledged financial instruments
	If the security for the loan consists in full or in part of financial instruments and if the value for borrowing purposes assigned by the Bank declines, implying that the security is no longer satisfactory, the borrower must at the request of the Bank immediately provide additional security. If such security is not provided, or if the Bank is unable to contact the borrower within a reasonable period of time, the Bank has the right, but not the obligation, to sell the required portion of the financial instruments. The proceeds shall be deposited to an interest-bearing account and continue to constitute a pledge for the loan. That which is stated above does not restrict the Bank’s right to terminate the facility for immediate payment in accordance with section 8 and/or the right to immediately suspend utilisation of the facility in accordance with section 8.
12.	Right of guarantor and pledger to prevent extension of overdraft period
	A guarantor is not entitled to terminate his guarantee and a pledger may not revoke his mortgage.

Handelsbanken Page 2 of 3

	However, any guarantor or pledger may separately, not later than six weeks before the due date of the facility, request in writing that the Bank shall not extend the facility. Such request may imply that the guarantor becomes forced to pay by virtue of his guarantee, or that the Bank utilises a pledge.
	If the Bank within the period set out in the preceding paragraph has received a request that the facility shall not be extended but nevertheless extends the facility, the guarantee or pledge provided by the party making such request ceases to be valid. This does not apply, however, if the Bank, due to the borrower’s negligence, before expiry of the aforementioned time period, has commenced legal proceedings against the party who has opposed an extension or has commenced negotiation with this party concerning the guarantee commitment or pledge.
13.	Sequence of utilisation of security
	If the borrower fails to meet his obligations under the contract, the Bank may determine the sequence in which the securities (pledges, guarantees, etc.) shall be utilised.
14.	General right of pledge
	Property pledged by the borrower in this contract shall also constitute security for any other obligations towards the Bank for which the borrower is or may in the future be liable, in his capacity as borrower, principal, account holder, guarantor or otherwise as customer of the Bank. Such other obligation must have arisen before the borrower’s obligations under this contract have been met. The Bank shall determine in which order the obligations are to be settled out of the proceeds of the pledge. However, account must be taken of the right of guarantors according to section 22.
	Property thus pledged shall not, however, by reason of the pledge, constitute security for the borrower’s obligations on account of bills of exchange which have been discounted, or which may be discounted at the Bank by a third party, unless they concern the renewal of bills, or have otherwise replaced bills originally discounted by the borrower. Neither shall the property thus pledged secure any other claims on the borrower which the Bank has acquired or may acquire from a third party.
15.	Yield on property pledged
	Yield and all other rights based on the pledge are also covered by the pledging and constitute a pledge. Thus, the pledging of shares, for example, includes the right of the Bank to participate in bonus issues, new issues and other issues for which the shares qualify. As stated in section 16, the Bank is, however, not liable for ensuring that such rights are safeguarded. Where this nevertheless occurs, the Bank is accountable to the pledger.
16.	Safeguard by the Bank of the pledge
	The Bank has a duty to take good care of the pledge. Where appropriate, the Bank shall renew limitation periods and lodge proof of claim in case of summons of unknown creditors and also in bankruptcies, where the pledger so requests after commencement of the bankruptcy. Where announcement has been made regarding the cancellation of a pledged document, the Bank shall give notice that it holds the document. However, the Bank is not obliged to take any of these measures regarding certificates of claim consisting of coupons or which are intended for the open market, such as bonds, or to which Swedish law does not apply.
	The Bank is not obliged to maintain personal liability for payment in respect of mortgaged instruments of debt.
	The Bank’s safeguard of the pledge does not extend beyond what has been stated above. Thus the Bank is not, for example, as far as securities are concerned, obliged to collect dividends and interest or observe the pledger’s rights in connection with issues, exchanges of shares, conversions, distributions of net assets, etc.
17.	How a pledge may be utilised by the Bank
	The Bank may utilise a pledge as the Bank deems fit. In this respect, the Bank shall proceed with care and, where possible and if in the opinion of the Bank it can be accomplished without prejudice to the Bank, notify the pledger to this effect in advance.
	When applying the above, a financial instrument can be sold in a different way than on a market where the instrument is registered or is normally traded.
	If the pledge consists of funds deposited in an account with the Bank, the Bank may immediately debit the account in reimbursement of the amount due, without informing the pledger in advance.
	Should the pledge consist of an instrument of debt for which the pledger is liable personally or with certain property, the instrument is, with respect to the pledger, due for payment on demand, regardless of the due date stipulated in the instrument.
18.	The Bank’s right to sign on behalf of the pledger
	Through his pledging, the pledger authorises the Bank, or anyone appointed by the Bank, to sign on behalf of the pledger, where this is necessary in order to safeguard the Bank’s right of pledge. This authorisation may not be revoked as long as the pledging is in force.
19.	Release of pledge
	The Bank may release pledges without being bound to observe any right to the pledge which may accrue to a guarantor who has made payment to a party other than the Bank by virtue of his guarantee.
20.	Transfer of unpledged deeds of mortgage
	When the Bank no longer holds the pledge and has not been informed of a new pledge-holder or received a request that a written deed of mortgage shall be issued, the Bank is entitled to transfer an electronic deed of mortgage to the National Land Survey’s register of mortgages for which no other mortgage-holder is registered, known as the Public Archive.
21.	Payment by the guarantor
	If a guarantor makes payment to the Bank on account of his guarantee, he shall specifically notify the Bank that he is paying in his capacity as guarantor and request that this fact be noted by the Bank.
22.	Guarantor’s right to pledges
	If a guarantee has been signed on this contract, the following shall apply with regard to the guarantor’s right to pledges in this contract by the borrower alone or jointly with another:
	The pledge shall constitute security for the guarantor’s claim for recourse against the borrower to the extent that it is not utilised by the Bank for the borrower’s obligations under this contract. When the pledge constitutes security for the right of recourse of several guarantors, they shall have rights to the pledge in proportion to the right of recourse of each of them, unless they agree otherwise.
	In relation to the Bank, a guarantor is not entitled to any other property which has been pledged to the Bank by the borrower or another party.
	The Bank may release yield from the pledge which is not required for payment of amounts due under this contract, without thereby reducing the liability of any guarantor.
23.	How the pledge may be utilised for a guarantor’s right of recourse
	Where a guarantor has made payment to the Bank by virtue of his guarantee, he may exercise his right to a pledge under section 22 only when the Bank has received payment in full for its claim under this contract. If the guarantor wishes to exercise this right, the Bank is entitled to choose between releasing the pledge to the guarantor or utilising the pledge on behalf of the guarantor. Section 17 shall apply in this connection.
24.	Property pledged by a party other than the borrower
	Property pledged on this contract by a party other than the borrower shall constitute security only for the borrower’s obligations under this contract, unless otherwise agreed.
	Without any reduction of the Bank’s right to property which a party other than the borrower has pledged on this contract, the Bank is entitled to release property pledged by the borrower or any other party, which has not been pledged on this contract, as well as the yield on such property. The Bank is also entitled to release the yield on property pledged on this contract by the

Handelsbanken Page 3 of 3

	borrower or any other party, if the yield is due for payment but is not required to cover interest or costs due under the contract.
25.	Cancellation of the contract
	The contract will be cancelled one month after the overdraft has been repaid in full, unless the borrower has asked in advance for it to be returned.
26.	Insurance
	Property which constitutes security for the Bank’s claim shall be satisfactorily insured.
	If the borrower fails to show proof that insurance as prescribed above is in force, the Bank shall be entitled to arrange for such insurance at the borrower’s expense.
27.	Processing of personal data
	Personal data submitted in connection with a credit application or otherwise registered in connection with processing or administration of this credit will be subject to such processing in computer systems at the Bank as required by the credit agreement. This includes information about contacts between the borrower and the Bank.
	This promissory note contains special information on the processing of data for credit references.
	The personal data is also used for marketing and customer research, business and methods development and risk management in the Handelsbanken Group. Risk management also involves processing information on the borrower and loans to assess the quality of loans for purposes of capital adequacy.
	The personal data is also used for marketing purposes, unless the borrower has requested a block on direct advertising from the Bank. The processing of personal data can — within the framework of current bank confidentiality regulations — take place with other Group companies and other companies with whom the Bank collaborates in its operations.
	If the borrower requires information about the personal data about him/her which is being processed by the Bank, the borrower can request this in writing from his/her branch of the Bank. Requests to correct incomplete or incorrect personal data can be made at the Bank branch or sent to Handelsbanken, Central auditing department, SE-106 70 Stockholm, Sweden. The above statements regarding borrowers also apply to guarantors, if any, or pledgers other than the borrower.
28.	Notices, etc.
	The borrower, guarantors and pledgers shall notify the Bank of any changes of address, telephone number or fax number. Registered letters regarding the overdraft facility which the Bank has forwarded to any of the parties mentioned above shall be deemed to have reached the addressee not later than on the seventh day after despatch if the letter has been sent to the address which is known to the Bank.
	Notices sent by fax shall be deemed to have reached the addressee no later than the next business day if the fax message was sent to a number which the addressee has submitted to the Bank. A business day is a day other than a Sunday, public holiday, Saturday, Midsummer’s Eve, Christmas Eve or New Year’s Eve.
	These provisions do not apply to notices renewing periods of limitation.
29.	Limitation of the Bank’s liability
	The Bank shall not be held responsible for any loss or damage resulting from a legal enactment (Swedish or foreign), the intervention of a public authority (Swedish or foreign), an act of war, a strike, a blockade, a boycott, a lockout or any other similar circumstance. The reservation in respect of strikes, blockades, boycotts and lockouts applies even if the Bank itself is subjected to such measures or takes such measures.
	Any damage which occurs in other circumstances shall not be compensated by the Bank, provided the Bank has exercised normal standards of care. The Bank shall in no case be liable for indirect damage.
	Where a circumstance as referred to in the first paragraph should prevent the Bank from making a payment or taking other measures, such payment or measures may be postponed until the obstacle no longer exists. In the event of a postponement of payment the Bank shall, if it is committed to pay interest, pay such interest at the interest rate prevailing on the due date for the postponed payment. Where the Bank is not committed to pay interest, the Bank shall not be obliged to pay interest at a higher rate than the prevailing reference rate of Sveriges Riks-bank pursuant to the Section 9 of the Interest Act (1975:635), plus two percentage points. Where a circumstance as referred to in the first paragraph should prevent the Bank from receiving payments, the Bank shall, as long as the obstacle exists, be entitled to interest only on the terms prevailing on the due date of the payment.

EX-10.68.1

Exhibit 10.68.1

Subscription No.                     

THE SHARES OF PREFERRED STOCK OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SHARES OF PREFERRED STOCK OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT OR ANY OTHER DOCUMENT DELIVERED HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

DRI CORPORATION
SUBSCRIPTION AGREEMENT
(the “Subscription Agreement”)

To be completed by Investors

     If and when accepted by DRI Corporation, a North Carolina corporation (the “Company”), and the issuer of Series K Senior Convertible Preferred Stock (the “Series K Preferred Stock”), this Subscription Agreement shall constitute a subscription for the number of shares of Preferred Stock set forth herein. The Company is relying upon the accuracy and completeness of the information set forth herein in complying with its obligation under applicable federal and state securities laws.

     The Preferred Stock being issued is Series K Senior Convertible Preferred Stock of the Company. Each share has a preference upon a Liquidating Event. A Liquidation Event is defined in the Company’s Articles of Incorporation to include any liquidation, dissolution or winding up of the Company, either voluntary or involuntary. Upon a Liquidating Event, the holders of the Series K Preferred Stock will be paid prior to any other currently outstanding equity holders Five Thousand Dollars ($5,000) per share, plus all accrued but unpaid dividends. The Series K Preferred Stock ranks prior and superior to the Series AAA Preferred Stock, the Series E Preferred Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series

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J. Preferred Stock with respect to payments upon liquidation, dissolution and winding up.

     The holders of Series K Preferred Stock shall receive dividends, as and if declared by the Board of Directors of the Company, consistent with applicable law, which shall accrue quarterly at an annual rate of nine and one-half percent (9-1/2%). Dividends shall accrue as of December 15, March 15, June 15, and September 15 of each year. Dividends shall be cumulative if not paid when and as they accrue. The Series K Preferred Stock shall rank prior and superior to the Series AAA Preferred Stock, the Series E Preferred Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series J Preferred Stock with respect to the payment of dividends.

     The shares of Series K Preferred Stock may be converted by the shareholder at any time or from time to time into fully paid and nonassessable shares (calculated as to each conversion to the largest whole share) of Common Stock at a conversion price (the “Conversion Price”) that increases periodically as follows: (i) during the period from October 7, 2009 to October 6, 2011, the Conversion Price shall equal $1.75 per share; (ii) during the period from October 7, 2011 to October 6, 2013, the Conversion Price shall equal $2.25 per share; and (iii) on or after October 7, 2013, the Conversion Price shall equal $3.00 per share. Further, if the closing bid price for the Common Stock on The Nasdaq Stock Market (or other exchange or market on which the Common Stock may from time to time be traded) for any period of twenty (20) consecutive trading days exceeds the following, then all outstanding shares of Series K Preferred Stock shall automatically convert: (i) during the period from the Commencement Date through October 6, 2011, $4.00 per share; (ii) during the period from October 7, 2011 through October 6, 2013, $4.75 per share; and (iii) on or after October 7, 2013, $5.50 per share. Upon the occurrence of the above, the outstanding shares of Series K Preferred Stock, at the close of the market on the last trading day in such period, shall convert into a number of fully paid and nonassessable shares (calculated to the largest whole share) of Common Stock determined by multiplying the number of shares of Series K Preferred Stock then outstanding by a fraction, the numerator of which is the Liquidation Preference of a share of Series K Preferred Stock, plus an amount equal to accrued and unpaid dividends on such shares, if any, and the denominator of which is the then applicable Conversion Price, provided that the resale of the shares issuable upon conversion shall have been registered or shall be subject to available exemption under applicable securities laws.

     In addition, the Company may redeem shares of its Series K Preferred Stock at any time in its sole discretion for an amount

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equal to Five Thousand Dollars ($5,000) per share, plus all accrued but unpaid dividends. The shareholder can always elect conversion as an alternative to redemption.

     Please read, complete, sign, date and deliver a completed Subscription Agreement with two (2) copies of the Subscription Agreement signature page to DRI Corporation, 13760 Noel Road, Suite 830, Dallas, TX 75240.

     Each subscriber hereto must complete this Subscription Agreement and the appendices hereto.

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PART I — SUBSCRIPTION

1. METHOD OF SUBSCRIPTION: The undersigned, intending to be legally bound, hereby irrevocably subscribes for and agrees to purchase the number of shares of Series K Preferred Stock set forth below for a subscription price of $5,000 per share (the “Shares”) and to become a stockholder of the Company on the terms and conditions described herein. A minimum total investment of $50,000 shall be required by the Company unless waived by management because of a strategic investment.

Before a subscription for Shares will be accepted, the following must be completed, executed and returned to the Company.

     a. This Subscription Agreement with signature page executed in duplicate.

     b. Check or wire made payable to “DRI Corporation” in the amount of $5,000 for each share of Series K Preferred Stock subscribed.

The undersigned agrees that this subscription is and shall be irrevocable, but the obligations hereunder will terminate if this subscription is not accepted by the Company within fifteen (15) days of receipt of monies from the Investors.

2. ACCEPTANCE BY THE COMPANY: Investor hereby acknowledges (i) that this subscription shall not be deemed to have been accepted by the Company until the Company indicates its acceptance by returning to Investor an executed copy of this subscription, and (ii) that acceptance by the Company of this subscription is conditioned upon the information and representations of Investor hereunder being complete, true and correct as of the date of this subscription and as of the date of closing of sale of the shares to Investor.

3. RISKS OF INVESTMENT: The undersigned is aware that:

     a. There are substantial risks incident to the ownership of Shares.

     b. The Investor has been furnished and read the Company’s most recent public filings (inclusive of risk considerations therein) and independent research reports as well as any corporate documents

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requested by the Investor. Further, the Investor has been afforded the opportunity to ask questions of, and receive answers from the Company’s management. The Investor has not received any oral or written representations in connection with this offering by the Company, its officers, directors, or agents not contained in the business plan or legal documents.

     c. There are substantial risks of loss of investment incident to the purchase of the Series K Preferred Stock, and the Investor must be capable of and prepared to lose all amounts invested in the Series K Preferred Stock.

     d. The Company’s objectives contain projections that are hypothetical and based upon a number of assumption and forward looking statements many of which are speculative; projections do not and cannot take into account such factors as general economic conditions, the introduction of new and better technologies, the entry into the Company’s line of business of competitors, the terms and conditions of future financing of the Company, and other risks inherent to the business of the Company; while management believes that the projections considered for its objectives and business plan reflect possible future results of the Company’s operations, such results cannot be guaranteed; further, Investors understand and are prepared for the substantial economic risks involved in the purchase of the preferred shares, including the total loss of their investment.

     e. The Company is highly dependent on the services of its management team and the loss of any of these individuals’ services for whatever reason could have a material adverse effect on the Company. Further, the recruitment and retention of executives, qualified managers and appropriate support personnel will be critical to the achievement of the Company’s objectives. There can be no assurances the Company will be able to attract or retain qualified personnel on acceptable terms.

     f. No federal or state agency has passed upon the Series K Preferred Stock or made any finding or determination concerning the merits or fairness of this investment.

     g. No promises or inducements have been made that the Company shall be successful in its operations in the future.

4. INDEPENDENT TAX ADVICE: The undersigned acknowledges that he has been advised to consult his own attorneys and advisors concerning

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this investment and to consult with an independent tax counsel regarding the tax consequences of making such an investment.

5. LIMITATION ON TRANSFER OF SHARES: The undersigned recognizes and agrees that:

     a. Due to restrictions described below, the lack of any market existing or likely to exist for the Shares, and the adverse tax consequences in the event he should sell his Shares, his investment in the Company will be highly illiquid and, most likely, must be held indefinitely.

     b. The undersigned represents that the Shares are being acquired without a view to, or for, resale in connection with any distribution of the Shares or interests therein without registration or compliance under the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, and that the undersigned has no direct or indirect participation in any such distribution or in the underwriting of such a distribution. The undersigned understands that the Shares have not been registered, and are being acquired by means of a specific exemption under the Act, as well as certain state statutes for transactions by an issuer not involving any public sale of securities, and that any disposition of the Shares may, under certain circumstances, be inconsistent with this exemption and make the undersigned an “underwriter” within the meaning of the Act. Accordingly, the undersigned must bear the economic risk of investment in the Shares for an indefinite period of time, since the Shares have not been registered under the Act, and therefore, the Shares cannot be offered, sold, transferred, pledged or hypothecated to any person unless they are either subsequently registered under said Act (which is not anticipated) or an exemption from such registration is available and the Company is provided a favorable opinion of counsel to that effect which is satisfactory to it. Further, the undersigned may not resell, hypothecate, transfer, assign or make any other disposition of said Shares except in a transaction exempt or excepted from the registration requirements of the securities laws of the state in which the Shares are offered and sold, and that the specific approval of such sales is required in some states.

6. REPRESENTATIONS OF THE SUBSCRIBER.

     a. The undersigned represents and warrants to the Company as follows:

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     (i) that he is the sole and true party in interest and that he is not purchasing for the benefit of any other person (or that he is purchasing for another person who meets all of the conditions set forth herein); and

     (ii) that he (and his purchaser representative, if such a purchaser representative is utilized by him) has (have) such knowledge and experience in financial and business matters that he is (they are) capable of evaluating the merits and the risks of this investment.

     b. The undersigned understands the risks of, and other considerations relating to, the purchase of Shares.

     c. The undersigned is acquiring the Shares for which he hereby subscribes for his own account, as principal, for investment purposes only and not with a view to, or for, subdivision, resale, distribution or fractionalization thereof in whole or in part, or for the account, in whole or in part, of others, and no other person has a direct or indirect beneficial interest in such Shares; further, the undersigned will hold the Shares as an investment and has no present intention, agreement or arrangement to divide his participation with others or to resell, assign, transfer or otherwise dispose of all or any part of the Shares subscribed for unless and until he determines, at some future date, that changed circumstances, not in contemplation at the time of this purchase, makes such disposition advisable.

     d. The undersigned has the financial ability to bear the economic risk of his investment, and has adequate means for providing for his current needs and personal contingencies and has no need for liquidity with respect to his investment in the shares.

     e. All of the information which is set forth below with respect to the undersigned is correct and complete as of the date hereof, and if there should be any material change in such information prior to the acceptance of this subscription by the Company, the undersigned will immediately furnish the revised or corrected information to the Company.

     f. The undersigned has not been furnished any oral representation, warranty or information in connection with the offering of the Shares by the Company or any of its officers, employees, agents, affiliates or subsidiaries.

     g. The undersigned acknowledges that neither the United States Securities and Exchange Commission nor the securities commissioner of

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any state has made any determination as to the merits of a purchase of the Shares.

     h. The undersigned was at no time solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicitation in connection with the offer, sale, or purchase of the securities through this Agreement.

     i. The undersigned acknowledges that this Agreement may be accepted or rejected in whole or in part by the Company and that, to the extent that the subscription may be rejected, the accompanying subscription payment will be refunded.

     j. If the Investor is a corporation, partnership, limited liability company, trust, estate or other entity, (i) it is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and (ii) the execution, delivery and performance by it of this Agreement are within its powers, have been duly authorized by all necessary action on its behalf and require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under any provision of applicable law or regulation or of its certificate of incorporation or other comparable organizational documents or any agreement, judgment, injunction, order, decree or other instrument binding upon it.

     k. If the Investor is a natural person, the execution, delivery and performance by such person of this Agreement are within such person’s legal right and power, require no action by or in respect of, or filing with, any governmental body, agency, or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or other instrument binding upon such person.

     l. The Investor is an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended. See Investor Suitability Requirements attached for reference to this representation of the Subscriber.

7. AGREEMENT TO BE BOUND BY TERMS AND CONDITIONS: The undersigned hereby adopts, accepts and agrees to be bound by all of the terms and conditions of the offering and by all the terms and conditions of this Subscription Agreement. Upon acceptance of this Subscription

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Agreement by the Company the undersigned shall become a stockholder of the Company.

8. REPRESENTATIONS AS TO INVESTMENT EXPERIENCE: The undersigned further hereby represents that he has such knowledge and experience in business and financial matters as to be capable of evaluating the Company and the proposed activities thereof, the risks and merits of investment in the Shares and of making an informed investment decision thereon or the undersigned is relying in making the investment on the advice of a purchaser representative.

9. INDEMNITY OF COMPANY: The undersigned hereby agrees to indemnify the Company and any person participating in the offering and hold them harmless from and against any and all liability, damage, cost or expense (including, but not limited to, reasonable attorney’s fees) incurred on account of or arising out of:

     a. Any inaccuracy in the declarations, representations and warranties set forth herein;

     b. The disposition of any of the Shares which he will receive, contrary to his foregoing declarations, representations and warranties; and

     c. Any action, suit or proceeding based upon (i) the claim that said declarations, representations, or warranties were inaccurate or misleading or otherwise cause for obtaining damages or redress from the Company; or (ii) the disposition of any of the Shares or any part thereof.

10. SETOFF: Notwithstanding the provisions of the last preceding section or the enforceability thereof, the undersigned hereby grants to the Company the right of setoff against an amount payable by the Company to the undersigned, for whatever reason, of any and all damages, costs or expenses (including, but not limited to, reasonable attorney’s fees) which are incurred by the Company on account of or arising out of any items referred to in the last preceding section.

11. MISCELLANEOUS: The undersigned further understands and acknowledges that:

     a. This Subscription Agreement is not transferable or assignable by the undersigned;

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     b. If the undersigned is more than one person, the obligations of the undersigned shall be joint and several and the representations and warranties herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, administrators, successors and assigns;

     c. The subscription, upon acceptance by the Company, shall be binding upon the heirs, executors, administrators, successors and assigns of the undersigned;

     d. This Subscription Agreement constitutes the entire agreement between the parties regarding the subject matter hereof;

     e. Captions in this Subscription Agreement are for the convenience of reference only and shall not limit or otherwise affect the interpretation or effect of any term or provision hereof;

     f. This Subscription Agreement shall be construed and governed under the laws of the State of North Carolina; and

     g. Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the undersigned, the undersigned does not waive any rights granted to the undersigned under applicable federal and state securities laws.

     IN WITNESS WHEREOF, the undersigned has completed this Subscription Agreement to evidence his subscription to the Company pursuant to the terms hereof this       day of                     , 2009.

Number of shares of Series K Preferred Stock:                          

Subscriber #1 Signature (*)	Subscriber #2 Signature (**)
Print or Type Name	Print or Type Name
Address	Address
Address	Address
Social Security Number/EIN	Social Security Number/EIN

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(*)	If a partnership, corporation or other qualified association, the signature should be in the name of such entity followed by the authorized signature and title of the signatory.
(**)	Second signature required for any joint investment.

     The Company has accepted this subscription in the amount of $                     this the       day of                     , 2009, for                      shares of Series K Preferred Stock of DRI Corporation.

DRI CORPORATION
By
	President

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INVESTOR SUITABILITY REQUIREMENTS

This offering is made in reliance upon an exemption from registration under the Securities Act of 1933, as amended (the “Act”). The speculative nature of the success of the Company’s business, together with the lack of liquidity of the preferred stock being offered, makes the purchase of the preferred stock suitable only for investors who have adequate financial resources and who can afford the total loss of their investment.

The suitability standards set forth below represent minimum suitability standards for prospective investors. The satisfaction of such standards by a prospective investor does not necessarily mean that the preferred stock being offered is a suitable investment for such prospective investor. Prospective investors are encouraged to consult their personal financial advisors to determine whether an investment in the preferred stock being offered is appropriate. The Company, at its absolute discretion, may reject subscriptions, in whole or in part.

By signing the Subscription Agreement each investor represents in writing, among other things, that: (i) by reason of the investor’s financial or business experience, or the investor’s financial advisor, the investor has the capacity of evaluating the merits and risks of an investment in the preferred stock and of protecting his/her own interests in connection with the transaction; (ii) the investor is acquiring the preferred stock for his/her own account, for investment only and not with a view toward the resale or distribution thereof, and that the investor is aware that the preferred stock has not been registered under the Act and that the transfer of the preferred stock is restricted by the Act, applicable state securities laws, the Subscription Agreement to be entered into in connection with the purchase of the preferred stock and the absence of a market for the preferred stock; and (iii) the investor meets the suitability requirements set forth below.

Each investor by singing the Subscription Agreement represents that such investor is qualified to invest in the preferred stock. To be qualified, the investor must fall within any of the following categories at the time of the offering for sale of preferred stock to that investor.

Accredited Investors:

1. Be a director or executive officer of the Company.

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2.	Be a natural person whose individual net worth or joint net worth, with that of the person’s spouse, at the time of purchase exceeds $1,000,000.
3.	Be a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year (the year in which the purchase is made).
4.	Be an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
5.	Be a bank as defined in Section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered under the Securities Exchange Act of 1934; an insurance company as defined in Section 2(a)(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
6.	Be a “private business development Company” as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
7.	Be an entity in which all of the equity owners are accredited investors.
8.	Be a trust, with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities offered,

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whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Act.

INVESTORS MUST BE ABLE TO BEAR THE ECONOMIC RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE ACT, AND THE PREFERRED STOCK CANNOT BE SOLD UNLESS IT IS SUBSEQUENTLY REGISTERED THEREUNDER OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

EX-10.69.1

Exhibit 10.69.1

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT dated as of the            day of                                         , 2009 by and among DRI CORPORATION, a North Carolina corporation (the “Company”) and                                          (the “Holder”).

     The parties agree as follows:

Section 1. Definitions. For purposes of this Agreement:

     (a) “Series K Senior Convertible Preferred Stock” means the Company’s Series K Senior Convertible Preferred Stock with a liquidating value of $5,000 per share;

     (b) “Registrable Securities” means                      shares of Series K Convertible Preferred Stock to be issued to the Holder upon acceptance by the Company of that certain Subscription Agreement of even date (the “Agreement”; certain terms not defined herein but used herein are used as defined in the Agreement);

     (c) “register” and “registration” refer to a registration of the Registrable Securities effected by filing a registration statement or similar document pursuant to the Securities Act of 1933, as amended (the “Act”) and the declaring or ordering of effectiveness of such registration statement; and

     (d) The “Company” means DRI Corporation, a North Carolina corporation.

Section 2. Demand Registration.

     (a) If at any time the Company receives a written request from the Holder that the Company file a registration statement under the Act covering the registration of Registrable Securities held by him, then the Company shall, subject to the limitations of this Section 2, use its best efforts to, within six months of the date of such request, effect the registration under the Act of all Registrable Securities and will keep such registration statement effective for a minimum period of six (6) months thereafter. The Company shall be obligated to effect only one (1) registration pursuant to this Section 2(a).

     (b) If the Holder intends to distribute the Registrable Securities covered by his request by means of an underwriting, he shall so advise the Company as a part of his request made

pursuant to this Section 2. The Holder shall (together with the Company as provided in Section 3) enter into an underwriting agreement in customary form with a mutually acceptable underwriter or underwriters.

Section 3. “Piggyback” Rights. For a period of one (1) year from December           , 2009, and if (but without any obligation to do so) the Company proposes to register any of its securities under the Act in connection with a public offering of such common stock for cash proceeds payable in whole or in part to the Company (other than with respect to a Registration Statement filed on Form S-8 or Form S-4 or such other similar form then in effect under the Securities Act), the Company shall, at such time, subject to the provisions of Section 6 and 7 hereof and upon request of the Holder cause to be registered under the Act all of the Registrable Securities which the Holder requests be registered; provided, however, if the managing underwriter of the public offering of shares proposed to be registered by the Company advises the Holder in writing that marketing factors require a limitation of the number of shares to be underwritten, then the number of shares of Registrable Securities of the Holder that may be included in the underwriting shall be so limited on a prorate basis. Such “piggyback rights” shall expire on the registration and sale of the Registrable Securities pursuant to Section 2 above or upon the sale of the Registrable Securities hereunder.

Section 4. Registration Procedure. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as is reasonably possible:

     (a) Furnish to the Holder of the Registrable Securities covered by such registration statement such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as he may reasonably request in order to facilitate the disposition of the Registrable Securities owned by him.

     (b) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. The Holder participating in such underwriting shall also enter into and perform his obligations under such agreement.

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     (c) Notify the Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

Section 5. Furnish Information. The Holder shall promptly furnish to the Company in writing such reasonable information regarding the Holder, the Registrable Securities held by the Holder, and the intended method of disposition of such securities as shall be required to effect the registration of his Registrable Securities.

Section 6. Expenses of Registration. All of the foregoing expenses relating to the Registrable Securities incurred in connection with registration, filing or qualification pursuant to this Agreement, including (without limitation) all registration, filing and qualification fees, printers’ bills, mailing and delivery expenses, accounting fees, and the fees and disbursements of counsel for the Company, but excluding underwriting discounts or fees, shall be borne by the Company.

Section 7. Indemnification and Contribution. In the event any Registrable Securities are included in a registration statement under this Agreement:

     (a) To the extent permitted by law, the Company will indemnify and hold harmless the Holder, the officers and directors of each Holder, any underwriter (as defined in the Act) for such holder, and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission or alleged omission to state therein a

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material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse each such Holder, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided however, that the indemnity agreement contained in this Section 7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus or final prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; provided, further, however, that if any losses, claims, damages or liabilities arise out of or are based upon any untrue statement, alleged untrue statement, omission or alleged omission contained in any preliminary prospectus, and made in reliance upon and in conformity with written information furnished by such Holder expressly for use therein, which did not appear in the final prospectus, the Company shall not have any such liability with respect thereto to such Holder, any person who controls such Holder within the meaning of the Act, or any director of such Holder, if such Holder delivered a copy of the preliminary prospectus to the person alleging such losses, claims, damages or liabilities and failed to deliver a copy of the final prospectus, as amended or supplemented if it has been amended or supplemented, to such person at or prior to the written confirmation of the sale to such person, provided that such Holder had an obligation to deliver a copy of the final prospectus to such person.

     (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter and any other Holder selling securities in such registration statement or any of its directors or officers or any person who controls such Holder or underwriter against any losses, claims, damages or liabilities, joint or several) to which the Company or any such director, officers, controlling person, or underwriter or controlling

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person, or other such Holder or director, officer or controlling person may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if the untrue statement or omission or alleged untrue statement or omission in respect of which such loss, claim, damage or liability is asserted was made in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or controlling person, or other Holder, officer, director, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action, if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld); provided, further that the maximum liability of any selling Holder under this Section 7(b) in regard to any registration statement shall in no event exceed the amount of the proceeds received by such selling Holder from the sale of securities under such registration statement; provided, further however, that if any losses, claims, damages or liabilities arise out of or are based upon an untrue statement, alleged untrue statement, omission or alleged omission contained in any preliminary prospectus which did not appear in the final prospectus, such seller shall not have any such liability with respect thereto to the Company, any person who controls the Company within the meaning of the Act, any officer of the Company who signed the registration statement or any director of the Company, if the Company delivered a copy of the preliminary prospectus to the person alleging such losses, claims, damages or liabilities and failed to deliver a copy of the final prospectus, as amended or supplemented if it has been amended or supplemented, to such person at or prior to the written confirmation of the sale to such person, provided that the Company had an obligation to deliver a copy of the final prospectus to such person.

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     (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel mutually satisfactory to the parties. An indemnified party shall have the right to retain its own counsel, however, the fees and expenses of such counsel shall be at the expense of the indemnified party, unless (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party has failed to assume the defense and employ counsel, or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified parry, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all indemnified parties). The failure to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party under this Agreement.

     (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein, then each indemnifying party shall in lieu of; indemnifying such indemnified party contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or actions in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and selling Holder, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give

6

any required notice. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by such selling Holder on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto acknowledge and agree that it would not be just and equitable if contribution pursuant to this subparagraph (d) were determined by pro rata allocation (even if all of the selling Holder were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subparagraph (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or actions in respect thereof referred to above in this subparagraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subparagraph (d), the amount the selling Holder shall be required to contribute shall not exceed the amount, if any, by which the total price at which the securities sold by each of them were offered to the public exceeds the amount of any damages which they would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, or other violation of law. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of fraudulent misrepresentation.

Section 8. Miscellaneous.

     (a) Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the Company and to the Holder and their respective heirs, personal representatives, successors and assigns.

     (b) Notices. Except as otherwise provided herein, any notice, consent or request to be given in connection with any term or provision of this Agreement shall be deemed to have been given sufficiently if sent by hand, registered or certified mail, postage prepaid, facsimile transmission or courier (next day delivery), to the Company or to the Holder at their respective addresses as provided on or about the date hereof.

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     (c) Integration. This Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereby and no party shall be bound by, nor shall any party be deemed to have made, any covenants, representations, warranties undertakings or agreements except those contained in such entire Agreement. The section and paragraph headings contained in this Agreement are for the reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

     (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.

     (e) Amendment. This Agreement may be amended, changed, waived or terminated only in writing signed by each of the parties.

     IN WITNESS WHEREOF, this Agreement has been executed effective as of the date first above written.

DRI CORPORATION
By
	President
HOLDER:
(SEAL)

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EX-21.1

Exhibit 21.1

DRI Corporation
Subsidiaries

Subsidiary	Jurisdiction of Incorporation
RTI, Inc.	Texas
Digital Recorders, Inc.	North Carolina
TwinVision® of North America, Inc.	North Carolina
DRI-Europa AB	Sweden
Mobitec AB	Sweden
Mobitec GmbH	Germany
Mobitec Brasil Ltda	Brazil
Mobitec Pty Ltd.	Australia
Castmaster Mobitec India Private Limited	India
Mobitec Empreendimientos e Participações Ltda.	Brazil
Mobitec Far East Pte. Ltd.	Singapore

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 31, 2010, with respect to the consolidated financial statements in the Annual Report of DRI Corporation on Form 10-K for the year ended December 31, 2009. We hereby consent to the incorporation by reference of said report in the Registration Statements of DRI Corporation on Forms S-8 (File No. 333-164553, effective January 27, 2010, File No. 333-116633, effective June 18, 2004 and File No. 333-118433, effective August 20, 2004), Forms S-3 (No. 333-134124, effective May 15, 2006 and File No. 333-147736, effective November 30, 2007), and Form S-3A (File No. 333-147736, effective December 13, 2007).

/s/ GRANT THORNTON LLP
Raleigh, North Carolina
April 15, 2010

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-116633, 333-118433 and 333-164553), Form S-3 (No. 333-134124 and 333-147736) and Form S-3A (No. 333-147736) of DRI Corporation of our report dated March 31, 2008 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
April 15, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David L. Turney, certify that:

1.	I have reviewed this annual report on Form 10-K of DRI Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/S/ DAVID L. TURNEY      David L. Turney

Chief Executive Officer
April 15, 2010

A signed copy of this written statement required by Section 302 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen P. Slay, certify that:

1.	I have reviewed this annual report on Form 10-K of DRI Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/S/ STEPHEN P. SLAY      Stephen P. Slay

Chief Financial Officer
April 15, 2010

A signed copy of this written statement required by Section 302 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of DRI Corporation (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Turney, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ DAVID L. TURNEY       David L. Turney

     Chief Executive Officer

     April 15, 2010

A signed copy of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of DRI Corporation (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen P. Slay, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ STEPHEN P. SLAY      Stephen P. Slay

Chief Financial Officer
April 15, 2010

A signed copy of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.