-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KDf1qv/sAzxQ0InYNyUZItEIDHtnd57aQJ9tQiRpeBcgce1eNvqZnxUv/kmX6gPh hGJrqbHF84Kl3sgpuFn1uA== 0001144204-07-002621.txt : 20070119 0001144204-07-002621.hdr.sgml : 20070119 20070119172206 ACCESSION NUMBER: 0001144204-07-002621 CONFORMED SUBMISSION TYPE: SC 13G PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20070119 DATE AS OF CHANGE: 20070119 GROUP MEMBERS: DAVID GRIN GROUP MEMBERS: EUGENE GRIN GROUP MEMBERS: LAURUS CAPITAL MANAGEMENT, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL RECORDERS INC CENTRAL INDEX KEY: 0000853695 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 561362926 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13G SEC ACT: 1934 Act SEC FILE NUMBER: 005-54425 FILM NUMBER: 07541596 BUSINESS ADDRESS: STREET 1: 5949 SHERRY LANE STREET 2: SUITE 1050 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: (214) 378-8992 MAIL ADDRESS: STREET 1: 5949 SHERRY LANE STREET 2: SUITE 1050 CITY: DALLAS STATE: TX ZIP: 75225 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LAURUS MASTER FUND LTD CENTRAL INDEX KEY: 0001189294 IRS NUMBER: 980337673 STATE OF INCORPORATION: E9 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13G BUSINESS ADDRESS: STREET 1: 152 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125415800 SC 13G 1 v062960_sc13g.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13G Under the Securities Exchange Act of 1934 (Amendment No.__)* DIGITAL RECORDERS, INC. ---------------------------------------- (Name of Issuer) Common Stock, $0.10 par value ---------------------------------------- (Title of Class of Securities) 253869101 ---------------------------------------- (CUSIP Number) January 10, 2007 ---------------------------------------- (Date of Event which Requires Filing of this Statement) Check the appropriate box to designate the rule pursuant to which this Schedule is filed: |_| Rule 13d-1 (b) |X| Rule 13d-1 (c) |_| Rule 13d-1 (d) * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 253869101 13G Page 2 of 13 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Laurus Master Fund, Ltd. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 98-0337673 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- NUMBER OF 5 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------------- EACH 6 SHARED VOTING POWER REPORTING PERSON 630,000 shares of Common Stock * ------------------------------------------------------------- 7 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------------- 8 SHARED DISPOSITIVE POWER 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- - -------------------- * Based on 9,820,675 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. As of December 31, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a warrant (the "March Warrant") to acquire 550,000 Shares, at an exercise price of $.10 per Share, subject to certain adjustments; (ii) a Warrant (the "April Warrant" and together with the March Warrant, the "Warrants") to acquire 80,000 Shares at an exercise price of $2.00 per Share, subject to certain adjustments; and (iii) 225,000 Shares. Each of the Warrants contains an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 4.99% of the Shares then issued and outstanding (the "4.99% Issuance Limitation"). On January 10, 2007, effective December 31, 2006, (a) the Fund provided the Company notice of the Fund's waiver of the 4.99% Issuance Limitation under the Warrants, which such waivers shall be effective on the 61st day following the delivery of such notice (the "Waiver Effective Date") and (b) the Company and the Fund agreed that, on the Waiver Effective Date, the 4.99% Limitation under the Warrants shall be increased to an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 9.99% of the Shares then issued and outstanding (the "9.99% Limitation"). The 9.99% Issuance Limitation under the Warrants may be waived by the Fund upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund reported in this Schedule 13G, as amended. CUSIP No. 253869101 13G Page 3 of 13 Pages - -------------------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 6.03%* - -------------------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP No. 253869101 13G Page 4 of 13 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Laurus Capital Management, LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 13-4150669 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 5 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------------- EACH 6 SHARED VOTING POWER REPORTING PERSON 630,000 shares of Common Stock * ------------------------------------------------------------- 7 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------------- 8 SHARED DISPOSITIVE POWER 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- - -------------------- * Based on 9,820,675 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. As of December 31, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a warrant (the "March Warrant") to acquire 550,000 Shares, at an exercise price of $.10 per Share, subject to certain adjustments; (ii) a Warrant (the "April Warrant" and together with the March Warrant, the "Warrants") to acquire 80,000 Shares at an exercise price of $2.00 per Share, subject to certain adjustments; and (iii) 225,000 Shares. Each of the Warrants contains an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 4.99% of the Shares then issued and outstanding (the "4.99% Issuance Limitation"). On January 10, 2007, effective December 31, 2006, (a) the Fund provided the Company notice of the Fund's waiver of the 4.99% Issuance Limitation under the Warrants, which such waivers shall be effective on the 61st day following the delivery of such notice (the "Waiver Effective Date") and (b) the Company and the Fund agreed that, on the Waiver Effective Date, the 4.99% Limitation under the Warrants shall be increased to an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 9.99% of the Shares then issued and outstanding (the "9.99% Limitation"). The 9.99% Issuance Limitation under the Warrants may be waived by the Fund upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund reported in this Schedule 13G, as amended. CUSIP No. 253869101 13G Page 5 of 13 Pages - -------------------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 6.03%* - -------------------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- CUSIP No. 253869101 13G Page 6 of 13 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: David Grin - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION Israel - -------------------------------------------------------------------------------- NUMBER OF 5 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------------- EACH 6 SHARED VOTING POWER REPORTING PERSON 630,000 shares of Common Stock * ------------------------------------------------------------- 7 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------------- 8 SHARED DISPOSITIVE POWER 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- - -------------------- * Based on 9,820,675 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. As of December 31, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a warrant (the "March Warrant") to acquire 550,000 Shares, at an exercise price of $.10 per Share, subject to certain adjustments; (ii) a Warrant (the "April Warrant" and together with the March Warrant, the "Warrants") to acquire 80,000 Shares at an exercise price of $2.00 per Share, subject to certain adjustments; and (iii) 225,000 Shares. Each of the Warrants contains an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 4.99% of the Shares then issued and outstanding (the "4.99% Issuance Limitation"). On January 10, 2007, effective December 31, 2006, (a) the Fund provided the Company notice of the Fund's waiver of the 4.99% Issuance Limitation under the Warrants, which such waivers shall be effective on the 61st day following the delivery of such notice (the "Waiver Effective Date") and (b) the Company and the Fund agreed that, on the Waiver Effective Date, the 4.99% Limitation under the Warrants shall be increased to an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 9.99% of the Shares then issued and outstanding (the "9.99% Limitation"). The 9.99% Issuance Limitation under the Warrants may be waived by the Fund upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund reported in this Schedule 13G, as amended. CUSIP No. 253869101 13G Page 7 of 13 Pages - -------------------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 6.03%* - -------------------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 253869101 13G Page 8 of 13 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Eugene Grin - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 5 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------------- EACH 6 SHARED VOTING POWER REPORTING PERSON 630,000 shares of Common Stock * ------------------------------------------------------------- 7 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------------- 8 SHARED DISPOSITIVE POWER 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 630,000 shares of Common Stock * - -------------------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES |_| - -------------------------------------------------------------------------------- - -------------------- * Based on 9,820,675 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. As of December 31, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a warrant (the "March Warrant") to acquire 550,000 Shares, at an exercise price of $.10 per Share, subject to certain adjustments; (ii) a Warrant (the "April Warrant" and together with the March Warrant, the "Warrants") to acquire 80,000 Shares at an exercise price of $2.00 per Share, subject to certain adjustments; and (iii) 225,000 Shares. Each of the Warrants contains an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 4.99% of the Shares then issued and outstanding (the "4.99% Issuance Limitation"). On January 10, 2007, effective December 31, 2006, (a) the Fund provided the Company notice of the Fund's waiver of the 4.99% Issuance Limitation under the Warrants, which such waivers shall be effective on the 61st day following the delivery of such notice (the "Waiver Effective Date") and (b) the Company and the Fund agreed that, on the Waiver Effective Date, the 4.99% Limitation under the Warrants shall be increased to an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 9.99% of the Shares then issued and outstanding (the "9.99% Limitation"). The 9.99% Issuance Limitation under the Warrants may be waived by the Fund upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund reported in this Schedule 13G, as amended. CUSIP No. 253869101 13G Page 9 of 13 Pages - -------------------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 6.03%* - -------------------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 253869101 13G Page 10 of 13 Pages Item 1(a). Name of Issuer: Digital Recorders, Inc. Item 1(b). Address of Issuer's Principal Executive Offices: 5949 Sherry Lane, Suite 1050, Dallas, Texas 75225 Item 2(a). Name of Person Filing: Laurus Master Fund, Ltd This Schedule 13G is also filed on behalf of Laurus Capital Management, LLC, a Delaware limited liability company, Eugene Grin and David Grin. Laurus Capital Management, LLC manages Laurus Master Fund, Ltd. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share voting and investment power over the shares owned by Laurus Master Fund, Ltd. Information related to each of Laurus Capital Management, LLC, Eugene Grin and David Grin is set forth on Appendix A hereto. Item 2(b). Address of Principal Business Office or if none, Residence: c/o Laurus Capital Management, LLC, 825 Third Avenue, 14th Floor, New York, NY 10022 Item 2(c). Citizenship: Cayman Islands Item 2(d). Title of Class of Securities: Common Stock, par value $0.10 per share Item 2(e). CUSIP Number: 253869101 Item 3. Not Applicable Item 4. Ownership: (a) Amount Beneficially Owned: 630,000 shares of Common Stock* (b) Percent of Class: 6.03% * (c) Number of shares as to which such person has: (i) sole power to vote or to direct the vote: 0 (ii) shared power to vote or to direct the vote: 630,000 shares of Common Stock* (iii) sole power to dispose or to direct the disposition of: 0 (iv) shared power to dispose or to direct the disposition of: 630,000 shares of Common Stock* Item 5. Ownership of Five Percent or Less of a Class: Not Applicable Item 6. Ownership of More than Five Percent on Behalf of Another Person: Not Applicable* CUSIP No. 253869101 13G Page 11 of 13 Pages Item 7. Identification and Classification of Subsidiary Which Acquired the Securities: Not Applicable Item 8. Identification and Classification of Members of the Group: Not Applicable Item 9. Notice of Dissolution of Group: Not Applicable Item 10. Certification: By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were not acquired and are not held for the purpose of or with the effect of changing or influencing with control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose of effect. - -------------------- * Based on 9,820,675 shares of common stock, par value $0.10 per share (the "Shares") of Digital Recorders, Inc., a North Carolina corporation (the "Company") outstanding, as represented by the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. As of December 31, 2006, Laurus Master Fund, Ltd. (the "Fund") held (i) a warrant (the "March Warrant") to acquire 550,000 Shares, at an exercise price of $.10 per Share, subject to certain adjustments; (ii) a Warrant (the "April Warrant" and together with the March Warrant, the "Warrants") to acquire 80,000 Shares at an exercise price of $2.00 per Share, subject to certain adjustments; and (iii) 225,000 Shares. Each of the Warrants contains an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 4.99% of the Shares then issued and outstanding (the "4.99% Issuance Limitation"). On January 10, 2007, effective December 31, 2006, (a) the Fund provided the Company notice of the Fund's waiver of the 4.99% Issuance Limitation under the Warrants, which such waivers shall be effective on the 61st day following the delivery of such notice (the "Waiver Effective Date") and (b) the Company and the Fund agreed that, on the Waiver Effective Date, the 4.99% Limitation under the Warrants shall be increased to an issuance limitation prohibiting the Fund from exercising or converting those securities to the extent that such exercise would result in beneficial ownership by the Fund of more than 9.99% of the Shares then issued and outstanding (the "9.99% Limitation"). The 9.99% Issuance Limitation under the Warrants may be waived by the Fund upon 61 days prior notice to the Company and shall automatically become null and void following notice to the Company of the occurrence and/or continuance of an event of default (as defined in and pursuant to the terms of the applicable instrument). The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund reported in this Schedule 13G, as amended. CUSIP No. 253869101 13G Page 12 of 13 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. January 18, 2007 LAURUS MASTER FUND, LTD. By: /s/ Eugene Grin --------------------------------- Name: Eugene Grin Title: Director LAURUS CAPITAL MANAGEMENT, LLC By: /s/ Eugene Grin --------------------------------- Name: Eugene Grin Title: Principal /s/ David Grin ------------------------------------- David Grin /s/ Eugene Grin ------------------------------------- Eugene Grin CUSIP No. 253869101 13G Page 13 of 13 Pages APPENDIX A A. Name: Laurus Capital Management, LLC, a Delaware limited liability company Business Address: 825 Third Avenue, 14th Floor New York, New York 10022 Place of Organization: Delaware B. Name: Eugene Grin Business Address: 825 Third Avenue, 14th Floor New York, New York 10022 Principal Occupation: Director of Laurus Master Fund, Ltd. Principal of Laurus Capital Management, LLC Citizenship: United States C. Name: David Grin Business Address: 825 Third Avenue, 14th Floor New York, New York 10022 Principal Occupation: Director of Laurus Master Fund, Ltd. Principal of Laurus Capital Management, LLC Citizenship: Israel -----END PRIVACY-ENHANCED MESSAGE-----