SUBSEQUENT EVENTS

Credit Agreement Amendment

On February 8, 2012, the Lender accepted a Second Amended and Restated Term Loan A Note, which was amended for terms both of principal repayment and maturity date (the “Note”). The Note will be payable interest only on a monthly basis through February 28, 2013 (the “Maturity Date"). The Note will be payable at a rate of 15.5% per annum until paid in full, plus any applicable default rate or late fees. Notwithstanding the foregoing, the Note requires a one-time principal payment to the Lender on or before February 29, 2012 in the amount of $500,000. In addition, if the Company pays certain amounts of principal before certain dates, the remainder of the principal amount will be deemed paid in full. Under this provision, if the Company pays the below listed amounts by the corresponding dates, the remaining unpaid balance of the principal amount will be forgiven:


(i)	$200,000 by April 30, 2012; or


(ii)	$225,000 at any time from May 1, 2012 through June 30, 2012; or


(iii)	$250,000 at any time from July 1, 2012 through August 31, 2012.

If such payments are not made, then the remaining principal amount will be due on the Maturity Date .

The proceeds from the sale of the CXR Halcyon telecommunications product line (as described below) were used to pay a portion of the $500,000 due to the Lender under the terms of the Note on February 29, 2012.

On February 8, 2012, the Borrowers and the Lender entered into Amendment Number 17 to Loan Documents (“Amendment 17”), which amends the Credit Agreement as of such date to modify the Note.

Sale of Test Product Line

On February 7, 2012, CXR Larus Corporation (“CXR Larus”), a wholly-owned subsidiary of EMRISE Corporation (the “Company”), entered into an agreement with LDDF Incorporated, doing business as TesCom, relating to the sale of certain assets relating solely to the CXR Halcyon product line of telecommunications test equipment (the “Test Product Line”).

At the closing of the sale, CXR Larus received net proceeds of $300,000. The consideration for the Test Product Line consisted of $300,000 in cash less any amount of cash collected in respect of any accounts receivable in connection with sales of product shipped by CXR Larus on or after November 15, 2011 (the “Purchase Price”). As previously discussed, the proceeds from the sale of the Test Product Line were used to pay a portion of the $500,000 due to the Lender under the terms of the Note on February 29, 2012.