Mail Stop 0308
September 24, 2004
David L. Turney, Chairman, CEO and President
Digital Recorders, Inc
5949 Sherry Lane, Suite 1050,
Dallas, Texas 75225
RE: Digital Recorders, Inc
Form 8-K filed September 10, 2004
File No. 33-82870-A
Dear Mr. Turney :
We have the following comments with regard to the above
referenced filing. We welcome any questions you may have about our
comments. Feel free to contact us at the telephone numbers listed at
the end of this letter.
1. Refer to third paragraph. Revise Item 4.01 to cover the period
from the date of the last audited financial statements through
September 3, 2004, the date of the dismissal, if true. See Item
304(a)(1)(IV) of Regulation S-K.
2. Refer to last paragraph. Revise Item 4.01 to cover the period from
the date of the last audited financial statements through September 3,
2004, the date of the dismissal, if true.
3. In detail, supplementally describe the nature of each reportable
event and the amounts involved, if any. Also, tell us in what period
the reportable event occurred and whether or not you restated (or
intend to restate) any prior period for any adjustment resulting from
the reportable event; and if not, why not. Tell us in detail the steps
you have taken (or plan to take) and procedures you implemented (or
plan to implement) to correct each reportable event.
4. In detail, supplementally describe the nature of each material
weakness and the amounts involved, as applicable. Also, tell us:
* in what period each material weakness and accounting error or
misapplication of GAAP occurred,
* the amount of each accounting error and misapplication of GAAP,
* the reason(s) for each error or misapplication of accounting,
* whether or not you intend to restate any prior period for any
adjustments. If not, tell us why not, and
David L. Turney, Chairman, CEO and President
Digital Recorders, Inc
September 24, 2004
Page 2
* in detail, all the steps you have taken (or plan to take) and
procedures you have implemented (or plan to implement) to correct each
concern.
5. Supplementally provide McGladrey`s Report to the Audit Committee
dated April 13, 2004. In addition, provide us with any letter or
written communication to and from the former accountants regarding any
disagreements or reportable events to management or the Audit
Committee.
Form 10-K Item 9A and Forms 10-Q Item 4
We monitored your Forms 10-K/10-Q solely related to the matters below.
Refer to the Item 4.01 Form 8-K and the material weaknesses
communicated to you by McGladrey & Pullen. Also, refer to the Item 9A
disclosures of your Form 10-K (Item 4 in the Forms 10-Q?. We note
that the Controls and Procedures were effective for the internal
control issues noted by McGladrey & Pullen. The material control
weakness disclosed in your Form 8-K appears to indicate you may lack
the necessary disclosure controls and procedures, as well as internal
controls necessary to provide true and accurate Item 9A and Item 4
disclosures. Tell how the controls and procedures can be effective
when you have a material control weakness. Further, you state that
the management will continue to evaluate the additional steps and
actions needed to improve your financial infrastructure and eliminate
the weaknesses identified. Tell us if you have taken any steps to
date to remedy the situation. To the extend that you made any changes
in your internal controls, please state so to comply with Item 308(c)
of Regulation S-K. Please revise accordingly.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to be
certain that they have provided all information investors require.
Since the company and its management are in possession of all facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
David L. Turney, Chairman, CEO and President
Digital Recorders, Inc
September 24, 2004
Page 3
In addition, please be advised that the Division of Enforcement has
access to all information you provide to the staff of the Division of
Corporation Finance in our review of your filing or in response to our
comments on your filing.
Please provide the supplemental information requested above
within 10 business days from the date of this letter. The
supplemental information should be filed as correspondence on EDGAR.
The amendment requested in the first comment above should be filed as
promptly as possible and should be reviewed by the former accountants.
The letter required by Exhibit 16 should cover the revised
disclosures. Any questions regarding the above should be directed to
me at (202) 824-5265, or in my absence, to Robert Benton at (202) 942-
1811.
Sincerely,
O. Nicole Holden
Staff Accountant