<Page>
MOBITEC HOLDING AB
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
<Page>
<Table>
CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated balance sheets 2
Consolidated statements of operations 3
Consolidated statements of stockholders' equity 4
Consolidated statements of cash flows 5 - 6
Notes to consolidated financial statements 7 - 14
- --------------------------------------------------------------------------------
</Table>
<Page>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Mobitec Holding AB and Subsidiaries
Herrrljunga, Sweden
We have audited the accompanying consolidated balance sheets of Mobitec Holding
AB and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. 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 in accordance with auditing standards generally accepted
in the United States of America. 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. An audit also includes 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 Mobitec Holding AB
and subsidiaries as of December 31, 2000 and 1999, 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.
McGLADREY & PULLEN, LLP
Raleigh, North Carolina
July 17, 2001
1
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
<Table>
<Caption>
(SEK AND DOLLAR AMOUNTS IN THOUSANDS)
(EXCEPT FOR SHARE AND PER SHARE INFORMATION)
December 31,
ASSETS (NOTE 4) 2000 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents SEK 2,077 $ 221 SEK 6,222
Trade accounts receivable (Note 8) 19,494 2,071 13,028
Other receivables 2,694 286 2,048
Inventories (Note 2) 15,630 1,660 9,861
Prepaid expenses and other assets 487 52 408
----------------------------------- -------------
TOTAL CURRENT ASSETS 40,382 4,290 31,567
Property and equipment, net of accumulated depreciation (Note 3) 4,094 435 3,622
Other assets (Note 7) 1,221 130 270
----------------------------------- -------------
TOTAL ASSETS SEK 45,697 $ 4,855 SEK 35,459
=================================== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Lines of credit (Note 4) SEK 10,061 $ 1,069 SEK 4,531
Accounts payable 10,459 1,111 8,613
Accrued expenses 6,017 639 5,434
Income tax payable 646 69 135
Other current liabilities (Note 4) 2,522 269 2,028
----------------------------------- -------------
TOTAL CURRENT LIABILITIES 29,705 3,157 20,741
----------------------------------- -------------
Long Term Liabilities
Deferred income taxes (Note 6) 145 15 334
Deferred compensation benefits (Note 7) 911 97 -
----------------------------------- -------------
TOTAL LONG TERM LIABILITIES 1,056 112 334
----------------------------------- -------------
TOTAL LIABILITIES 30,761 3,269 21,075
----------------------------------- -------------
Minority interest in consolidated subsidiary 1,819 193 1,009
----------------------------------- -------------
Commitments and Contingencies (Notes 5 and 11)
Stockholders' Equity
Share capital, par value SEK 1.00 per share, 100,000 shares
authorized and outstanding 100 12 100
Legal reserve 2,653 299 2,653
Accumulated other comprehensive income, foreign
translation adjustments 564 41 112
Retained earnings 9,800 1,041 10,510
----------------------------------- -------------
TOTAL STOCKHOLDERS' EQUITY 13,117 1,393 13,375
----------------------------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY SEK 45,697 $ 4,855 SEK 35,459
=================================== =============
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000 AND 1999
<Table>
<Caption>
(SEK AND DOLLAR AMOUNTS IN THOUSANDS)
(EXCEPT FOR SHARE AND PER SHARE INFORMATION)
For the Years Ended December 31,
2000 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales (Note 8) SEK 114,031 $ 12,438 SEK 96,093
Cost of sales 67,961 7,413 65,747
-------------------------------- --------------
GROSS PROFIT 46,070 5,025 30,346
-------------------------------- --------------
Operating expenses:
Selling, general and administrative 37,781 4,121 24,014
Research and development 6,821 744 4,742
Other 146 16 373
-------------------------------- --------------
Total operating expenses 44,748 4,881 29,129
-------------------------------- --------------
OPERATING INCOME 1,322 144 1,217
-------------------------------- --------------
Nonoperating income (expense):
Other income (expense) 219 24 (288)
Interest (expense) (434) (47) (243)
-------------------------------- --------------
Total nonoperating income (expense) (215) (23) (531)
-------------------------------- --------------
INCOME BEFORE INCOME TAXES 1,107 121 686
Income tax expense (Note 6) 491 54 274
-------------------------------- --------------
INCOME BEFORE MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED SUBSIDIARY 616 67 412
Minority interest in net income of consolidated subsidiary 807 88 175
-------------------------------- --------------
NET INCOME (LOSS) SEK (191) $ (21) SEK 237
================================ ==============
EARNINGS PER SHARE:
Earnings (loss) per common share SEK (1.91) $ (0.21) SEK 2.37
================================ ==============
Weighted average shares outstanding 100,000 100,000 100,000
================================ ==============
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000 AND 1999
<Table>
<Caption>
(SEK AMOUNTS IN THOUSANDS)
Accumulated
Other Other Total
Share Legal Retained Comprehensive Comprehensive Stockholders'
Capital Reserve Earnings Income Income Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1999 100 2,653 10,273 - 13,026
Net income - - 237 - 237 237
Changes in cumulative translation adjustments - - - 112 112 112
-------------
Total comprehensive income 349
---------------------------------------------------=============---------------
Balance, December 31, 1999 100 2,653 10,510 112 13,375
Net (loss) - - (191) - (191) (191)
Changes in cumulative translation adjustments - - - 452 452 452
-------------
Total comprehensive income 261
=============
Dividends - - (519) - (519)
--------------------------------------------------- ----------------
Balance, December 31, 2000 100 2,653 9,800 564 13,117
=================================================== ================
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000 AND 1999
<Table>
<Caption>
(SEK AMOUNTS IN THOUSANDS)
For the Years Ended December 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income (loss) SEK (191) SEK 237
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Minority interest in net income of consolidated subsidiary 807 175
Depreciation and amortization 1,600 1,348
Deferred income taxes (189) 26
Gain on sale of property and equipment (183) -
Deferred compensation expense 1,046 -
Changes in operating assets and liabilities:
(Increase) in trade accounts receivable (6,466) (5,643)
(Increase) in other receivables (646) (663)
(Increase) decrease in inventories (5,769) 814
(Increase) decrease in prepaid expenses and other current assets (79) 36
Increase in accounts payable 1,846 2,354
Increase in accrued expenses 583 2,267
(Decrease) increase in income tax payable 511 (156)
Increase in other current liabilities 494 1,628
---------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,636) 2,423
---------------------------------------------
Cash Flows From Investing Activities
Proceeds from sales of property and equipment 461 -
Purchases of property and equipment (2,254) (1,732)
Purchase of insurance to fund deferred compensation (1,046) -
Purchase of other assets (153) (338)
---------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,992) (2,070)
---------------------------------------------
Cash Flows From Financing Activities
Dividends (519) -
Net proceeds from bank borrowings 5,530 1,741
---------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,011 1,741
---------------------------------------------
Effect of exchange rate change 472 105
---------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,145) 2,199
Cash and cash equivalents at beginning of year 6,222 4,023
---------------- ---------------
Cash and cash equivalents at end of year SEK 2,077 SEK 6,222
================ ===============
(Continued)
5
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(SEK AMOUNTS IN THOUSANDS)
For the Years Ended December 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest SEK 434 SEK 243
================ ===============
Income taxes SEK 169 SEK 93
================ ===============
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company develops, manufactures, and distributes
information systems primarily for buses used in public transportation. Customers
are primarily bus manufacturers located in Australia, Brazil, Germany, and
Scandinavia.
A summary of the Company's significant accounting policies follows:
BASIS OF PRESENTATION: These consolidated financial statements have been
prepared in Swedish Krona (SEK), the Company's functional currency. The 2000
consolidated balance sheet and statement of operations reflect amounts in US
dollars in a "convenience translation" column. The consolidated financial
statements have also been prepared in accordance with accounting principles
generally accepted in the United States of America.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Mobitec AB. The
consolidated financial statements also include the accounts of Mobitec AB's
wholly owned subsidiaries (Mobitec GmbH, Mobitec Australia, Pty Ltd., Mobitec
Klimat AB and Mobitec Hexair AB) and the accounts of its 50% owned subsidiary,
Mobitec Brazil LTDA. Mobitec Hexair AB was sold during the year ended December
31, 2000; however, the results of its operations are included in the statements
of income. All significant inter-company accounts and transactions have been
eliminated in consolidation.
INVENTORIES: Inventories are stated at the lower of cost (average cost) or
market.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost, less
accumulated depreciation. If facts and circumstances suggest that the property
and equipment will not be recoverable, as determined, based on the undiscounted
cash flows over the remaining depreciable period, the Company will review for
impairment. To the extent that there is an impairment, analysis is preformed
based on several criteria, including but not limited to, revenue trends,
discounted operation cash flows and other factors to determine the impairment
amount. The Company computes depreciation on its equipment using the
straight-line method over the following estimated useful lives:
<Table>
<Caption>
Years
-------
Buildings 50
Leasehold improvements 5
Machinery and equipment 3 to 10
</Table>
ESTIMATES: The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INCOME TAXES: The Company reports deferred tax assets and liabilities
attributable to temporary differences between the book value of assets and
liabilities and their tax value. The accumulated deferred tax liability is
adjusted each year by applying the current tax rate in each country and is
reported in the balance sheet as deferred income taxes.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's foreign
subsidiaries are translated at exchange rates prevailing at the end of the year.
Revenue and expense transactions are translated at the average of exchange rates
in effect during the period. Translations gains and losses are recorded directly
to stockholders' equity. Realized gains and losses on foreign currency
transactions, if any, are included in operations.
7
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following summarizes the major methods
and assumptions used in estimating the fair value of financial instruments:
Cash and cash equivalents - The carrying amount approximates fair value
due to the relatively short-term period to maturity of these
instruments.
Short-term borrowings - The carrying amount approximates fair value due
to the variable interest rate adjustments based upon market conditions.
REVENUE RECOGNITION: The Company recognizes operating revenues upon shipment of
goods to customers.
RESEARCH AND DEVELOPMENT: The Company expenses all research and development
costs at the time expenses are incurred.
EARNINGS PER SHARE AMOUNTS: Earnings (loss) per share has been computed based
upon the weighted average number of shares of share capital outstanding.
NOTE 2. INVENTORIES
The components of inventories consist of the following:
<Table>
<Caption>
2000 1999
--------- --------
Raw materials SEK 13,479 SEK 7,194
Work-in-process 197 148
Finished goods 1,264 802
Supplies 690 1,717
--------- --------
SEK 15,630 SEK 9,861
========= ========
</Table>
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment are as follows:
<Table>
<Caption>
2000 1999
--------- --------
Land SEK - SEK 95
Buildings - 194
Machinery and equipment 8,454 6,373
Leasehold improvements 797 797
--------- --------
9,251 7,459
Less accumulated depreciation 5,157 3,837
--------- --------
SEK 4,094 SEK 3,622
========= ========
</Table>
Depreciation expense was 1,504 SEK and 1,280 SEK for 2000 and 1999,
respectively.
8
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 4. LOAN AGREEMENTS
The Company has an agreement with a bank in which the Company may currently
borrow up to a maximum of 4,500 SEK. At December 31, 2000 and 1999, 4,406 SEK
and 4,531 SEK, respectively, was outstanding. Advances under the agreement are
subject to a borrowing base of 75% of eligible accounts receivable. The line of
credit bears interest at 5.1% and is collateralized by accounts receivable. This
line of credit agreement expires on October 31, 2001.
The Company also has an agreement with a bank in which it may borrow up to 6,000
SEK of which 5,655 SEK was outstanding at December 31, 2000. The terms of this
agreement require the payment of an unused credit line fee equal to 0.5% of the
unused portion and interest at 5% of the outstanding balance. This agreement is
collateralized by a mortgage on substantially all assets of the Company. This
agreement expires on October 31, 2001.
The Company also has convertible loans of 99 SEK at December 31, 2000 from
employees that can be converted into share capital of the Company. These loans
are reflected in "other current liabilities" at December 31, 2000. These loans
were repaid by the Company in June 2001.
NOTE 5. LEASE COMMITMENTS
The Company has lease commitments under operating leases for vehicles and office
space. Rental expense for 2000 and 1999 was 1,800 SEK and 1,040 SEK,
respectively.
At December 31, 2000, the future minimum lease commitments under non-cancelable
operating leases are as follows:
<Table>
<Caption>
Year Ending Operating
December 31, Leases
- ---------------------------------------------------------------------------------
2001 SEK 1,320
2002 1,488
2003 1,382
2004 1,009
2005 916
Thereafter 192
-------------
Total minimum lease payments SEK 6,307
=============
</Table>
9
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 6. INCOME TAXES
The components of income tax expense for the years ended December 31, 2000 and
1999 consisted of the following:
<Table>
<Caption>
2000 1999
------------ -----------
Current expense SEK 680 SEK 248
Deferred expense (benefit) (189) 26
------------ -----------
SEK 491 SEK 274
============ ===========
</Table>
At December 31, 2000 and 1999, the Company has net deferred tax liabilities that
consist of the following:
<Table>
<Caption>
2000 1999
------------ -----------
Deferred tax assets:
Property and equipment SEK 130 SEK 87
Inventories 6 -
------------ -----------
136 87
------------ -----------
Deferred tax liabilities:
Untaxed reserves 281 281
Other - 140
------------ -----------
281 421
------------ -----------
Net deferred tax liabilities SEK (145) SEK (334)
============ ===========
</Table>
10
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 6. INCOME TAXES (CONTINUED)
The deferred tax amounts above have been classified on the consolidated balance
sheets as follows:
<Table>
<Caption>
2000 1999
----------------------------------
Current assets SEK - SEK -
Noncurrent assets - -
Noncurrent liabilities (145) (334)
------------- ------------
SEK (145) SEK (334)
============= ============
</Table>
The income tax provision differs from the amount of income tax determined by
applying the applicable Swedish income tax rate to pretax income for 2000 and
1999 due to the following:
<Table>
<Caption>
2000 1999
---------------------- --------------------
Amount Percent Amount %
---------------------- --------------------
Computed "expected" tax expense SEK 310 28.0% SEK 192 28.0%
Increase in income taxes resulting from:
Nondeductible items 173 15.6% 68 9.9%
Other 8 0.8% 14 2.0%
---------------------- --------------------
SEK 491 44.4% SEK 274 39.9%
====================== ====================
</Table>
NOTE 7. RETIREMENT PLAN
During 2000, the Company entered into a deferred compensation plan agreement
with a former key employee which permitted the employee to retire at age 60. In
March 2000, the employee retired and the Company paid approximately 1,046 SEK to
fund an insurance contract. The Company also recorded a corresponding liability
to cover the estimated present value of the liability to be paid to the
recipient. Each month, the recipient will receive approximately 17 SEK over a
60-month term. At December 31, 2000, the related asset and liability associated
with this plan is 911 SEK and is included in the accompanying balance sheet as
"other assets" and as "deferred compensation benefits."
The amount of the expense associated with this plan for the year ended December
31, 2000 was approximately 1,046 SEK.
11
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8. MAJOR CUSTOMER
Sales to a major customer (which consists of six wholly-owned subsidiaries of a
Scandinavian and European bus and truck manufacturing company) during the years
ended December 31, 2000 and 1999 are as follows:
<Table>
<Caption>
Amount of Net Sales
Years Ended December 31,
------------------------------------
2000 1999
------------------------------------
Customer A SEK 31,261 SEK 25,788
-------------- --------------
SEK 31,261 SEK 25,788
============== ==============
Trade Accounts Receivable
December 31,
------------------------------------
2000 1999
------------------------------------
Customer A SEK 2,839 SEK 4,819
-------------- --------------
SEK 2,839 SEK 4,819
============== ==============
</Table>
Because of the nature of the Company's business, the major customers may vary
between years.
NOTE 9. OTHER COMPREHENSIVE INCOME
The following is a summary of the tax effects of the components of other
comprehensive income, consisting solely of foreign currency translation
adjustments, reported in the statements of stockholders' equity for the years
ended December 31, 2000 and 1999:
<Table>
<Caption>
Pre-tax Tax Net-of-tax
Amount Expense Amount
-------------- -------------- --------------
Year ended December 31, 2000:
Foreign currency translation adjustment SEK 628 SEK 176 SEK 452
============== ============== ==============
Year ended December 31, 1999:
Foreign currency translation adjustment SEK 155 SEK 43 SEK 112
============== ============== ==============
</Table>
12
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 10. FOREIGN OPERATIONS
The Company has one business segment in which it develops, manufactures, and
distributes information systems primarily for buses used in public
transportation. Customers are primarily bus manufacturers located in
Scandinavia, Germany, Australia, and Brazil.
Summarized financial information for the Company's foreign sales (attributed to
countries based on the location of the subsidiary) for the year ended December
31, 2000 and 1999 is as follows:
<Table>
<Caption>
2000 1999
-----------------------------------
Sweden SEK 99,761 SEK 96,277
Germany 11,925 7,727
Australia 6,770 -
Brazil 13,850 1,594
Elimination of inter-company sales (18,275) (9,505)
------------ ------------
SEK 114,031 SEK 96,093
============ ============
The following table presents information about the Company's operating income by
geographic area:
Sweden SEK (647) SEK 1,302
Germany (1,013) (252)
Australia 770 -
Brazil 1,767 328
Elimination of inter-company income (loss) 445 (161)
------------ ------------
SEK 1,322 SEK 1,217
============ ============
The following table presents information about the Company's identifiable assets
by geographic area:
Sweden SEK 43,365 SEK 37,387
Germany 3,730 4,624
Australia 5,311 -
Brazil 6,297 3,772
Elimination of inter-company receivables and payables (13,006) (10,324)
------------ ------------
SEK 45,697 SEK 35,459
============ ============
</Table>
13
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 11. CONTINGENCIES
The Company, in the normal course of operations, is involved in several legal
actions, which are vigorously being contested. In management's opinion, the
ultimate resolution of these matters will not have a material adverse effect on
the Company's financial position.
NOTE 12. SUBSEQUENT EVENT
On June 28, 2001, all of the outstanding stock of the Company was acquired by
Digital Recorders, Inc. ("Digital"), a manufacturer incorporated in the United
States, and its wholly-owned subsidiary, DRI Europa AB ("DRI Europa"). The
acquisition of the Company's stock was made pursuant to an Amended Option
Agreement, dated March 13, 2001, and a Stock Purchase Agreement, dated June 27,
2001. Both agreements were between Digital and DRI Europa, as the purchasers,
and the Company's individual shareholders, as the sellers. The purchase price
for the Company's shares consisted of a combination of cash, notes to the
individual sellers, Digital stock and warrants to purchase Digital stock. The
total purchase price was approximately 80,277 SEK. As a result of the
acquisition, the Company has become a wholly-owned subsidiary of DRI Europa.
14
<Page>
MOBITEC HOLDING AB
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
<Page>
CONTENTS
<Table>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets 1
Consolidated statements of income 2
Consolidated statements of cash flows 3 - 4
Notes to consolidated financial statements 5 - 8
- -----------------------------------------------------------------------------------
</Table>
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
(SEK AND DOLLAR AMOUNTS IN THOUSANDS)
(EXCEPT FOR SHARE AND PER SHARE INFORMATION)
MARCH 31, MARCH 31, DECEMBER 31,
2001 2001 2000
ASSETS (UNAUDITED) (NOTE)
- -----------------------------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents SEK 2,182 $ 210 SEK 2,077
Trade accounts receivable 21,966 2,112 19,494
Other receivables 4,777 459 2,694
Inventories 15,557 1,496 15,630
Prepaid expenses and other assets 558 54 487
------------------------------- ----------
TOTAL CURRENT ASSETS 45,040 4,331 40,382
Property and equipment, net of accumulated depreciation 2,950 284 4,094
Other assets 867 83 1,221
------------------------------- ----------
TOTAL ASSETS SEK 48,857 $ 4,698 SEK 45,697
=============================== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Lines of credit SEK 11,544 $ 1,110 SEK 10,061
Accounts payable 10,614 1,020 10,459
Accrued expenses 6,323 608 6,017
Income tax payable 1,019 98 646
Other current liabilities 1,411 136 2,522
------------------------------- ----------
TOTAL CURRENT LIABILITIES 30,911 2,972 29,705
------------------------------- ----------
Long Term Liabilities
Deferred income taxes 389 37 145
Deferred compensation benefits 860 83 911
------------------------------- ----------
TOTAL LONG TERM LIABILITIES 1,249 120 1,056
------------------------------- ----------
TOTAL LIABILITIES 32,160 3,092 30,761
------------------------------- ----------
Minority interest in consolidated subsidiary 2,163 208 1,819
------------------------------- ----------
Stockholders' Equity
Share capital, par value $1.00 per share, 100,000 shares
authorized and outstanding 100 12 100
Legal reserve 2,106 266 2,653
Accumulated other comprehensive income, foreign
translation adjustment (348) (98) 564
Retained earnings 12,676 1,218 9,800
------------------------------- ----------
TOTAL STOCKHOLDERS' EQUITY 14,534 1,398 13,117
------------------------------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY SEK 48,857 $ 4,698 SEK 45,697
=============================== ==========
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Note: The consolidated balance sheet as of December 31, 2000 was taken from the
audited financial statements as of that date.
1
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
<Table>
<Caption>
(SEK AND DOLLAR AMOUNTS IN THOUSANDS)
(EXCEPT FOR SHARE AND PER SHARE INFORMATION)
For the Three Months Ended March 31,
2001 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales SEK 34,207 $ 3,511 SEK 26,148
Cost of sales 18,306 1,879 15,076
------------------------------- ----------
GROSS PROFIT 15,901 1,632 11,072
------------------------------- ----------
Operating expenses:
Selling, general and administrative 10,113 1,038 8,178
Research and development 1,500 154 1,705
------------------------------- ----------
Total operating expenses 11,613 1,192 9,883
------------------------------- ----------
OPERATING INCOME 4,288 440 1,189
------------------------------- ----------
Nonoperating income (expense):
Other income (expense) (139) (14) (28)
Interest (expense) (9) (1) (17)
------------------------------- ----------
Total nonoperating income (expense) (148) (15) (45)
------------------------------- ----------
INCOME BEFORE INCOME TAXES 4,140 425 1,144
Income tax expense 920 94 534
------------------------------- ----------
INCOME BEFORE MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED SUBSIDIARY 3,220 331 610
Minority interest in net income of consolidated subsidiary 344 35 99
------------------------------- ----------
NET INCOME SEK 2,876 $ 296 SEK 511
=============================== ==========
COMPREHENSIVE INCOME SEK 1,964 $ 202 SEK 482
=============================== ==========
EARNINGS PER SHARE:
Earnings per common share SEK 28.76 $ 2.96 SEK 5.11
=============================== ==========
Weighted average shares outstanding 100,000 100,000 100,000
=============================== ==========
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
<Table>
<Caption>
(AMOUNTS IN THOUSANDS)
For the Three Months Ended March 31,
2001 2000
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income SEK 2,876 SEK 511
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Minority interest in net income of consolidated subsidiary 344 99
Depreciation 224 368
Deferred income taxes 244 (9)
Book value of property and equipment and other assets disposed 2,290 -
Changes in operating assets and liabilities:
(Increase) in trade accounts receivable (2,472) (889)
(Increase) decrease in other receivables (2,083) 33
(Increase) decrease in inventories 73 (2,654)
(Increase) in prepaid expenses and other current assets (71) (328)
Increase in accounts payable 155 2,547
(Decrease) increase in accrued expenses 306 (916)
Increase in income tax payable 373 341
(Decrease) in other current liabilities (1,111) (824)
(Decrease) in deferred compensation benefits (51) -
----------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,097 (1,721)
----------------------------------------
Cash Flows From Investing Activities
Proceeds from sales of property and equipment 1 -
Purchases of property and equipment (1,050) (653)
Other 33 16
----------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,016) (637)
----------------------------------------
Cash Flows From Financing Activities
Net proceeds from bank borrowings 1,483 244
Change in legal reserve (547) 363
----------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 936 607
----------------------------------------
Effect of exchange rate change (912) (29)
----------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 105 (1,780)
Cash and cash equivalents at beginning of period 2,077 6,222
-------------- ------------
Cash and cash equivalents at end of period SEK 2,182 SEK 4,442
============== ============
(Continued)
3
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS)
For the Three Months Ended March 31,
2001 2000
- --------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest SEK 9 SEK 17
============== ============
Income taxes SEK 303 SEK 202
============== ============
</Table>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company develops, manufactures, and distributes
information systems primarily for buses used in public transportation. Customers
are primarily bus manufacturers located in Australia, Brazil, Germany, and
Scandinavia.
A summary of the Company's significant accounting policies follows:
BASIS OF PRESENTATION: In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments (consisting only of
normal adjustments) necessary for a fair presentation of the financial position
of Mobitec Holding AB and subsidiaries (the "Company") at March 31, 2001 and
December 31, 2000, the results of operations for the three months ended March
31, 2001 and 2000, and cash flows for the three months ended March 31, 2001 and
2000. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and the related notes included in the
Company's annual 2000 financial statements.
These consolidated financial statements have been prepared in Swedish Krona
(SEK), the Company's functional currency. The 2001 consolidated balance sheet
and statement of income reflect amounts in US dollars in a "convenience
translation" column. The consolidated financial statements have also been
prepared in accordance with accounting principles generally accepted in the
United States of America.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Mobitec AB. The
consolidated financial statements also include the accounts of Mobitec AB's
wholly owned subsidiaries (Mobitec GmbH, Mobitec Australia, Pty Ltd., Mobitec
Klimat AB and Mobitec Hexair AB) and the accounts of its 50% owned subsidiary,
Mobitec Brazil LTDA. Mobitec Hexair AB was sold on December 31, 2000 and Mobitec
Klimat AB was sold on January 1, 2001. All significant inter-company accounts
and transactions have been eliminated in consolidation.
INVENTORIES: Inventories are stated at the lower of cost (average cost) or
market.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost, less
accumulated depreciation. If facts and circumstances suggest that the property
and equipment will not be recoverable, as determined, based on the undiscounted
cash flows over the remaining depreciable period, the Company will review for
impairment. To the extent that there is an impairment, analysis is preformed
based on several criteria, including but not limited to, revenue trends,
discounted operation cash flows and other factors to determine the impairment
amount. The Company computes depreciation on its equipment using the
straight-line method over the following estimated useful lives:
<Table>
<Caption>
Years
---------
Buildings 50
Leasehold improvements 5
Machinery and equipment 3 to 10
</Table>
ESTIMATES: The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INCOME TAXES: The Company reports deferred tax assets and liabilities
attributable to temporary differences between the book value of assets and
liabilities and their tax value. The accumulated deferred tax liability is
adjusted each year by applying the current tax rate in each country and is
reported in the balance sheet as deferred income taxes.
5
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's foreign
subsidiaries are translated at exchange rates prevailing at the end of the
period. Revenue and expense transactions are translated at the average of
exchange rates in effect during the period. Translations gains and losses are
recorded directly to stockholders' equity. Realized gains and losses on foreign
currency transactions, if any, are included in operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following summarizes the major methods
and assumptions used in estimating the fair value of financial instruments:
Cash and cash equivalents - The carrying amount approximates fair value
due to the relatively short-term period to maturity of these
instruments.
Short-term borrowings - The carrying amount approximates fair value due
to the variable interest rate adjustments based upon market conditions.
REVENUE RECOGNITION: The Company recognizes operating revenues upon shipment of
goods to customers.
RESEARCH AND DEVELOPMENT: The Company expenses all research and development
costs at the time expenses are incurred.
EARNINGS PER SHARE AMOUNTS: Earnings per share has been computed based upon the
weighted average number of shares of share capital outstanding.
NOTE 2. OTHER COMPREHENSIVE INCOME
The following is a summary of the tax effects of the components of other
comprehensive income, consisting solely of foreign currency translation
adjustments, reported in the statements of stockholders' equity for the three
months ended March 31, 2001 and 2000:
<Table>
<Caption>
Pre-tax Tax Net-of-tax
Amount (Benefit) Amount
------------ ------------- --------------
Three months ended March 31, 2001:
Foreign currency translation adjustment SEK (1,266) SEK (354) SEK (912)
============ ============= ==============
Three months ended March 31, 2000:
Foreign currency translation adjustment SEK (40) SEK (11) SEK (29)
============ ============= ==============
</Table>
6
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 3. FOREIGN OPERATIONS
The Company has one business segment in which it develops, manufactures, and
distributes information systems primarily for buses used in public
transportation. Customers are primarily bus manufacturers located in
Scandinavia, Germany, Australia, and Brazil.
Summarized financial information for the Company's foreign sales (attributed to
countries based on the location of the subsidiary) for the three months ended
March 31, 2001 and 2000 is as follows:
<Table>
<Caption>
2001 2000
----------------------------------------
Sweden SEK 29,414 SEK 24,978
Germany 3,209 3,746
Australia 3,778 -
Brazil 4,106 2,197
Elimination of inter-company sales (6,300) (4,773)
---------------- -------------
SEK 34,207 SEK 26,148
================ =============
</Table>
The following table presents information about the Company's operating income
(loss) by geographic area:
<Table>
Sweden SEK 2,676 SEK 726
Germany (106) 128
Australia 279 -
Brazil 840 179
Elimination of inter-company income (loss) 599 156
---------------- -------------
SEK 4,288 SEK 1,189
================ =============
</Table>
The following table presents information about the Company's identifiable assets
by geographic area:
<Table>
Sweden SEK 43,928
Germany 3,444
Australia 5,124
Brazil 7,012
Elimination of inter-company receivables and payables (10,651)
----------------
SEK 48,857
================
</Table>
7
<Page>
MOBITEC HOLDING AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 4. SUBSEQUENT EVENT
On June 28, 2001, all of the outstanding stock of the Company was acquired by
Digital Recorders, Inc. ("Digital"), a manufacturer incorporated in the United
States, and its wholly-owned subsidiary, DRI Europa AB ("DRI Europa"). The
acquisition of the Company's stock was made pursuant to an Amended Option
Agreement, dated March 13, 2001, and a Stock Purchase Agreement, dated June 27,
2001. Both agreements were between Digital and DRI Europa, as the purchasers,
and the Company's individual shareholders, as the sellers. The purchase price
for the Company's shares consisted of a combination of cash, notes to the
individual sellers, Digital stock and warrants to purchase Digital stock. The
total purchase price was approximately 80,277 SEK. As a result of the
acquisition, the Company has become a wholly-owned subsidiary of DRI Europa.
8