<Page>
DIGITAL RECORDERS, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
These pro forma condensed financial statements reflect the June 28, 2001
acquisition of Mobitec Holding AB and Subsidiaries. The pro forma condensed
financial statements present the balance sheet as if the transaction had
occurred on March 31, 2001 and the income statement as if the transaction had
occurred at January 1, 2000 for the year ended December 31, 2000 and carried
through the three months ended March 31, 2001.
The following unaudited pro forma condensed statements of operations are
derived from the audited statement of operations of Digital Recorders, Inc.
(DRI or the Company) for the year ended December 31, 2000 and the audited
statement of operations of Mobitec Holding AB and Subsidiaries for the year
ended December 31, 2000. The March 31, 2001 balance sheets and the statements
of operations for the three months ended March 31, 2001 are derived from
their unaudited interim financial statements. The unaudited financial
information herein reflects all adjustments, consisting only of normal
recurring adjustments which, in the opinion of management of the respective
companies, are necessary to fairly state the Company's financial position and
results of its operations.
These pro forma condensed statements of operations and balance sheet do not
purport to represent what the Company's results or financial condition would
actually have been if the Acquisition had occurred on the dates indicated or
to project the Company's results or financial condition for or at any future
period or date. The pro forma adjustments, as described in the accompanying
data, are based on available information and certain assumptions that
management believes are reasonable.
The unaudited pro forma condensed financial statements should be read in
conjunction with the historical financial statements and related notes of DRI
and Mobitec Holding AB.
<Page>
DIGITAL RECORDERS, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 2001
(Amounts in Thousands)
(Unaudited)
<Table>
<Caption>
PRO FORMA PRO FORMA
DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED
---------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 81 $ 210 $ - B1 $ 291
Trade accounts receivable - net 7,067 2,112 - 9,179
Other receivables 46 459 - 505
Inventories 5,557 1,496 - 7,053
Prepaids and other current assets 438 54 - 492
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Total current assets 13,189 4,331 - 17,520
Property and equipment - net 602 284 - 886
Goodwill - net 1,049 - 2,559 B2 3,608
Intangible assets - net 76 - 4,500 B2 4,576
Deferred taxes 170 - - 170
Other assets 522 83 - 605
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TOTAL ASSETS $ 15,608 $ 4,698 $ 7,059 $ 27,365
=====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit and current maturities $ 4,163 $ 1,110 $ 404 B3 $ 5,677
Accounts payable 2,347 1,020 349 B1 3,716
Accounts payable, related party 2,685 - - 2,685
Accrued expenses 938 608 - 1,546
Income tax payable - 98 - 98
Other current liabilities - 136 - 136
Preferred stock dividends payable 44 - - 44
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Total current liabilities 10,177 2,972 753 13,902
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LONG TERM LIABILITIES
Other liabilities - 37 - 37
Long term liabilities - 83 6,548 B3 6,631
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Total long term liabilities - 120 6,548 6,668
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Total Liabilities 10,177 3,092 7,301 20,570
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SERIES AAA REDEEMABLE, CONVERTIBLE,
NONVOTING PREFERRED STOCK 1,770 - - 1,770
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MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY - 208 - 208
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STOCKHOLDERS' EQUITY:
Share capital - 12 (12) B2 -
Legal reserve - 266 (266) B2 -
Common stock 327 - 43 B4 370
Additional paid-in-capital 11,115 - 1,113 B4 12,228
Accumulated other comprehensive income
(loss) (407) (98) 98 B2 (407)
Accumulated earnings (deficit) (7,374) 1,218 (1,218) B2 (7,374)
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Total stockholders' equity 3,661 1,398 (242) 4,817
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 15,608 $ 4,698 $ 7,059 $ 27,365
=====================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<Page>
DIGITAL RECORDERS, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001
(Amounts in Thousands Except Share and Per Share Information)
(Unaudited)
<Table>
<Caption>
PRO FORMA PRO FORMA
DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED
---------------------------------------------------------------------
Net sales $ 6,981 $ 3,511 $ - $ 10,492
Cost of sales 4,420 1,879 - 6,299
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Gross profit 2,561 1,632 - 4,193
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Operating expenses:
Selling, general and administrative 1,936 1,038 142 C-1 3,116
Research and development 535 154 - 689
Other - - - -
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Total operating expenses 2,471 1,192 142 3,805
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Operating income (loss) 90 440 (142) 388
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Other expense (2) (14) - (16)
Interest expense (137) (1) (179) C-2 (317)
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Total other expense and
interest expense (139) (15) (179) (333)
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Income (loss) before income taxes (49) 425 (321) 55
Income tax expense - 94 - 94
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Net income (loss) (49) 331 (321) (39)
Minority interest in net income of
consolidated subsidiary - 35 - 35
Preferred stock dividend requirements 44 - - 44
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Net income (loss) applicable to
common shareholders $ (93) $ 296 $ (321) $ (118)
=====================================================================
Earnings per share:
Net loss per share - basic and
diluted $ (0.03) $ (0.03)
============ ============
Weighted average number of common
shares outstanding 3,274,475 3,704,475
============ ============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<Page>
DIGITAL RECORDERS, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(Amounts in Thousands Except Share and Per Share Information)
(Unaudited)
<Table>
<Caption>
PRO FORMA PRO FORMA
DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED
---------------------------------------------------------------------
Net sales $ 29,886 $ 12,438 $ (716) C3 $ 41,608
Cost of sales 18,980 7,413 (562) C3 25,831
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Gross profit 10,906 5,025 (154) 15,777
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Operating expenses:
Selling, general and administrative 8,378 4,121 222 C1, C3 12,721
Research and development 2,295 744 - 3,039
Other - 16 - 16
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Total operating expenses 10,673 4,881 222 15,776
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Operating income (loss) 233 144 (376) 1
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Other expense (2) 24 - 22
Interest expense (510) (47) (576) C2 (1,133)
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Total other expense and
interest expense (512) (23) (576) (1,111)
---------------------------------------------------------------------
Income (loss) before income taxes (279) 121 (952) (1,110)
Income tax expense - 54 56 C3 110
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Net income (loss) (279) 67 (1,008) (1,220)
Minority interest in net income of
consolidated subsidiary - 88 - 88
Preferred stock dividend requirements 177 - - 177
---------------------------------------------------------------------
Net income (loss) applicable
to common shareholders $ (456) $ (21) $ (1,008) $ (1,485)
=====================================================================
Earnings per share:
Net loss per share - basic
and diluted $ (0.14) $ (0.40)
============ ============
Weighted average number of
common shares outstanding 3,274,475 3,704,475
============ ============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<Page>
DIGITAL RECORDERS, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Note A--Acquisition:
On June 28, 2001, the Company and its wholly owned subsidiary, DRI Europa
AB ("DRI Europa"), acquired all of the outstanding stock of Mobitec Holding
AB ("Mobitec"), a Swedish manufacturer. The acquisition of the Mobitec
shares 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 the Company and DRI Europa, as the purchasers, and the
individual Mobitec shareholders, as the sellers.
The purchase price for the Mobitec shares consisted of a combination of
cash, notes, stock and warrants to purchase stock. The total purchase
price, including acquisition costs, was $8,458,183, consisting of
(i) $5,368,958 in cash, (ii) promissory notes issued by DRI Europa to the
sellers aggregating $2,111,325 (iii) 430,000 restricted shares of the
Company's common stock (valued at $915,900 or $2.13 per share) issued to
two of the sellers, and (iv) warrants to purchase in the aggregate of
100,000 shares of the Company's common stock at an exercise price of
$4.00 per share for a period of five years (valued at a total of $62,000)
issued to one of the sellers. The excess of the total acquisition cost
over the fair value of the net assets acquired of $2,559,000 will be
amortized over 15 years by the straight-line method.
Note B--Pro Forma Adjustments - Balance Sheet:
(1) Represents the cash received from (i) the issuance of $3,000,000 of
convertible debentures which are convertible to up to 1,500,000 shares
of the Company's common stock, which funds will be used to fund part
of the Stock Purchase Agreement, and (ii) the borrowing of $2,020,629
from Svenska Handelsbaken AB, less (i) the cash consideration of
$4,375,140 paid as part of the Acquisition and (ii) $993,818 in
professional fees and expenses (less $348,329 accrued) related to the
Acquisition.
(2) Represents the fair value of goodwill and intangible assets (customer
lists, product designs and non-compete agreements) acquired and
recorded in connection with the Acquisition and the elimination of
Mobitec's stockholders' equity. The total purchase price has been
allocated, on a preliminary basis, to goodwill and intangible assets
as follows:
<Table>
Goodwill $2,559,000
==========
Intangible assets:
Customer lists $2,900,000
Product designs 1,500,000
Non-compete agreements 100,000
----------
$4,500,000
==========
</Table>
(3) Represents the borrowings incurred related to the financing of the
Acquisition of (i) $2,820,000 of convertible debentures which are
convertible into up to 1,500,000 shares of the Company's common stock,
and (ii) $2,020,629 in a term loan from Svenska Handelsbaken AB, and
(iii) $2,111,325 in seller financed debt issued to the Bodin Sellers.
All borrowings are reflected as long-term obligations except for
$404,126 of the term loan which is due within one year.
<Page>
DIGITAL RECORDERS, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(4) Represents the issuance of 430,000 Restricted Shares of the Company's
common stock as part of the consideration for the Acquisition using a
fair market value of $2.13, the value as of the date of the acquisition
and the issuance of 100,000 warrants valued at $62,000. Also represents
an allocation to additional paid-in capital of $180,000, the value of
the 200,000 warrants attached to the convertible debentures.
Note C--Pro Forma Adjustments - Statements of Operations:
(1) Represents amortization expense of $567,000 of recorded goodwill and
intangible assets over the following estimated lives:
<Table>
<Caption>
Years
-----
Goodwill 15
Customer lists 15
Product designs 5-10
Non-compete agreements 3
</Table>
(2) Represents the interest expense for the year ended December 31, 2000
and the three months ended March 31, 2001 associated with the issuance
of the convertible debentures of $2,820,000 (8%), the seller financed
notes of $2,111,325 (9%) and the borrowings in connection with the
Svenska Handelsbaken AB term loan of $2,020,629 (5.35%). Also
represents the interest expense for the year ended December 31, 2000
and the three months ended March 31, 2001 associated with the
amortization of the $180,000 amount of the discounted convertible
debentures.
(3) Represents the removal of the income and expenses ($345,000) of
Mobitec Klimat AB, a subsidiary sold on January 1, 2001, which is not
part of the Acquisition. No adjustment is required for the statements
of operations for the three months ended March 31, 2001.