Exhibit 99.1

    Digital Recorders, Inc. Reports Second Quarter 2004 Preliminary Results

     DALLAS--(BUSINESS WIRE)--July 21, 2004--

        FY2004 Six Months Revenue Up Approximately 2 Percent and Quarter
                                 Down 6 Percent
                      Management Expects to Report a Profit

     Digital Recorders, Inc. (DRI) (Nasdaq:TBUS), a market leader in transit,
transportation, and law enforcement digital communications and audio enhancement
systems, announced today that it expects to report second quarter 2004 sales of
approximately $11.7 million, or a decrease of about 6 percent over same-period
results a year ago; for the first six months of fiscal year 2004, revenue is up
approximately 2 percent.
     "Although our consolidated operations experienced a decrease in revenue for
second quarter 2004, we made gains in important markets including Germany and
Australia, as well as in the automatic vehicle location sector of the U.S.
market. The revenue decrease is substantially attributable to order timing. For
the same quarter last year, we reported revenue of $12.52 million with a net
income of $215,827. We expect to report a profit for second quarter 2004
inclusive of financing-related entries," David L. Turney, the Company's
Chairman, Chief Executive Officer, and President, said.
     The Company will file its second quarter 2004 Form 10-Q with the Securities
and Exchange Commission on or before the Aug. 16 filing deadline for
non-accelerated filers.

     Long-Term Outlook

     "Our outlook for the coming 12 to 18 months continues to indicate organic
top-line growth and profitability for fiscal year 2004 before considering any
non-cash financing charges should any materialize related to additional
financing activities of the Company," Mr. Turney said. "The delay in federal
legislative action to pass the long-awaited reauthorization of federal
transportation funding following last year's expiration of the Transportation
Equity Act for the 21st Century (TEA-21) is troubling. The U.S. transit industry
has been operating on a series of continuing resolutions passed at the all-time
high funding levels in existence at TEA-21's expiration; that is a positive
indicator. At issue, however, are the negative effects of uncertainty that the
multiple legislative delays have on the industry and market. Both the U.S. House
of Representatives and the U.S. Senate have passed a record-high funding bill,
but the Bush Administration has so far declined to sign it into law. Related to
the security side of our Transportation Communications Segment, it appears that
additional funding to enhance transit security measures may materialize in
2005-2006 through the U.S. Department of Homeland Security."

     About the Company

     Digital Recorders, Inc. is a market leader in transit, transportation and
law enforcement or security digital communications and audio enhancement systems
using proprietary software applications. Our products improve the flow and
mobility of people through transportation infrastructure, mitigate security
threats, and enhance law enforcement agencies' surveillance capabilities. Our
transit communications products -- TwinVision(R) and Mobitec route destination
signage systems, Talking Bus(R) voice announcement systems, and Internet-based,
automatic vehicle locating and monitoring systems -- enhance public
transportation and mitigate security threats worldwide. Our electronic
surveillance tools, including microphone amplifiers and processors,
countermeasures devices, speech activity detectors, and radio/television noise
cancellers, help law-enforcement agencies around the globe detect, capture,
arrest and prosecute criminals. For more information about DRI and its
operations worldwide, go to www.digrec.com.

     Forward-Looking Statements

     This press release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. In particular, any
statement, express or implied, concerning future events or expectations is a
forward-looking statement. Use of words such as "expect," "fully expect,"
"expected," "appears," "believe," "plan," "anticipate," "would," "goal,"
"potential," "potentially," "range," "pursuit," "run rate," "stronger,"
"preliminarily," etc., is intended to identify forward-looking statements that
are subject to risks and uncertainties, including those described below. There
can be no assurance that any expectation, express or implied, in a
forward-looking statement will prove correct or that the contemplated event or
result will occur as anticipated. It is important to note the Company's actual
results could differ materially from those contemplated in the Company's
forward-looking statements as a result of various factors. Among other factors,
the Company's results will be affected, perhaps materially, by general economic
conditions, the availability of national government assistance and funding to
local transportation authorities, the adoption and implementation of regulations
concerning public transportation services, product demand and market acceptance
risks, the effect of import, licensing and trade restrictions, the results of
implementing the Company's business plan, the impact on the Company of its
relationship with its lenders, the plans and prospects of competitors, the
impact of competitive products and pricing, currency fluctuations, infringement
by third parties of the Company's trade secrets and other intellectual property,
the burdens and costs of defending against potential infringement claims against
the Company, and our ability to attract and retain personnel. Refer to the
Company's various Securities and Exchange Commission filings, such as its Forms
10-Q and 10-K, for further information about forward-looking statements and
risks associated with the Company's business.

     CONTACT: Digital Recorders, Inc., Dallas
              Veronica B. Marks, 214-378-4776
              Fax: 214-378-8437
              veronicam@digrec.com