Exhibit 99.1

                        Digital Recorders, Inc. Announces
      Preliminary Second Quarter 2005 Results; A 45.3 Percent Increase in
                 Reauthorization Legislation Funding is Expected


    DALLAS--(BUSINESS WIRE)--August 2, 2005--Digital Recorders, Inc. (DRI)
(Nasdaq:TBUS), a market leader in transportation, law enforcement, and
security digital communications systems, announced today that second
quarter 2005 sales were approximately $12.7 million, reflecting an
increase of 8.5 percent over the $11.7 million in sales posted for the
same period a year ago.
    "Our preliminary second quarter results reflect, in substantial
part, continued softness in the market created, in our opinion, by the
ongoing delay in the reauthorization of the Transportation Equity Act
for the 21st Century (TEA-21). As such, we expect to post a net loss
before considering $550,000 in non-cash charges related to the
previously announced Series G Preferred Stock financing. However, we
expect to show an improvement in operating results compared to first
quarter 2005," David L. Turney, the Company's Chairman, Chief
Executive Officer, and President, said.
    Commenting on the reauthorization of TEA-21, Mr. Turney said, "The
legislation has been passed by both the House and the Senate. While
the next step, signature by President Bush, remains to be
accomplished, we anticipate that such will occur by mid-August.
Meantime, a two-week extension of the prior TEA-21 legislation is in
effect. According to American Public Transportation Association (APTA)
President William W. Millar in a public statement made July 29, 2005,
the new legislation contains $52.6 billion of guaranteed funding for
public transportation over six years. At $52.6 billion, according to
APTA staff, that would represent a 45.3 percent increase over the
comparable funding in the prior legislation. While we do not expect
this reauthorization to materially affect our revenue in 2005, we
certainly do believe the cloud of uncertainty, which has hung over the
market for two years, now going away may lead to more robust market
opportunity."
    On or about Monday, Aug. 15, 2005, the Company plans to file with
the Securities and Exchange Commission a Form 10-Q for the period
ended June 30, 2005.

    New Transit Security Products and Services Coming Soon

    According to Mr. Turney, the Company plans to introduce additional
transit security products and services during the American Public
Transportation Association International Public Transportation Expo
(APTA Expo 2005) slated Sept. 26-28, 2005, at the Dallas Convention
Center in Dallas. "The rollout plans fall in line with management's
strategy of delivering transit products with additional security
features and increasing security-related functionality in the
Company's traditional Intelligent Transportation Systems (ITS) market
through specially designed products, services, and strategic
alliances. APTA Expo 2005 will provide an opportunity for us to
showcase our capabilities in the security market, as well as in our
core ITS served market. The new transit security products and services
are not expected to materially impact the Company's fiscal year 2005
results, but are expected to contribute to 2006 results."

    About APTA

    APTA is a nonprofit international association of more than 1,500
member organizations including public transportation systems;
planning, design, construction and finance firms; product and service
providers; academic institutions, and state associations and
departments of transportation. APTA members serve the public interest
by providing safe, efficient and economical public transportation
services and products. Over ninety percent of persons using public
transportation in the United States and Canada are served by APTA
members.
    APTA Expo 2005 is slated to take place Sept. 26-28, 2005, at the
Dallas Convention Center in Dallas. DRI's exhibit booth number is
3515. For more information about this transit industry event, refer to
www.apta.com/expo2005.

    About the Company

    Digital Recorders, Inc. is a market leader in transportation, law
enforcement, and security digital communications systems using
proprietary hardware and 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 transportation communications products
- -- TwinVision(R) and Mobitec(R) electronic destination sign systems,
Talking Bus(R) voice announcement systems, Internet-based passenger
information systems, and computer-aided dispatch/ 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 noise cancellation equipment,
help law-enforcement agencies around the globe 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, statements concerning the timing or amount of future
revenues; future product and service offerings; the ability to include
additional security features to existing products and services; the
potential benefits such security features may have for our customers;
the potential positive effect such product and service offering may
have on future revenues; the expected contribution of sales of new and
modified security related products to our profitability; statements
about the expected passage of pending federal legislation as well as
the potential beneficial effects of such legislation on the Company's
sales; statements made by APTA staff and quoted in this press release
regarding federal transportation funding and the potential effect such
funding may have on the transportation industry; as well as 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 risks and uncertainties that the assumptions
behind future revenue timing or amounts may not prove accurate over
time; risks that future product and service offerings may not be
accepted by our customers; risks that we may be unable to create
meaningful security product features in either new or existing
products; risks that pending federal legislation will not be enacted,
or enacted at a later time than anticipated, or that the beneficial
effects of the enactment of such legislation will not materialize;
risks that statements made by APTA staff and quoted in this press
release may not accurately predict future events or outcomes,
including the risk that certain predicted events may not occur or if
they do occur will not have the anticipated result on the
transportation industry; as well as other risks and uncertainties set
forth in our Annual Report on 10-K filed April 1, 2005, particularly
those identified in Risk Factors Affecting Our Business. 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.



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