8-K

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        Date of Report (Date of Earliest Event Reported): March 17, 2006

                                -----------------

                             Digital Recorders, Inc.
             (Exact Name of Registrant as Specified in Its Charter)



       North Carolina                   1-13408                 56-1362926
(State or Other Jurisdiction          (Commission              (IRS Employer
      of Incorporation)               File Number)           Identification No.)


                5949 Sherry Lane, Suite 1050, Dallas, Texas 75225
               (Address of Principle Executive Offices) (Zip Code)

        Registrant's Telephone Number, Including Area Code (214) 378-8992


         Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[_]  Written communications pursuant to Rule 425 under the Securities
     Act (17 CFR 230.425)

[_]  Soliciting material pursuant to Rule 14a-12 under the Exchange
     Act (17 CFR 240.14a-12)

[_]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[_]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))





ITEM 7.01. Regulation FD

     On March 17, 2006, Digital Recorders, Inc. (the "Company") announced in a
press release that it has entered into a new loan agreement with Laurus Master
Fund, Ltd., and reached the final stages of closing a $500,000 convertible
preferred stock private placement with a private investor.

     The Company anticipates filing a Form 8-K containing all of the necessary
disclosures with the Securities and Exchange Commission by close of business on
Tuesday, March 21, 2006.

     A copy of the Company's press release is attached hereto as Exhibit 99.1.
This Form 8-K and the attached exhibit are furnished to, but not filed with, the
Securities and Exchange Commission.


ITEM 9.01. Financial Statements and Exhibits

(c)  Exhibits.
     99.1   Press release dated March 17, 2006.





Signature(s)

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                               DIGITAL RECORDERS, INC.

Date: March 17, 2006                           By: /s/ DAVID N. PILOTTE
                                                  ------------------------------
                                                   David N. Pilotte
                                                   Chief Financial Officer





INDEX TO EXHIBITS

EXHIBIT
NUMBER     DESCRIPTION
- ------     -----------

  99.1     Press release dated March 17, 2006.

EX-99.1

                                                                    Exhibit 99.1

                   Digital Recorders, Inc. Announces
New Loan Agreement in Place; CEO Says New Convertible Preferred Stock
                    Private Placement in the Works

     DALLAS--(BUSINESS WIRE)--March 17, 2006--Digital Recorders, Inc.
(DRI) (Nasdaq:TBUS), a technology leader in transit, transportation,
law enforcement, and security digital communications systems,
announced today that it has entered into a new loan agreement with
Laurus Master Fund, Ltd. (Laurus), and reached the final stages of
closing a $500,000 convertible preferred stock private placement with
a private investor.
   "This new relationship with Laurus is an important step for us in
our focus on the coming two years where, as we have already noted, we
expect significant growth. We are excited about working with Laurus as
they have already demonstrated a keen understanding of companies like
DRI and potentially can be of material benefit and assistance to the
Company's strategic plans. With regard to the forthcoming private
placement, these efforts will serve to support and amplify our profit
improvement focus as we further leverage economies of scale in our
long-term growth plans," David L. Turney, the Company's Chairman,
Chief Executive Officer, and President, said.

   NEW LOAN AGREEMENT

   The Company entered into a loan agreement with Laurus on March 16,
2006, thus replacing its former lender, LaSalle Business Credit, LLC
(LaSalle). The new $6 million, two-year working capital facility has
no financial covenants, and borrowing availability is based upon
accounts receivable and inventory. The interest rate is WSJ Prime plus
1.75 percent subject to an 8 percent floor. Additional security under
the credit facility is a pledge of all tangible and intangible U.S.
assets of the Company. The Company also granted Laurus warrants to
acquire, at any time in the future, 550,000 shares of its restricted
common stock at $0.10 per share, which are subject to registration
within 120 days.
   Execution of the Laurus facility resulted in a total of $4.8
million in proceeds to the Company. After paying LaSalle and other
transaction-related costs, the Company netted approximately $1.2
million in additional working capital.

   NEW PRIVATE PLACEMENT

   According to Mr. Turney, the Company also is in final stages of
closing a $500,000 convertible preferred stock private placement with
an industry knowledgeable private investor. This placement is
convertible into shares of the Company's common stock at a price of
$1.60 per share, has additional warrants for 93,750 shares similarly
priced and exercisable for five years, and carries a 6 percent annual
dividend payable quarterly in cash or in kind.
   None of the warrants issued in connection with the new loan
agreement or the private placement have been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.

   ABOUT LAURUS MASTER FUND, LTD.

   Laurus is a New York-based financial institution that makes direct
investments in US listed small and micro cap companies. Its vision is
to lead the transformation of financial resources into growing
profitable businesses in the small and micro cap universe. Since
inception, Laurus has funded numerous public companies across many
different industries. For more information, please visit
www.laurusfunds.com.

   ABOUT THE COMPANY

   Digital Recorders, Inc. is a technology 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, Digital Recorders(R)
Internet-based passenger information and automatic vehicle
location/monitoring systems, and VacTell(TM) video actionable
intelligence 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 about the expected closing of a new equity
placement, expected significant growth, expected registrations
timelines and shares to be included in such, 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 equity
placement will not be completed or not be completed on the terms
expected, the risk that growth will not occur as expected or within
the time frame expected, risks that registration statements might be
delayed, 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: Veronica B. Marks
             Manager, Corporate Communications
             Digital Recorders, Inc.
             Phone: 214-378-4776
             Fax: 214-378-8437
             E-Mail: veronicam@digrec.com