Exhibit 10.5

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“ACT”), OR APPLICABLE STATE SECURITIES LAWS (“STATE ACTS”), AND SHALL
NOT BE SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED, UNLESS SUCH TRANSFER IS
MADE IN COMPLIANCE WITH THE ACT AND THE STATE ACTS.

STOCK PURCHASE WARRANT

     This Stock Purchase Warrant (this “Warrant”), dated June 23, 2005, is
issued to JOHN D. HIGGINS (the “Holder”), by DIGITAL RECORDERS, INC., a North
Carolina corporation (the “Company”).

     1. Purchase of Shares. Subject to the terms and conditions hereinafter set
forth, the Holder is entitled, upon surrender of this Warrant at the principal
office of the Company (or at such other place as the Company shall notify the
Holder hereof in writing), to purchase from the Company 35,714 fully paid and
non-assessable shares of Common Stock, $.10 par value (the “Common Stock”), of
the Company (as adjusted pursuant to Section 7 hereof, the “Shares”) for the
purchase price specified in Section 2 below.

     2. Purchase Price. The purchase price for the Shares is $2.21 per share.
Such price shall be subject to adjustment pursuant to Section 7 hereof (such
price, as adjusted from time to time, is herein referred to as the “Warrant
Price”).

     3. Exercise Period. This Warrant is exercisable in whole or in part at any
time from the date hereof through June 22, 2010.

     4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, but in increments of no less than 10,000 shares, the purchase
rights evidenced hereby. Such exercise shall be effected by tender of a duly
executed copy of the form of Exercise Notice attached hereto, to the Secretary
of the Company at its principal offices, and the payment to the Company of an
amount equal to the aggregate purchase price for the number of Shares being
purchased unless done by cashless exercise.

     5. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.

     6. Reservation of Shares. The Company covenants that it will at all times
keep available such number of authorized shares of its Common Stock, free from
all preemptive rights with respect thereto, which will be sufficient to permit
the exercise of this Warrant for the full number of Shares specified herein. The
Company further covenants that such Shares, when issued pursuant to the exercise
of this Warrant, will be duly and validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issuance thereof.

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     7. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon exercise of this Warrant and the Warrant Price shall
be subject to adjustment from time to time as follows:

          (a) Stock Dividends, Subdivisions, Combinations and Other Issuances.
If the Company shall at any time prior to the expiration of this Warrant
subdivide its Common Stock, by stock split or otherwise, combine its Common
Stock or issue additional shares of its Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend and proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the Warrant Price
payable per Share, but the aggregate Warrant Price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective or as of
the record date of such dividend, or, in the event that no record date is fixed,
upon the making of such dividend.

          (b) Reclassification, Reorganization, Merger, Sale or Consolidation.
In the event of any reclassification, capital reorganization or other change in
the Common Stock of the Company (other than as a result of a subdivision,
combination or stock dividend provided for in Section 7(a) above) or in the
event of a consolidation or merger of the Company with or into, or the sale of
all or substantially all of the properties and assets of the Company to, any
person, and in connection therewith consideration is payable to holders of
Common Stock in cash, securities or other property, then as a condition of such
reclassification, reorganization or change, consolidation, merger or sale,
lawful provision shall be made, and duly executed documents evidencing the same
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant immediately prior to such
event, the kind and amount of cash, securities or other property receivable in
connection with such reclassification, reorganization or change, consolidation,
merger or sale, by a holder of the same number of shares of Common Stock as were
purchasable upon exercise hereof by the Holder immediately prior to such
reclassification, reorganization or change, consolidation, merger or sale. In
any such case, appropriate provisions shall be made with respect to the rights
and interest of the Holder so that the provisions hereof shall thereafter be
applicable with respect to any cash, securities or property deliverable upon
exercise hereof. Notwithstanding the foregoing, (i) if the Company merges or
consolidates with, or sells all or substantially all of its property and assets
to, any other person, and consideration is payable to holders of Common Stock in
exchange for their Common Stock in connection with such merger, consolidation or
sale which consists solely of cash, or (ii) in the event of the dissolution,
liquidation or winding up of the Company, then the Holder shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Common Stock as if this Warrant had been exercised immediately prior to such
event, less the Warrant Price. Upon receipt of such payment, if any, the rights
of the Holder shall terminate and cease, and this Warrant shall expire. In case
of any such merger, consolidation or sale of assets, the surviving or acquiring
person and, in the event of any dissolution, liquidation or winding up of the
Company, the Company shall promptly, after receipt of this surrendered Warrant,
make payment by delivering a check in such amount as is appropriate (or, in the
case of consideration

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other than cash, such other consideration as is appropriate) to such person as
it may be directed in writing by the Holder surrendering this Warrant.

          (c) Certain Distributions. In case the Company shall fix a record date
for the making of a dividend or distribution of cash, securities or property to
all holders of Common Stock (excluding any dividends or distributions referred
to in Section 7(a) or 7(b) above), the number of Shares purchasable upon an
exercise of this Warrant after such record date shall be adjusted to equal the
product obtained by multiplying the number of Shares purchasable upon an
exercise of this Warrant immediately prior to such record date by a fraction,
the numerator of which shall be the Warrant Price immediately prior to such
distribution, and the denominator of which shall be the Warrant Price
immediately prior to such distribution, less the fair market value per Share, as
reasonably determined by the Holder, of the cash, securities or property so
distributed. Such adjustment shall be made successively whenever any such
distribution is made and shall become effective on the effective date of
distribution.

     8. Pre-Exercise Rights. Prior to exercise of this Warrant, the Holder shall
not be entitled to any rights of a shareholder with respect to the Shares other
than as set forth herein, including without limitation, the right to vote such
Shares, receive preemptive rights or be notified of shareholder meetings, and
the Holder shall not be entitled to any notice or other communication concerning
the business or affairs of the Company.

     9. Registration Rights. The Shares of Common Stock issuable upon exercise
of this Warrant shall be subject to the registration rights set forth in the
Registration Rights Agreement of even date herewith by and between the Holder
and the Company (the “Registration Rights Agreement”), and the Holder shall be
entitled to all rights and benefits thereof.

     10. Non-Cash Exercise. The rights represented by this Warrant may be
exercised by a written notice of exercise in the form attached hereto specifying
that the holder of this Warrant wishes to convert all or any portion of this
Warrant (the “Conversion Right”) into a number of Shares equal to the quotient
obtained by dividing (x) the current market value of the Warrant Shares subject
to the portion of this Warrant being exercised (determined by subtracting the
aggregate Warrant Exercise Price for all such Warrant Shares in effect
immediately prior to the exercise of the Conversion Right from the aggregate
current or closing market price of such Shares issuable upon exercise of such
portion of this Warrant immediately prior to the exercise of the Conversion
Right) by (y) the current or closing market price (as defined below) of one
share of Common Stock immediately prior to the exercise of the Conversion Right.
For the purpose of any computation under this Section 10, the current or closing
market price per share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for five (5) consecutive trading days
commencing ten (10) trading days before the date of such computation. The
closing price for each day shall be the last sale price for such day, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NASDAQ National
Market (or if the Common Stock is not listed on the NASDAQ, then on the
principal United States national securities exchange on which the Common Stock
is listed or quoted. If the Common Stock is not listed or quoted on any United
States national securities exchange, then the current or closing market price
per share of Common Stock shall be determined by the Board of Directors of
Company in good faith This provision shall only apply if legally available to
Holder at the time of any

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exercise; otherwise, it shall be deemed null and void if prohibited under the
then prevailing statutes, rules and regulations.

     11. Successors and Assigns. The terms and provisions of this Warrant shall
inure to the benefit of, and be binding upon, the Company and the Holder and
their respective successors and assigns, provided that neither party may assign
its rights or obligations hereunder with the prior written consent of the other
party.

     12. Governing Law. This Warrant shall be governed by the laws of the State
of North Carolina, excluding the conflicts of laws provisions thereof.

            DIGITAL RECORDERS, INC.
      By:   /s/ David L. Turney         David L. Turney        Chairman, Chief
Executive Officer and President   

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EXERCISE NOTICE

Dated                     , ____

     The undersigned hereby irrevocably elects to exercise the Stock Purchase
Warrant, dated June 23, 2005, issued by Digital Recorders, Inc., a North
Carolina corporation (the “Company”) to the undersigned to the extent of
purchasing                      shares of Common Stock and hereby makes payment
of $                     in payment of the aggregate Warrant Price of such
shares pursuant hereto in cash or elects to purchase                      shares
of Common Stock in Company pursuant to non-cash conversion of the Warrant as
provided in Section 10 of the Warrant (if legally available).

     Please issue the shares as to which this Warrant is exercised in accordance
with the instructions given below.

By:                                                            

INSTRUCTIONS FOR REGISTRATION OF SHARES

Register Shares in name of:
                                                                                                                                                     

Address:
                                                                                                                                                                                  

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