SOURCE: ATSI Communications

March 20, 2007 08:30 ET

ATSI Communications Announces 140% Revenue Increase Results in Record - Earnings per Share Milestone Achieved

SAN ANTONIO, TX -- (MARKET WIRE) -- March 20, 2007 -- ATSI Communications, Inc. (OTCBB: ATSX) announced today that the Company's revenues for its 2nd fiscal quarter ended January 31, 2007 reached $7,073,000, a 140% improvement over revenues of $2,947,000 for the corresponding quarter ended January 31, 2006. The significant improvement in revenues resulted in the Company's 10th consecutive quarter of record revenues, a record gross profit of $564,000, and 3rd consecutive quarter of positive cash flow from operations. Due to the increase in revenues and continued operating efficiencies, net income for the three months ended January 31, 2007 was $230,000 or $0.01 basic earnings per share vs. a net loss of $222,000 or ($0.02) basic loss per share for the three months ended January 31, 2006.

In addition to ATSI's revenue growth and net earnings, recent achievements and highlights for the quarter include:

--  217% improvement in gross profit for the three months ended January
    31, 2007 vs. the three months ended January 31, 2006 ($564,000 vs. $178,000
    respectively).
--  $168,000 in positive cash flow from operations.
--  The Company processed a record volume of 115 million VoIP minutes of
    use ("MOU") during the quarter through its NexTone powered VoIP network.
    
Arthur L. Smith, CEO of ATSI, stated, "The Company has achieved a key metric in its development by producing bottom line profits from recurring operations for the first time. Profitability, combined with its consistent production of positive cash flow from operations, positions ATSI to finance its growth and strategic opportunities that meet the Company's future goals and objectives." Mr. Smith added, "Upon completing a successful 2nd quarter, management promptly initiated activities in the 3rd quarter to support continued growth, improve the Company's balance sheet, and increase cash reserves. We look forward to communicating the result of these initiatives in the near future."

Adjusted for non-cash items, net income for the three months ended January 31, 2007 was $168,000 vs. a net loss before non-cash items of $35,000 for the three months ended January 31, 2006. Non-cash items include long-term incentive compensation for employees and directors that reflects the Company's adoption of SFAS 123R accounting for the amortization expense of stock option grants. Additional non-cash items incurred during the quarter include interest, depreciation, amortization, and preferred dividend expense.

Net income before non-cash items is not a term defined by generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measurements used by other companies. Such non-GAAP measures should be considered in addition to, and not as a substitute for, performance measures calculated in accordance with GAAP. The accompanying table includes a detailed reconciliation of net loss reported in accordance with GAAP to net income before non-cash items.

ATSI Communications, Inc. operates through its two wholly owned subsidiaries, Digerati Networks, Inc. and Telefamilia Communications, Inc. Digerati Networks, Inc. is a premier global VoIP carrier serving rapidly expanding markets in Asia, Europe, the Middle East, and Latin America, with an emphasis on Mexico. Through Digerati's partnerships with established foreign carriers and network operators, interconnection and service agreements, and a NexTone powered VoIP network, ATSI believes it has clear advantages over its competition. Telefamilia Communications provides specialized retail communication services that includes VoIP services to the high-growth Hispanic market in the United States. ATSI also owns a minority interest of a subsidiary in Mexico, ATSI Comunicaciones, S.A. de C.V., which operates under a 30-year government issued telecommunications license.

Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have identified forward-looking statements by using words such as "expect," "believe," "should," "may," "intend," and "anticipate" or words of similar import. Those statements include, but may not be limited to, all statements regarding our management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Although we believe our expectations are reasonable, our operations involve a number of risks and uncertainties, and these statements may turn out not to be true. These risks and uncertainties include the assumption that we will continue as a going business; our inability to predict or anticipate changes in regulations or the actions of domestic and foreign governments; and the continued availability of funds in amounts and on acceptable terms. More detailed information about ATSI Communications, Inc. is available in the Company's public filings with the Securities and Exchange Commission. We believe that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.

                ATSI COMMUNICATIONS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
            (In thousands, except share and per share amounts)
                                (Unaudited)

                                                   Three months ended
                                                        January 31,
                                                    2007          2006
                                                ------------  ------------
OPERATING REVENUES:
  Carrier services                              $      7,041  $      2,913
  Communication services                                  27            29
  Network services                                         5             5
                                                ------------  ------------
    Total operating revenues                           7,073         2,947
                                                ------------  ------------

OPERATING EXPENSES:
Cost of services (exclusive of depreciation and
 amortization, shown below)                            6,509         2,769
  Selling, general and administrative
   expense (exclusive of legal and
   professional fees)                                    380           224
  Legal and professional fees                             59            55
  Bad debt expense                                        25             -
  Depreciation and amortization expense                   21            26
                                                ------------  ------------
    Total operating expenses                           6,994         3,074
                                                ------------  ------------

OPERATING INCOME (LOSS)                                   79          (127)
                                                ------------  ------------

OTHER INCOME (EXPENSE):
  Loss on derivative instrument liabilities                -           (69)
  Debt forgiveness income                                  -            38
  Interest expense                                       (41)          (28)
                                                ------------  ------------
    Total other income (expense), net                    (41)          (59)
                                                ------------  ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                  38          (186)
                                                ------------  ------------

DISCONTINUED OPERATIONS
  Gain on disposal of discontinued
   operations                                              -             -
                                                ------------  ------------
INCOME FROM DISCONTINUED OPERATIONS                        -             -
                                                ------------  ------------

NET INCOME (LOSS)                               $         38  $       (186)
LESS: PREFERRED DIVIDEND                                 (19)          (36)
ADD: REVERSAL OF PREVIOUSLY RECORDED PREFERRED
 DIVIDEND                                                211             -
                                                ------------  ------------

NET INCOME (LOSS) TO COMMON  STOCKHOLDERS       $        230  $       (222)
                                                ============  ============

BASIC INCOME (LOSS) PER SHARE:
  From continuing operations                    $       0.01  $      (0.02)
  From discontinued operations                             -             -
                                                ------------  ------------
  Total                                         $       0.01  $      (0.02)
                                                ============  ============

DILUTED INCOME (LOSS) PER SHARE
  From continuing operations                    $       0.01  $      (0.02)
  From discontinued operations                             -             -
                                                ------------  ------------
  Total                                         $       0.01  $      (0.02)
                                                ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC                                             19,962,710    12,927,793
DILUTED                                           32,420,096    12,927,793

NET INCOME (LOSS) TO COMMON STOCKHOLDERS:       $        230  $       (222)
                                                ------------  ------------
EXCLUDING NON-CASH ITEMS:
ADD:
  Non-cash issuance of common stock  and
   warrants for services                                  13            66
  Non-cash stock-based compensation,
   employees                                              55             -
  Depreciation and amortization                           21            26
  Loss on derivative instrument liabilities                -            69
  Interest expense                                        41            28
MINUS:
  Debt forgiveness income                                  -            38
  Gain on disposal of discontinued
   operations                                              -             -
  Preferred dividend                                     192           (36)

NET INCOME (LOSS) TO COMMON STOCKHOLDERS:
                                                ------------  ------------
EXCLUDING NON-CASH ITEMS:                       $        168  $        (35)
                                                ------------  ------------

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