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) December 17, 2008

ATSI Communications, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada

(State or Other Jurisdiction of Incorporation

001-15687 (Commission File Number)	74-2849995 (I.R.S. Employer Identification No.)
3201 Cherry Ridge Building C, Suite 300 San Antonio, Texas (Address of Principal Executive Offices)	78230 (Zip Code)

(210) 614-7240

(Registrant’s Telephone Number, Including Area Code)

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:

o Written communications pursuant to Rule 425 under the Securities Act.

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Item 2.02. Results of Operations and Financial Condition.

On Tuesday, December 16, 2008, ATSI Communications, Inc. (the "Registrant") issued a press release regarding its results of operations for the quarter ending October 31, 2008. A copy of this press release is being furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, is furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d)     Exhibits.

Exhibit Number	Description
Exhibit 99.1	Press Release, dated December 16, 2008

SIGNATURES

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

ATSI Communications, Inc. Dated: December 17, 2008
By:	/s/ Antonio Estrada, Jr.
	Antonio Estrada, Jr.
	Sr. VP of Finance & Corporate Controller

EX-99.1

	NEWS RELEASE
	Contact:	Jack Eversull
		The Eversull Group
		972-378-7917
		972-378-7981 (fax)
	E-mail:	jack@theeversullgroup.com
	Web Site:	www.atsi.net

ATSI Reports 1st Quarter Results

- Reports 8th Consecutive Quarter of Net Earnings -

San Antonio, Texas – December 16, 2008 – ATSI Communications, Inc. (OTCBB:ATSX) today announced financial results for the first fiscal quarter ended October 31, 2008.

First quarter financial highlights include:

- Increase in gross margin percentage to 8.0% for the quarter ended October 31, 2008 vs. 6.8% for the quarter ended October 31, 2007.

- 10th consecutive quarter of positive cash flow from operations

- 8th consecutive quarter of positive earnings per share

- 47% Increase in available cash to $1,966,000 as of October 31, 2008 when compared to the year ended July 31, 2008.

- 144% or $613,000 Improvement in working capital as of October 31, 2008 when compared to the year ended July 31, 2008.

- 50% increase in stockholders' equity to $591,000 as of October 31, 2008 when compared to the year ended July 31, 2008.  

Arthur Smith, Chief Executive Officer for ATSI Communications, commented on the results, “We are pleased with the significant improvements made to our balance sheet during the quarter.  Although our business has traditionally been seasonably slow during this time of the year, the global economic conditions have increased that impact.  We believe the current state of the U.S economy has also affected the immigrant community, thus causing declines in international voice communications from this important source of global voice traffic.”

Mr. Smith added, “Operators in our sector are not immune to global market forces, but we do believe that our already low cost of operations gives us a competitive advantage as other companies and carriers seek to reduce expenses by turning to low cost solutions for their global communication needs.  We are operationally and financially prepared to weather the current recession and recently took steps to control expenses by reducing headcount by 25%, and analyzing all fixed costs.”

Total revenues were $7.1 million compared to $9.4 million in the first quarter of FY2008.  Gross profit was $570,000 during the quarter ended October 31, 2008, compared to $642,000 for the same period last year. Net income to common stockholders' for the quarter ended October 31, 2008 was $7,000 vs. net income to common stockholders' of $35,000 for the quarter ended October 31, 2007. Non-GAAP net income for the quarter ended October 31, 2008 was $32,000 vs. Non-GAAP net income of $185,000 for the quarter ended October 31, 2007. 

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principals, or GAAP, ATSI uses non-GAAP measures of operating income (loss), net income (loss) and income (loss) per share, which are adjustments from results based on GAAP to exclude non-cash expenses, including non-cash stock-based compensation in accordance with SFAS 123R. ATSI’s management believes the non-GAAP financial information provided in this release is useful to investors’ understanding and assessment of ATSI’s on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such deemed it important to provide all this information to investors.

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 loss before non-cash items.

ATSI Communications, Inc. operates through its wholly owned subsidiary, Digerati Networks, Inc.  Digerati Networks 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 NextPoint powered VoIP network, ATSI believes it has clear advantages over its competition.  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.

The information in this news release includes certain forward-looking statements that are based upon management’s expectations and assumptions about certain risks and uncertainties that can affect future events.  Although management believes these assumptions and expectations to be reasonable on the date of this news release, these risks and uncertainties may cause actual events to differ material from managements those contained in this news release.  The risks and uncertainties include, but are not limited to, continuing as a going concern, availability and cost of our present vendors and suppliers, and absence of any change in government regulations or other costs associated with data transmission over the Internet or termination of transmissions in foreign countries.

ATSI COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three months ended October 31,
	2008			2007
OPERATING REVENUES:
VoIP services	$	7,136		$	9,427
Total operating revenues		7,136			9,427
OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization, shown below)		6,566			8,785
Selling, general and administrative expense (exclusive of legal and professional fees)		533			823
Legal and professional fees		67			89
Bad debt expense (recovery)		(20	)		-
Depreciation and amortization expense		43			40
Total operating expenses		7,189			9,737
OPERATING LOSS		(53	)		(310	)
OTHER INCOME (EXPENSE):
Gain on early extinguishment of debt		108			41
Investment loss		(14	)		-
Interest income (expense)		(34	)		(24	)
Total other income (expense), net		60			17
NET INCOME (LOSS)		7			(293	)
LESS: PREFERRED DIVIDEND		-			(12	)
ADD: REVERSAL OF PREVIOUSLY RECORDED PREFERRED DIVIDEND		-			340
NET INCOME TO COMMON  STOCKHOLDERS	$	7		$	35
BASIC INCOME PER SHARE TO COMMON STOCKHOLDERS	$	0.00		$	0.00
DILUTED INCOME PER SHARE TO COMMON STOCKHOLDERS	$	0.00		$	0.00
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		39,677,598			38,792,388
DILUTED COMMON SHARES OUTSTANDING		40,265,098			38,796,275

Unaudited
NET INCOME TO COMMON STOCKHOLDERS, as reported:	$	7		$	35
EXCLUDING NON-CASH ITEMS:
ADD:
Non-cash issuance of common stock  and warrants for services		-			15
Non-cash stock-based compensation, employees		62			440
Bad debt expense (recovery)		(20	)		-
Depreciation and amortization		43			40
Investment loss		14			-
Interest expense		34			24
MINUS:
Gain on early extinguishment of debt		108			41
Preferred dividend		-			328
NET INCOME TO COMMON STOCKHOLDERS
EXCLUDING NON-CASH ITEMS:	$	32		$	185