Cellular Technical Services Reports 2002 First-Quarter Results.

Business Editors

SEATTLE--(BUSINESS WIRE)--May 15, 2002

Cellular Technical Services Company, Inc. (Nasdaq:CTSC) ("CTS"), a provider of products and services for the prepaid and wireless communications industries, today reported its first quarter financial results for 2002.

                     Three months ended    Three months ended
                       March 31, 2002        March 31, 2001
-------------------- ------------------    ------------------
Revenue                   $2,358                 $5,561
-------------------- ------------------    ------------------
Net Loss                  ($ 983)                 ($ 50)
-------------------- ------------------    ------------------
Net Loss Per Share        ($0.43)                ($0.02)
-------------------- ------------------    ------------------

Revenue decreased 58% to $2.4 million in the first quarter of 2002 compared to the prior year quarter. 2001 was the final year of revenue for CTS' Blackbird Platform product suite, which accounted for $1.4 million in revenue in the first quarter of 2001 compared to zero in 2002. As previously reported, our Blackbird business ended in December 2001 and we forecast no additional revenue from that segment in future periods.

CTS reported a quarterly net loss of $983,000 compared to $50,000 in the prior year period. The $0.9 million change in net loss is due to several factors: i) gross margin decreased by $1.1 million as the Blackbird business provided $1.0 million in the prior year and Isis gross margins decreased by $0.1 million; ii) as part of its adoption of a new accounting pronouncement relating to goodwill (FAS 142), the Company recorded a writedown in the first quarter of 2002 of $0.1 million in deferred purchase price goodwill related to its ISIS segment as a cumulative effect of a change in accounting principle; partially offset by iii) operating expense reductions of $0.3 million.

The Company's Isis Telecommunications, Inc. subsidiary ("Isis") provided $2.4 million in revenue during 2002 compared to $4.2 million in 2001. Today, with long-distance prices down substantially, our customers need to purchase fewer cards to get the same amount of calling time. This has impacted both Isis' top and bottom lines. We believe, however, that we have now passed the low point and have recently recorded increasing sequential monthly sales totals through our Boston and Los Angeles sales offices. If these trends continue, combined with our reduced operating expenses, Isis should be operationally profitable in the next few months.

Stephen Katz, CTS Chairman and CEO noted, "At March 31, 2002 we had $5.3 million in cash, $5.7 million of working capital and no bank debt. We have continued our strict headcount and expense controls while devoting our entire R&D and engineering resources to develop our Neumobility(TM) location based services ("LBS") platform and suite of applications.

"For the remainder of 2002, we plan that our cash burn rate will average less than $250,000 per month in support of our Neumobility development efforts. Our discussions with customers and possible industry partners about Neumobility continue to be encouraging. However, the LBS market continues to be slow to develop as implementation of the FCC's enhanced emergency 911 service initiative ("E-911") has been delayed beyond its initial October 2001 deadline as waivers have been granted by the FCC to wireless operators. As a result of this, our ability to generate revenue from this product line will be delayed until after the E-911 deployment is well underway, which we anticipate will occur in late 2002.

"However, some important developments have taken place at Neumobility in the past few weeks, serving to both legitimize our vision for CTS' future in the Telco marketplace and signaling the beginning of what we hope is broader exposure to the opening of the LBS market.

"We are in the process of planning a deployment of our services with a major U.S. carrier, currently projected to occur toward the end of Q3. Initially, our services will be made available to subscribers on a manual location input basis only. Though substantially less effective than automatic location provided directly from the carrier's network and therefore generating minimal revenues, Neumobility will be in a good position to provide subscribers with the benefits of complete LBS functionality as the carrier gradually phases in automatic location acquisition.

"Additionally, Neumobility has recently submitted responses to the RFI and RFP processes for major wireless carriers both in the US and abroad. The release of these requests from carriers signals a positive step towards the eventual deployment of LBS and speaks to the significant opportunity available for Neumobility to take advantage of this new market. Finally, in an effort to gain additional carrier exposure, we are continuing with our efforts to secure strategic partnerships with companies to enhance our overall product offerings."

The Company will hold a conference call at 4:15 p.m. Eastern time May 15, 2002 to discuss its first-quarter 2002 results. Please call 888/270-8045 to join the call. Replays will be available starting two hours after the call until May 22, 2002 at 800/642-1687, code 4219420.

Over the past 13 years, CTS has used its experience with real-time wireless call processing to create technologically advanced solutions for the wireless industry, including integrated solutions for fraud management. Today, CTS is building a more diversified organization focusing on two areas: (i) distributing a wide range of prepaid telecommunications products and (ii) developing and marketing a software platform and applications for the emerging wireless location-based services marketplace.

Special Note Regarding Forward-Looking Statements: This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results for CTS or its affiliates to differ materially from those expressed or implied in the applicable statements. These risks and uncertainties include but are not limited to: vulnerability to rapid industry change and technological obsolescence; limited customer base and reliance on a relatively small number of customers and customer contracts; dependence on a limited number of existing products and services; uncertainty of continued demand for and market penetration of its existing products and services under existing and future contracts; uncertainty in its ability to timely develop, introduce and gain acceptance of new products and services; uncertainty of the demand for and market penetration of new products and services; the possible impact of competitive products and pricing; the risk that its current and future products may contain errors or be affected by technical problems that would be difficult and costly to detect and correct; reliance on a limited number of outside vendors for key components and processes; potential difficulties in managing changing business conditions; dependence on key personnel; the availability of financing; and other risks described in CTS' filings with the Securities and Exchange Commission.

               CELLULAR TECHNICAL SERVICES COMPANY, INC.
               SELECTED CONSOLIDATED BALANCE SHEET DATA
                              (in 000's)

                          March 31, 2002  December 31, 2001
------------------------- --------------- -----------------
Cash                           $5,267          $6,353
------------------------- --------------- -----------------
Accounts Receivable, net          468             529
------------------------- --------------- -----------------
Inventories, net                  473             531
------------------------- --------------- -----------------
Total Assets                    8,862           9,990
------------------------- --------------- -----------------
Working Capital                 5,702           6,523
------------------------- --------------- -----------------
Stockholders' Equity            7,896           8,879
------------------------- --------------- -----------------


               CELLULAR TECHNICAL SERVICES COMPANY, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in 000's, except per share amounts)

                                                  Three Months Ended
                                                      March 31,
                                                 --------------------
                                                  2002          2001
                                                 -------      -------
REVENUE
  Phonecards                                     $ 2,358      $ 4,156
  Services and Systems                              --          1,405
                                                 -------      -------
Total Revenue                                      2,358        5,561

COSTS AND EXPENSES
  Cost of phonecards                               2,271        3,967
  Cost of services and systems                      --            387
  Sales and marketing                                291          406
  General and administrative                         307          442
  Research and development                           404          491
                                                 -------      -------
Total Costs and Expenses                           3,273        5,693
                                                 -------      -------
LOSS FROM OPERATIONS                                (915)        (132)

OTHER INCOME, net                                      3           24

INTEREST INCOME, net                                  29           60
                                                 -------      -------
LOSS BEFORE INCOME TAXES AND CHANGE IN
 ACCOUNTING PRINCIPLE                               (883)         (48)

INCOME TAX PROVISION                                --              2
                                                 -------      -------
LOSS BEFORE THE EFFECT OF A CHANGE IN
 ACCOUNTING PRINCIPLE                               (883)         (50)
                                                 -------      -------
CUMULATIVE EFFECT OF A CHANGE IN
 ACCOUNTING PRINCIPLE                               (100)        --
                                                 -------      -------

NET LOSS                                         $  (983)     $   (50)
                                                 =======      =======
LOSS PER SHARE:
     Basic                                       $ (0.43)     $ (0.02)
                                                 =======      =======

     Diluted                                     $ (0.43)     $ (0.02)
                                                 =======      =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
     Basic                                         2,292        2,292

     Diluted                                       2,292        2,292