EXHIBIT 10.1


              CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE



         ATSI Communications,  Inc., a Nevada corporation  ("ATSI"),  formerly a
Delaware  corporation,   and  Carlos  Kauachi  ("Kauachi")  (collectively,   the
"Parties"),  hereby enter into this Confidential Settlement Agreement and Mutual
Release (the "Settlement Agreement").

                                    RECITALS

         WHEREAS, the Parties are agreed that certain  relationships between and
among the Parties should be ended and any and all claims or liabilities  between
and among them be held for naught; and

         WHEREAS, the Parties have previously executed agreements for consulting
services; and WHEREAS, Kauachi had provided such services; and WHEREAS, ATSI
failed to pay Kauachi; and

         WHEREAS,  all Parties wish to reach a full and final  settlement of all
matters and all causes and potential  causes of action arising from any of their
relationships  with each  other,  including  any and all  disputes  or rights or
potential  rights  between or among the Parties  arising  from any  transactions
between or among them prior to the  execution  date of this  Agreement,  and now
desire to set forth their agreement in writing.

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
covenants  and  agreements  set forth  herein,  and  further  good and  valuable
consideration,  the Parties hereby agree and covenant as follows:

         1.  PAYMENT.  As  consideration  for a total of $51,034  owed up to and
including July 31, 2005,  ATSI shall deliver to Kauachi a total of 50,000 shares
of ATSI's common stock  post-split as follows:  50,000  subject to Rule 144 (the
"Payment").  This  Payment is subject to the  approval of the Board of Directors
whose approval shall be sought as soon as practicable.


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         2. RELEASE BY KAUACHI.  In consideration of the receipt of the Payment,
Kauachi,  with the intention of binding  itself,  and its  officers,  directors,
shareholder,  employees,   representatives,   attorneys-in-fact,   predecessors,
successors and assigns,  (the "Kauachi Releasing  Parties")  expressly releases,
acquits,   and  discharges   ATSI  and  its  respective   officers,   directors,
shareholders,  representatives,  attorneys,  successors,  and assigns (the "ATSI
Released  Parties")  from all claims,  demands,  causes of action and  potential
claims or causes of  action,  of  whatever  nature  that the  Kauachi  Releasing
Parties may have or claim to have against the ATSI Released Parties arising from
or  connected  with,  directly  or  indirectly,  any and all claims the  Kauachi
Releasing  Parties may have or claim to have against the ATSI  Released  Parties
accruing  before  the  execution  date  of  this  Release.  Notwithstanding  the
foregoing  paragraph,  the  ATSI  Released  Parties  are not  released  from the
obligations or indemnities set forth in this Settlement Agreement.

         2. RELEASE BY ATSI. In further  consideration  of the foregoing,  ATSI,
with the intention of binding  itself and its  respective  officers,  directors,
shareholders,  employees,  representatives,   attorneys-in-fact,   predecessors,
successors,  assigns,  and subsidiaries (the "ATSI Releasing Parties") expressly
release,   acquit,   and  discharge   Kauachi  and  its   officers,   directors,
shareholders, representatives, attorneys, successors, and assigns, (the "Kauachi
Released Parties") from all claims,  demands,  and causes of action or potential
claims and causes of action of whatever  nature that the ATSI Releasing  Parties
may have or claim to have against the Kauachi  Released  Parties arising from or
connected with, directly or indirectly,  any relationship or transaction between
or among the Parties,  as well as any and all other or potential claims that the
ATSI  Releasing  Parties may have or claim to have against the Kauachi  Released
Parties  accruing  before  the  execution  date  of this  Settlement  Agreement.
Notwithstanding  the foregoing  paragraph,  the Kauachi Released Parties are not
released from the obligations of this Settlement Agreement.

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         3. NO  ADMISSION OF  LIABILITY.  This  settlement  and the Payment made
hereunder do not  constitute an admission of liability by any Party hereto,  and
liability is expressly denied by all Parties.

         4.  CONFIDENTIALITY.  The Parties agree that they will not disclose the
terms of this  Settlement  Agreement,  unless  necessary to enforce the terms of
this  Settlement  Agreement  or after  receipt  of  judicial  process  or lawful
discovery  procedures.  In the event  that any Party is  served  with  notice to
disclose such  information by subpoena or otherwise,  that Party agrees promptly
to notify the other  Parties in writing of such notice.  The Party or Parties so
notified  in writing  shall  thereafter  undertake  the cost and  obligation  to
maintain the propriety and confidentiality of the terms of such information.

         5. NON-DISPARAGEMENT. The Parties agree to use reasonable effort not to
disparage  or  interfere  with  any  other  Party's  agreements  or  prospective
agreements with any third party. 6. ENTIRE AGREEMENT.  This Settlement Agreement
contains  the entire  understanding  and  agreement  of the Parties  hereto with
respect to the subject matters herein, and may not be amended or modified in any
respect other than in a writing  which  specifically  refers to this  Settlement
Agreement and which is signed by all of the Parties  hereto.  7.  GOVERNING LAW.
This  Settlement  Agreement  was  negotiated  in, and shall be  governed  by and
construed  according  to, the laws of the State of Texas.  In the event that any
provision  herein is deemed not  enforceable,  the remainder of this  Settlement
Agreement  will  remain  unaffected.  Venue  for  any  action  relating  to  the
provisions of this Agreement shall be in Bexar County, Texas.


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         8. NO ASSIGNMENT.  By signing this  Settlement  Agreement,  each of the
Parties  represents  and warrants that it has not assigned or subrogated  any of
its claims or potential claims, in whole or in part, to any third party.

         9.  MODIFICATION AND ATTORNEY'S  FEES. This Settlement  Agreement shall
not be suspended,  amended, or modified in any manner except by an instrument in
writing signed by all Parties to be bound. Should it become necessary to enforce
this Settlement Agreement, or any portion of it, or to declare the effect of any
provision of this Settlement  Agreement,  the prevailing Party shall be entitled
to recover costs incurred including reasonable attorney's fees.

         10. INFORMED  CONSENT.  The Parties  acknowledge that they have had the
opportunity to consult with their respective attorneys regarding the meaning and
effect of this Settlement  Agreement,  and that none of the Parties has made any
representations,  written or oral,  upon which another Party relies in executing
this Settlement  Agreement.  11. COUNTERPARTS.  This Settlement Agreement may be
executed  in  multiple   counterparts.   A  set  of  counterpart   copies  which
collectively  contains the  signature  and  acknowledgment  of all Parties shall
constitute an original.

         EXECUTED by an authorized representative of ATSI Communications,  Inc.,
a Nevada corporation, on December 2, 2005.

ATSI COMMUNICATIONS, INC.


By:  /S/ Arthur L. Smith
     ---------------------------------------

Its: President & CEO
     ---------------------------------------
Date: December 2, 2005


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         EXECUTED by Carlos Kauachi on the date written below.

CARLOS KAUACHI


By: /s/ Carlos Kauachi
    -----------------------------------------
Its:
    -----------------------------------------
Date: December 2, 2005
      ---------------------------------------



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