**EXHIBIT
        10.20**
 **MUTUAL
        RELEASE AND TERMINATION**
 **AGREEMENT**
 
 
 THIS
        MUTUAL RELEASE AND TERMINATION AGREEMENT, by Recap Marketing and Consulting,
        LLC, Hunter M. A. Carr, and Donald W. Sapaugh (collectively “Recap”) and ATSI
        Communications, Inc., a Nevada corporation (“ATSI”), is made and entered into
        this the 1st day of June, 2005, with the following covenants, agreements,
        understandings and promises having been made by RECAP to ATSI and by ATSI
        to
        RECAP
 
 WHEREAS,
        RECAP entered into a Consulting Agreement with ATSI on October 13, 2003
        (“Consulting Agreement”), and
 
 WHEREAS,
        ATSI extended the Consulting Agreement on November 1, 2004 for a period of
        6
        months (“Extension”), and
 
 WHEREAS,
        ATSI and RECAP amended the Consulting Agreement on March 1, 2005, and
 
 WHEREAS,
        ATSI and RECAP are mutually terminating the Consulting Agreement and agree
        to
        the following:
  1.  ATSI
        shall terminate RECAP’s Agreement to provide certain consulting services
        effective August 1, 2005, and shall pay RECAP based upon the schedule attached
        hereto entitled Exhibit A.
 
 2.  RECAP
        does hereby release ATSI and all related entities and their officers, directors,
        agents, representatives, successors and assigns of and from any and all claims
        RECAP might otherwise have on account of its contract for services with ATSI.
        Further, RECAP hereby knowingly waives any claims it might have under any
        state
        or federal law or statute related to its Consulting Agreement.
 3.  ATSI
        does
        hereby release RECAP and all related representatives, successors and assigns
        of
        and from any and all claims ATSI might otherwise have on account of its
        relationship with RECAP. Further, ATSI hereby knowingly waives any claims
        it
        might have under any state or federal law or statute related to its Consulting
        Agreement.
 
 4.  The
        parties agree to treat the terms of this agreement in a confidential manner
        to
        the greatest extent legally permissible and reasonably possible. ATSI may
        disclose the terms of this agreement only to its attorney, board, or senior
        management.
 
 5.  ATSI
        and
        RECAP declares that they execute this Agreement based on their own knowledge
        and
        investigation of the facts concerning any claims that they might have, that
        this
        Release is not executed in reliance upon any statement made by any person
        or
        party hereby released, nor is it executed in reliance upon any statement
        of any
        person connected with, or represented by, any of said persons or entities
        hereby
        released.
 
 
  7.  The
        terms
        of this Agreement shall be construed under the laws of Harris County, the
        State
        of Texas.
  8. This
        Agreement contains the entire agreement between the parties hereto and the
        terms
        hereof are contractual and not merely recitals.
 
 9.  Both
        parties agree to resolve any and all disputes which may arise from this
        Agreement or any prior Agreement, via binding arbitration. Such arbitration
        may
        be initiated by either party, by providing written notice of breach or a
        dispute
        which remains unresolved for a period of at least ten (10) days.
  WHEREOF,
        the parties hereto have executed this Agreement the day and year first above
        written.
 
 **RECAP**
 **Marketing
        and Consulting, LLC, and individually**
 **Donald
        W. Sapaugh**  **and
        Hunter M. A. Carr**
 
 
 
 By:
        /S/ Donald W. Sapaugh   Date: 
        06/01/05
 Donald
        W.
        Sapaugh
 
 By:
        /S/  Hunter
        M. A.
        Carr Date:
        06/01/05
 Hunter
        M.
        A. Carr
 
 **ATSI
        Communications, Inc.**
 **A
        Nevada Corporation**
 
  By:
        /S/  Arthur
        L.
        Smith Date: 06/01/05
 Arthur L. Smith
 Its: CEO
        & President
 
  
  Exhibit
        A
 
 Settlement
        Warrant Payments
 
 
 **Donald
                  W. Sapaugh****Hunter
                  M. A. Carr****Shares
                  to****Total
                  Warrants Outstanding**
              
              **Price**
              
              **Proposal**
              
              
              
              **Shares
                  Owed**
              
              **be
                  Converted**683,500
              
              $
              0.50
              
              $
              0.25
              
              $
              170,875
              
              
              
              
              
              683,500100,000
              
              $
              0.75
              
              $
              0.20
              
              $
              20,000
              
              
              
              
              
              100,000$
              190,875**Note
                  Payable**
              
              
              
              
              
              
              $
              83,250
              
              
              361,957
              
              
              (361,957
              )**Additional
                  Cash to Company (based upon conversion)**
              
              
              
              $
              107,625**Interest
                  Payable - Warrants**
              
              
              
              
              
              
              
              
              
              
              110,000**Total
                  Shares**
              
              
              
              
              
              
              
              
              
              
              **471,957**
              
              
              **421,543**
 
 
 Total
        shares to be issued upon execution of this Agreement 471,957
 
 Total
        shares remaining to be issued upon payment of warrants above 421,543 ($107,625)
 
 
 
 
 Initials
 
 _____
        ____