Exhibit 10.1

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
DOCUMENTS  INCLUDED:
--------------------
1)   Confidential Settlement Agreement and Mutual Release, dated October 1, 2004
2)   Promissory note payable, dated October 1, 2004
3)   Lock-out Agreement, dated October 1, 2004
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

              CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE
              ----------------------------------------------------


     ATSI  Communications,  Inc.,  a  Nevada  corporation  ("ATSI"),  formerly a
Delaware  corporation,  and  Alfonso  Torres  Roqueni, an individual residing in
Mexico City, Mexico, ("Torres") (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  entered into an agreement on June 7, 2000 regarding
the  sale  by  Torres  of  the  3%  stock  and  the 48% stock as defined in such
Agreement;  and

     WHEREAS,  the  Parties  amended  such  Agreement  on  July  19,  2001;  and

     WHEREAS,  ATSI executed a Promissory Note for $357,000 on November 1, 2001;
and

     WHEREAS, ATSI has defaulted in its obligations of the Amended Agreement and
Promissory  Note;  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


                                     Page 1
<PAGE>
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  all  amounts  owed  up  to  and including
September  30,  2004  of $1,359,500 including any and all accrued interest, ATSI
shall  deliver  to  Torres  a  total  of  687,600  shares of ATSI's common stock
post-split  (the  "Payment"),  for  $859,500  and a promissory note for $500,000
payable  on  October 1, 2007.  The Shares will be considered issued at $1.25 per
share;  however,  if on the Measurement Date the price per share is below $1.15,
ATSI  shall  issue  an  additional  59,791  shares  of  ATSI's common stock; if,
however,  the  share  price  is at or above $1.15 on the Measurement Date, there
shall  be  no  additional  consideration  paid  and  the amount of shares issued
(687,600)  shall  be  considered  as  final  consideration.

Measurement  Date shall be defined as the arithmetic mean of the average closing
prices  of the Common Shares for the ten (10) trading days immediately preceding
April  1,  2005.

This Payment is subject to the approval of the Board of Directors whose approval
shall  be  sought  as  soon  as  practicable.

  2.   RELEASE  BY  TORRES.  In  consideration  of  the  receipt of the Payment,
Torres,  with  the  intention  of  binding  itself, and its officers, directors,
shareholder,  employees,  representatives,  attorneys-in-fact,  predecessors,
successors  and  assigns,  (the  "Torres 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


                                     Page 2
<PAGE>
claims or causes of action, of whatever nature that the Torres 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 Torres 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.

     3.   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 Torres and its officers, directors, shareholders,
representatives,  attorneys,  successors,  and  assigns,  (the  "Torres 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  Torres 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 Torres  Released Parties
accruing before the execution date of this Settlement Agreement. Notwithstanding
the  foregoing  paragraph, the Torres Released Parties are not released from the
obligations  of  this  Settlement  Agreement.

4.   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.

5.   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


                                     Page 3
<PAGE>
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.

6.   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.

7.   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.

8.   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.

9.   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.

10.   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.


                                     Page 4
<PAGE>
11.   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.

12.   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  the  date  written  below.


ATSI COMMUNICATIONS, INC.


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

Its: PRESIDENT AND CHIEF EXECUTIVE OFFICER
     -------------------------------------
Date:  October 1, 2004
       ---------------


     EXECUTED by Alfonso Torres Roqueni on the date written below.

ALFONSO TORRES ROQUE-I


By:    /s/ Alfonso Torres Roqueni
       --------------------------
Its:   President
       ---------
Date:  October 1, 2004
       ---------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++


                                     Page 5
<PAGE>
                                 PROMISSORY NOTE
                                 ---------------

PRINCIPAL AMOUNT: $500,000.00
DATED: OCTOBER 1, 2004

     This  Promissory  Note ("Note") is made and entered into as of this 1st day
of  October, 2004 by and between ATSI Communications, Inc., a Nevada corporation
("ATSI")  with  its  principal place of business located at 8600 Wurzbach, Suite
700W,  San  Antonio,  Texas, 78240 and Dr. Alfonso Torres Roque i, ("Lender") of
Blvd.  Miguel  Avila  Camacho No. 184, Piso 16, Col. Lomas de San Isidro, Mexico
City,  Mexico.

     For value received, ATSI promises to pay FIVE HUNDRED THOUSAND U.S. Dollars
($500,000)  to  the  order of Lender at Blvd. Miguel Avila Camacho No. 184, Piso
16,  Col.  Lomas  de  San Isidro, Mexico City, Mexico, or such other location as
Lender  may  designate  in  writing,  on  October  1,  2007.

     Interest  shall  accrue  at  6% (six percent) per annum.   Lender shall not
impose  any  penalty  for  ATSI's  pre-payment  of  this  Note.

     Upon  and  at any time after any Default (as defined below) all amounts due
under  this  Note,  at  the option of Lender and without demand, notice or legal
process  of  any  kind,  may  be  declared  and immediately shall become due and
payable.  "Default" shall mean the occurrence or existence of any one or more of
the  following  events  or conditions: (i) ATSI fails to pay when due any amount
due  under  this  Note  and fails to cure such late payment within five (5) days
following  written  receipt of notice of the late payment; or (ii) ATSI makes an
assignment for the benefit of creditors, or any proceeding is filed or commenced
by  or  against  ATSI  under any bankruptcy, reorganization, arrangement of debt
insolvency,  readjustment  of  debt or receivership law or statute, and any such
proceeding  remains  undismissed  or unstayed for a period of 30 days, or any of
the  actions  sought  in any such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, ATSI or for any substantial part of its
property)  shall  occur,  or  ATSI shall take any action to authorize any of the
actions  set  forth  above  in  this  subsection.

     ATSI  hereby  waives presentment, demand of payment, protest or notice with
respect  to  the  indebtedness  evidenced  by  this  Note  including,  without
limitation, notice that the Note or any portion thereof, is due.

     If  Lender  prevails  in  any  action to collect on or enforce this Note or
claims  arising  from  the  execution  of  this  Note,  then Lender's reasonable
attorneys'  fees  and  costs  will  also  be  payable  under  this  Note.

     Neither party may assign this Note without the prior written consent of the
other,  which  shall  not  be  unreasonably  withheld.

     This  Note  may  be  modified  only  by  a  written  document  that  refers
specifically  to  this  Note and is signed by both parties. A party's failure or
delay  in  enforcing  any  provision of this Note will not be deemed a waiver of
that  party's  rights  with  respect to that provision or any other


                                     Page 6
<PAGE>
provision of this Note. A party's waiver of any of its rights under this Note is
not a waiver of any of its other rights with respect to a prior, contemporaneous
or  future  occurrence,  whether  similar  in  nature or not. This Note shall be
binding  upon  and  inure  to  the  benefit of the successors and assigns of the
parties  hereto.

     THIS  NOTE  SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, AND LENDER
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS FOR ALL
PURPOSES. SOLE AND EXCLUSIVE VENUE FOR ANY DISPUTE OR DISAGREEMENT ARISING UNDER
OR  RELATING  TO  THIS  NOTE  SHALL  BE  IN A COURT SITTING IN BEXAR COUNTY, SAN
ANTONIO,  TEXAS.

     MADE this 1st day of October, 2004.


ATSI  COMMUNICATIONS,  INC.               ALFONSO  TORRES  ROQUE  I/GEORGE KAUSS


By:  /s/ Arthur L. Smith                  By:   /s/Alfonso Torres Roqueni
  --------------------------------           ----------------------------
       ARTHUR  L.  SMITH                        ALFONSO  TORRES  ROQUENI
       PRESIDENT  &  CEO


                                          By:   /s/  George  Kauss
                                             ----------------------------
                                                GEORGE  KAUSS

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++


                                     Page 7
<PAGE>
                               LOCK-OUT AGREEMENT

ATSI Communications, Inc.                                        October 1, 2004
8600 Wurzbach, Suite 700W
San Antonio, TX  78240

     Re:     ATSI Communications, Inc. (the "Company")

Ladies and Gentlemen:

     The undersigned stock holder or warrant holder hereby agrees that for a
period of twelve (12) months (such period being a "Restricted Period") the
undersigned may only offer to sell, contract to sell, or otherwise sell, dispose
of, pledge or grant any rights with respect to (collectively, a "Disposition")
up to 5,000 shares of Common Stock per calendar month or a total of 60,000 total
shares, any options or warrants to purchase any shares of Common Stock or any
securities convertible into or exchangeable for shares of, or enter into any
hedging or derivatives transaction related to the Common Stock of the Company
(collectively, "Securities") resulting from the Confidential Settlement
Agreement and Mutual Release dated October 1, 2004 or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition.  The foregoing restriction has been expressly
agreed to preclude the undersigned during the Restricted Period from engaging in
any hedging or other transaction that is designed to or reasonably expected to
lead to or result in a Disposition of Securities during the Lock-out Period,
even if such Securities would be disposed of by someone other than such holder.
Such prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that included, relates to or derives any
significant part of its value from Securities. The undersigned agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent and registrar against the transfer of shares of Common Stock or Securities
held by the undersigned except in compliance with the foregoing restrictions.

     This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned.

                                       Dated October 1, 2004
                                             ---------------


                                       Alfonso  Torres  Roqueni
                                       ------------------------
                                       Printed Name of Holder


                                         /S/ Alfonso Torres Roqueni
                                       ----------------------------
                                       Signature

                                       George Kauss
                                       ------------
                                       Printed Name of Person Signing


                                       /s/ George Kauss
                                       ----------------
                                       Signature


                                     Page 8
<PAGE>