| Nevada                               |   | 74-2849995               |
|--------------------------------------|--------|--------------------------|
| (State or Other Jurisdiction      of |   | (I.R.S.      Employer    |
| Incorporation or      Organization)  |   | Identification      No.) |

| 3201 Cherry      Ridge                        |   |        |
|-----------------------------------------------|--------|-------------|
| Building      C, Suite 300                    |   |        |
| San Antonio,      Texas                       |   | 78230       |
| (Address of Principal Executive      Offices) |   | (Zip  Code) |

| Large accelerated filer  ̈      |   | Accelerated filer  ̈         |
|----------------------------------------------------|--------|--------------------------------------------|
| Non-accelerated filer    ̈ |   | Smaller reporting Company x |

----

|                                                                                                                               |   | Page   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| PART      I. FINANCIAL INFORMATION                                                                                                 |   |   |
|                                                                                                                               |   |   |
| Item      1. Financial Statements                                                                                                  |   |   |
|                                                                                                                               |   |   |
| Consolidated      Balance Sheets as of October 31, 2009 and July 31, 2009      (unaudited)                                         |   | 2      |
| Consolidated      Statements of Operations for the Three Months Ended October 31, 2009 and      2008 (unaudited)                   |   | 3      |
| Consolidated      Statement of Changes in Stockholders’ Deficit for the      Three Months Ended October 31, 2009 (unaudited) |   | 4      |
| Consolidated      Statements of Cash Flows for the Three Months Ended October 31, 2009 and      2008 (unaudited)                   |   | 5      |
| Notes      to Consolidated Financial Statements (unaudited)                                                                        |   | 6      |
|                                                                                                                               |   |   |
| Item      2. Management’s Discussions and Analysis of Financial Condition and      Results of Operations                     |   | 8      |
|                                                                                                                               |   |   |
| Item      3. Quantitative and qualitative disclosures about market    risk                                                         |   | 11     |
|                                                                                                                               |   |   |
| Item      4. Controls and Procedures                                                                                               |   | 11     |
|                                                                                                                               |   |   |
| PART      II. OTHER INFORMATION                                                                                                    |   |   |
|                                                                                                                               |   |   |
| Item      6. Exhibits                                                                                                              |   | 11     |

----

|                                                                                                                                           |   | October 31, |    |   | July 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|---------|--------|---------------|--------|
|                                                                                                                                           |   | 2009             |    |   | 2009          |   |
|                                                                                                                                           |   |             |    |   |          |   |
| ASSETS                                                                                                                                         |   |             |    |   |          |   |
| CURRENT      ASSETS:                                                                                                                           |   |             |    |   |          |   |
| Cash      and cash equivalents                                                                                                                 |   | $                | 305     |   |          | $      | 637 |   |
| Certificates      of deposit                                                                                                                   |   |             | 61      |   |          |   | 325 |   |
| Accounts      receivable, net of allowance for bad debt of $10 and $10,      respectively                                                      |   |             | 617     |   |          |   | 337 |   |
| Prepaid      & other current assets                                                                                                        |   |             | 84      |   |          |   | 77 |   |
| Total      current assets                                                                                                                      |   |             | 1,067   |   |          |   | 1,376 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| LONG-TERM      ASSETS:                                                                                                                         |   |             |    |   |          |   |   |   |
| Intangible      Assets, net of amortization of $20 and $16, respectively                                                                       |   |             | 130     |   |          |   | 134 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| PROPERTY      AND EQUIPMENT                                                                                                                    |   |             | 809     |   |          |   | 794 |   |
| Less      - accumulated depreciation                                                                                                           |   |             | (616    | )      |          |   | (576 | ) |
| Net      property and equipment                                                                                                                |   |             | 193     |   |          |   | 218 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| Total      assets                                                                                                                              |   | $                | 1,390   |   |          | $      | 1,728 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| LIABILITIES AND STOCKHOLDERS'      DEFICIT                                                                                                     |   |             |    |   |          |   |   |   |
| CURRENT      LIABILITIES:                                                                                                                      |   |             |    |   |          |   |   |   |
| Accounts      payable                                                                                                                          |   | $                | 698     |   |          | $      | 585 |   |
| Accrued      liabilities                                                                                                                       |   |             | 98      |   |          |   | 192 |   |
| Notes      payable, net of unamortized discount of $21 and $33,      respectively                                                              |   |             | 712     |   |          |   | 1,173 |   |
| Derivative      liability                                                                                                                      |   |             | 85      |   |          |   | - |   |
| Total      current liabilities                                                                                                                 |   |             | 1,593   |   |          |   | 1,950 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| LONG-TERM      LIABILITIES:                                                                                                                    |   |             |    |   |          |   |   |   |
| Notes      payable                                                                                                                             |   |             | 649     |   |          |   | 291 |   |
| Derivative      liability                                                                                                                      |   |             | -       |   |          |   | 85 |   |
| Other                                                                                                                                          |   |             | 8       |   |          |   | 3 |   |
| Total      long-term liabilities                                                                                                               |   |             | 657     |   |          |   | 379 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| Total      liabilities                                                                                                                         |   |             | 2,250   |   |          |   | 2,329 |   |
|                                                                                                                                           |   |             |    |   |          |   |   |   |
| STOCKHOLDERS'      EQUITY DEFICIT:                                                                                                             |   |             |    |   |          |   |   |   |
| Preferred      stock, 16,063,000 shares authorized, none issued      and  outstanding                                                |   |             | -       |   |          |   | - |   |
| Common stock, $0.001 par value,      150,000,000 shares authorized, 45,504,120 and 45,504,120 shares issued and      outstanding, respectively |   |             | 46      |   |          |   | 46 |   |
| Additional paid in      capital                                                                                                                |   |             | 73,267  |   |          |   | 73,253 |   |
| Noncontrolling      interest                                                                                                                   |   |             | (138    | )      |          |   | (114 | ) |
| Accumulated      deficit                                                                                                                       |   |             | (74,036 | )      |          |   | (73,787 | ) |
| Other      comprehensive income                                                                                                                |   |             | 1       |   |          |   | 1 |   |
| Total      stockholders' deficit                                                                                                               |   |             | (860    | )      |          |   | (601 | ) |
| Total      liabilities and stockholders' deficit                                                                                               |   | $                | 1,390   |   |          | $      | 1,728 |   |

----

|                                                                                             |   | Three months ended October 31, |       |
|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|
|                                                                                             |   | 2009                                               |       |   | 2008 |   |
| OPERATING      REVENUES:                                                                         |   |                                               |       |   |   |   |
| VoIP      services                                                                               |   | $                                                  | 4,985      |   |   | $ | 7,136 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| Total      operating revenues                                                                    |   |                                               | 4,985      |   |   |   | 7,136 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| OPERATING      EXPENSES:                                                                         |   |                                               |       |   |   |   |   |   |
| Cost      of services (exclusive of depreciation and amortization)                               |   |                                               | 4,705      |   |   |   | 6,566 |   |
| Selling,      general and administrative expense (exclusive of legal and professional      fees) |   |                                               | 368        |   |   |   | 533 |   |
| Legal      and professional fees                                                                 |   |                                               | 98         |   |   |   | 67 |   |
| Bad      debt expense                                                                            |   |                                               | -          |   |   |   | (20 | ) |
| Depreciation      and amortization expense                                                       |   |                                               | 44         |   |   |   | 43 |   |
| Total      operating expenses                                                                    |   |                                               | 5,215      |   |   |   | 7,189 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| OPERATING      LOSS                                                                              |   |                                               | (230       | ) |   |   | (53 | ) |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| OTHER      INCOME (EXPENSE):                                                                     |   |                                               |       |   |   |   |   |   |
| Gain      on early extinguishment of debt                                                        |   |                                               | -          |   |   |   | 108 |   |
| Investment      loss                                                                             |   |                                               | -          |   |   |   | (14 | ) |
| Interest      expense                                                                            |   |                                               | (43        | ) |   |   | (34 | ) |
| Total      other expense                                                                         |   |                                               | (43        | ) |   |   | 60 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| NET      INCOME (LOSS)                                                                           |   |                                               | (273       | ) |   |   | 7 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| Net      loss applicable to noncontrolling interest                                              |   |                                               | 24         |   |   |   | - |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| NET      INCOME (LOSS) TO COMMON  STOCKHOLDERS                                         |   | $                                                  | (249       | ) |   | $ | 7 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| BASIC      INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS                                        |   | $                                                  | (0.01      | ) |   | $ | 0.00 |   |
| DILUTED      INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS                                      |   | $                                                  | (0.01      | ) |   | $ | 0.00 |   |
|                                                                                             |   |                                               |       |   |   |   |   |   |
| WEIGHTED      AVERAGE BASIC COMMON SHARES OUTSTANDING                                            |   |                                               | 45,504,120 |   |   |   | 39,677,598 |   |
| WEIGHTED      AVERAGE DILUTED COMMON SHARES OUTSTANDING                                          |   |                                               | 45,504,120 |   |   |   | 40,265,098 |   |

----

|                           |   |   |       |   |    |   |   | Additional     |   |   |        |   |   |             |   |   |        |   |    |   |   |
|--------------------------------|--------|--------|------------|--------|---------|--------|--------|----------------|--------|--------|-------------|--------|--------|------------------|--------|--------|-------------|--------|---------|--------|--------|
|                           |   | Common |       |   | Paid-in |   |   | Noncontrolling |   |   | Accumulated |   |   | Other Comp. |   |   |        |   |
|                           |   | Shares |       |   | Par     |   |   | Capital        |   |   | interest    |   |   | Deficit          |   |   | Income/Loss |   |    | Totals |   |
| BALANCE,      July 31, 2009    |   |   | 45,504,120 |   |    |   | 46     |           |   | $      | 73,253      |   |   | $                | (114   | )      |        | $      | (73,787 | )      |   | $ | 1 |   |   | $ | (601 | ) |
| Stock      option expense      |   |   |       |   |    |   |   |           |   |   | 14          |   |   |             |   |   |        |   |    |   |   |   |   |   |   |   | 14 |   |
| Net      loss                  |   |   |       |   |    |   |   |           |   |   |        |   |   |             | (24    | )      |        |   | (249    | )      |   |   |   |   |   |   | (273 | ) |
| BALANCE,      October 31, 2009 |   |   | 45,504,120 |   |    |   | 46     |           |   | $      | 73,267      |   |   | $                | (138   | )      |        | $      | (74,036 | )      |   |   | 1 |   |   | $ | (860 | ) |

----

|                                                                        |   | Three months ended October 31, |   |
|-----------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                        |   | 2009                                               |   |   | 2008 |   |
|                                                                        |   |                                               |   |   |   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                  |   |                                               |   |   |   |   |
| NET      INCOME (LOSS)                                                      |   | $                                                  | (273   | ) |   | $ | 7 |   |
| Adjustments      to reconcile net loss to cash used in operatingactivities: |   |                                               |   |   |   |   |   |   |
| Investment      loss                                                        |   |                                               | -      |   |   |   | 14 |   |
| Gain      on early extinguishment of debt                                   |   |                                               | -      |   |   |   | (108 | ) |
| Depreciation      and amortization                                          |   |                                               | 44     |   |   |   | 43 |   |
| Issuance      of stock grants and options, employees for services           |   |                                               | 14     |   |   |   | 62 |   |
| Provisions      (recovery) for losses on accounts receivables               |   |                                               | -      |   |   |   | (20 | ) |
| Amortization      of debt discount                                          |   |                                               | 12     |   |   |   | 11 |   |
| Changes      in operating assets and liabilities:                           |   |                                               |   |   |   |   |   |   |
| Accounts      receivable                                                    |   |                                               | (280   | ) |   |   | 538 |   |
| Prepaid      expenses and other                                             |   |                                               | (7     | ) |   |   | (77 | ) |
| Accounts      payable                                                       |   |                                               | 115    |   |   |   | (832 | ) |
| Wells      Fargo Factoring Collateral                                       |   |                                               | -      |   |   |   | 23 |   |
| Accrued      liabilities                                                    |   |                                               | (33    | ) |   |   | 28 |   |
| Net      cash used in by operating activities                               |   |                                               | (408   | ) |   |   | (311 | ) |
|                                                                        |   |                                               |   |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                  |   |                                               |   |   |   |   |   |   |
| Investment      in certificates of deposit                                  |   |                                               | 264    |   |   |   | (3 | ) |
| Note      receivable, related party                                         |   |                                               | -      |   |   |   | (70 | ) |
| Purchases      of property & equipment                                  |   |                                               | (15    | ) |   |   | (62 | ) |
| Net      cash provided by / ( used in) investing activities                 |   |                                               | 249    |   |   |   | (135 | ) |
|                                                                        |   |                                               |   |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                  |   |                                               |   |   |   |   |   |   |
| Payments      on notes payable                                              |   |                                               | (172   | ) |   |   | (156 | ) |
| Acquisition      of common stock                                            |   |                                               | -      |   |   |   | (44 | ) |
| Proceeds      from Notes payables                                           |   |                                               | -      |   |   |   | 1,275 |   |
| Principal      payments on capital lease obligation                         |   |                                               | (1     | ) |   |   | (1 | ) |
| Net      cash (used in) / provided by financing activities                  |   |                                               | (173   | ) |   |   | 1,074 |   |
|                                                                        |   |                                               |   |   |   |   |   |   |
| DECREASE      IN CASH                                                       |   |                                               | (332   | ) |   |   | 628 |   |
| CASH      AND CASH EQUIVALENTS, beginning of period                         |   |                                               | 637    |   |   |   | 1,338 |   |
|                                                                        |   |                                               |   |   |   |   |   |   |
| CASH      AND CASH EQUIVALENTS, end of period                               |   | $                                                  | 305    |   |   | $ | 1,966 |   |
|                                                                        |   |                                               |   |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURES:                                              |   |                                               |   |   |   |   |   |   |
| Cash      paid for interest                                                 |   | $                                                  | 25     |   |   | $ | 20 |   |
| Cash      paid for income tax                                               |   |                                               | -      |   |   |   | - |   |
|                                                                        |   |                                               |   |   |   |   |   |   |
| NON-CASH  INVESTING      AND FINANCING TRANSACTIONS               |   |                                               |   |   |   |   |   |   |
| Issuance      of common stock for conversion of debt                        |   | $                                                  | -      |   |   | $ | 172 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | October 31,    |   |   | July 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2009                |   |   | 2009          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |
| Note      payable to Alfonso Torres, payable upon maturity, bearing interest of      6.00% per annum, maturing January 31, 2011, unsecured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                | 517    |   |          |   | 460 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Note      payable to Wells Fargo bank payable in monthly installments, bearing      interest at  7.25% per annum, maturing July 25, 2010,      collateralized by ATSI's certificates of deposit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                | 54     |   |          |   | 72 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Note      payable to ATVF, Scott Crist, Roderick Ciaccio & Vencore Solutions,      payable in monthly installments, bearing interest at 10.00% per annum,      maturing      September 10, 2010, collateralized by ATSI's accounts receivables (other      than accounts factored with Wells Fargo), $100,000 certificate      of deposit with Wells Fargo and ATSI's ownership in ATSICOM. Additionally,      we issued 425,000 warrants to the note holders, at an exercise      price      per warrant of $0.19. The      warrants have the following “Put” and “Call” rights: Put      right. From and after      the second anniversary of the notes payable, the holder shall have the right to      request from ATSI, upon five (5) Business days’ prior notice, to acquire      from the holders the warrants at a price $0.39 per warrant.      Call      right.  At      any time any warrants are outstanding, if the last sale price of ATSI’s      common stock is greater than $.80 per share for ten (10)      consecutive trading days, ATSI      shall be entitled to require the purchaser to exercise the warrants and      pay the exercise price therefore upon five (5) business days’ written      notice. Net of unamortized discount of $21 and $33,      respectively |   |                | 496    |   |          |   | 604 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Note      payable to San Antonio National Bank payable in monthly installments,      bearing interest at 8.00% per annum, maturing October 25, 2011,      collateralized by ATSI's assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                | 294    |   |          |   | 328 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Total      outstanding debt long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                | 1,361  |   |          |   | 1,464 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Current      portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                | (712   | )      |          |   | (1,173 | ) |
| Long-term      debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                   | 649    |   |          | $      | 291 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |          |   |   |   |
| Payments on long-term debt of ATSI are due as      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                |   |   |          |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | (in      thousands) |   |
| Fiscal      2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                |   |   |          | $      | 712 |   |
| Fiscal      2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                |   |   |          |   | 649 |   |
| Total      payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                |   |   |          | $      | 1,361 |   |

----

----

|                                                                                             |   | Three      months ended October 31, |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                             |   | 2009                                |   |   | 2008 |   |   | Variances |   |   | % |   |
| OPERATING      REVENUES:                                                                         |   |                                |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  VoIP      services                                                                         |   | $                                   | 4,985  |   |   | $ | 7,136 |   |   | $ | (2,151 | ) |   |   | -30 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      operating revenues                                                                    |   |                                | 4,985  |   |   |   | 7,136 |   |   |   | (2,151 | ) |   |   | -30 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of services (exclusive of depreciation and amortization, shown      below)             |   |                                | 4,705  |   |   |   | 6,566 |   |   |   | (1,861 | ) |   |   | -28 | % |
| GROSS      MARGIN                                                                                |   |                                | 280    |   |   |   | 570 |   |   |   | (290 | ) |   |   | -51 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expense (exclusive of legal and professional      fees) |   |                                | 368    |   |   |   | 533 |   |   |   | (165 | ) |   |   | -31 | % |
|       Legal      and professional fees                             |   |                                | 98     |   |   |   | 67 |   |   |   | 31 |   |   |   | 46 | % |
|       Bad      debt expense                                        |   |                                | -      |   |   |   | (20 | ) |   |   | 20 |   |   |   | -100 | % |
|       Depreciation      and amortization expense                   |   |                                | 44     |   |   |   | 43 |   |   |   | 1 |   |   |   | 2 | % |
| OPERATING      LOSS                                                                              |   |                                | (230   | ) |   |   | (53 | ) |   |   | (177 | ) |   |   | 334 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER      INCOME (EXPENSE):                                                                     |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Gain      on early extinguishment of debt                    |   |                                | -      |   |   |   | 108 |   |   |   | (108 | ) |   |   | -100 | % |
|       Minority      Interest                                       |   |                                | -      |   |   |   | (14 | ) |   |   | 14 |   |   |   | -100 | % |
|       Interest      income (expense)                               |   |                                | (43    | ) |   |   | (34 | ) |   |   | (9 | ) |   |   | 26 | % |
|       Total      other income (expense), net                       |   |                                | (43    | ) |   |   | 60 |   |   |   | (103 | ) |   |   | -172 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME (LOSS)                                                                           |   |                                | (273   | ) |   |   | 7 |   |   |   | (280 | ) |   |   | -4000 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Net      loss applicable to noncontrolling interest          |   |                                | 24     |   |   |   | - |   |   |   | 24 |   |   |   | 100 | % |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME (LOSS) TO COMMON  STOCKHOLDERS                                         |   |                                | (249   | ) |   |   | 7 |   |   |   | (256 | ) |   |   | -3657 | % |

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| Number |         | Description                                                                                                                                            |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |         |                                                                                                                                                   |
| 10.1   |         | Promissory note payable and      security agreement with ATV Texas Ventures III, LP. dated November 11,      2009 in the principal amount of $100,000. |
|   |         |                                                                                                                                                   |
| 31.1   |         | Certification      of our President and Chief Executive Officer, under Section 302 of the      Sarbanes-Oxley Act of 2002.                             |
|   |         |                                                                                                                                                   |
| 31.2   |         | Certification      of our Corporate Controller and Principal Financial Officer, under Section      302 of the Sarbanes-Oxley Act of 2002.              |
|   |         |                                                                                                                                                   |
| 32.1   |         | Certification      of our President and Chief Executive Officer, under Section 906 of the      Sarbanes-Oxley Act of 2002.                             |
|   |         |                                                                                                                                                   |
| 32.2   |    | Certification      of our Corporate Controller and Principal Financial Officer, under Section      906 of the Sarbanes-Oxley Act of2002.               |

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|                         | ATSI COMMUNICATIONS,      INC. |
|------------------------------|--------------------------------|
|                         | (Registrant)                   |
|                         |                           |   |
| Date:      December 10, 2009 | By:                            | /s/ Arthur L. Smith |
|                         | Name:                          | Arthur      L. Smith |
|                         | Title:                         | President      and |
|                         |                           | Chief      Executive Officer |
|                         |                           |   |
| Date:      December 10, 2009 | By:                            | /s/ Antonio Estrada Jr. |
|                         | Name:                          | Antonio      Estrada Jr. |
|                         | Title:                         | Sr.      VP of Finance & Corporate Controller (Principal Accounting and      Principal FinancialOfficer) |

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| Number |   | Description                                                                                                                                                 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                        |
| 10.1   |   | Promissory note      payable and security      agreement with ATV Texas Ventures III, LP. dated November 11, 2009 in the principal amount of      $100,000. |
|   |   |                                                                                                                                                        |
| 31.1   |   | Certification      of our President and Chief Executive Officer, under Section 302 of the      Sarbanes-Oxley Act of 2002.                                  |
|   |   |                                                                                                                                                        |
| 31.2   |   | Certification      of our Corporate Controller and Principal Financial Officer, under Section      302 of the Sarbanes-Oxley Act of 2002.                   |
|   |   |                                                                                                                                                        |
| 32.1   |   | Certification      of our President and Chief Executive Officer, under Section 906 of the      Sarbanes-Oxley Act of 2002.                                  |
|   |   |                                                                                                                                                        |
| 32.2   |   | Certification      of our Corporate Controller and Principal Financial Officer, under Section      906 of the Sarbanes-Oxley Act of2002.                    |

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