| Nevada                                                                  |   | 74-2849995                                    |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State or Other Jurisdiction      ofIncorporation or      Organization) |   | (I.R.S.      EmployerIdentification      No.) |

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

| Number      of Shares |   | Class      Common Stock |   | As      of        |
|-----------------------|--------|-------------------------|--------|-------------------|
| 45,504,120            |   | $001.      par value    |   | June      8, 2010 |

----

|                                                                                                                                 |                                                                                                   | Page   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                 |                                                                                                   |   |
| PART      I. FINANCIAL INFORMATION                                                                                                   |                                                                                                   |
|                                                                                                                                 |                                                                                                   |   |
| Item      1.                                                                                                                         | Financial      Statements                                                                              |   |
|                                                                                                                                 |                                                                                                   |   |
| Consolidated      Balance Sheets as of April 30, 2010 and July 31, 2009      (unaudited)                                             | 3                                                                                                      |
| Consolidated      Statements of Operations for the Three and Nine Months Ended April 30,      2010 and 2009 (unaudited)              | 4                                                                                                      |
| Consolidated      Statement of Changes in Stockholders’ Deficit for the Nine Months Ended      April 30, 2010 (unaudited) | 5                                                                                                      |
| Consolidated      Statements of Cash Flows for the Nine Months Ended April 30, 2010      and 2009 (unaudited)                   | 6                                                                                                      |
| Notes      to Consolidated Financial Statements (unaudited)                                                                          | 7                                                                                                      |
|                                                                                                                                 |                                                                                                   |   |
| Item      2.                                                                                                                         | Management’s      Discussions and Analysis of Financial Condition and Results of      Operations | 9      |
|                                                                                                                                 |                                                                                                   |   |
| Item      3.                                                                                                                         | Quantitative      and Qualitative Disclosures about Market Risk                                        | 13     |
|                                                                                                                                 |                                                                                                   |   |
| Item      4.                                                                                                                         | Controls      and Procedures                                                                           | 13     |
|                                                                                                                                 |                                                                                                   |   |
| PART      II. OTHER INFORMATION                                                                                                      |                                                                                                   |
|                                                                                                                                 |                                                                                                   |   |
| Item      6.                                                                                                                         | Exhibits                                                                                               | 14     |

----

|                                                                                                                                                |   | April 30, |    |   | July 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|---------|--------|----------|--------|
|                                                                                                                                                |   | 2010      |    |   | 2009     |   |
|                                                                                                                                                |   |      |    |   |     |   |
| ASSETS                                                                                                                                              |   |      |    |   |     |   |
| CURRENT    ASSETS:                                                                                                                                  |   |      |    |   |     |   |
| Cash and cash      equivalents                                                                                                                      |   | $         | 309     |   |     | $      | 637 |   |
| Certificates of      deposit                                                                                                                        |   |      | 25      |   |     |   | 325 |   |
| Accounts receivable, net of      allowance for bad debt of $10 and $10, respectively                                                                |   |      | 684     |   |     |   | 337 |   |
| Prepaid and other current      assets                                                                                                               |   |      | 43      |   |     |   | 77 |   |
|      Total      current assets                                                                                             |   |      | 1,061   |   |     |   | 1,376 |   |
|                                                                                                                                                |   |      |    |   |     |   |   |   |
| LONG-TERM      ASSETS:                                                                                                                              |   |      |    |   |     |   |   |   |
| Intangible Assets, net of      amortization of $28 and $16, respectively                                                                            |   |      | 122     |   |     |   | 134 |   |
|                                                                                                                                                |   |      |    |   |     |   |   |   |
| Property and      Equipment                                                                                                                         |   |      | 855     |   |     |   | 794 |   |
| Less - accumulated      depreciation                                                                                                                |   |      | (695    | )      |     |   | (576 | ) |
|      Net      property and equipment                                                                                       |   |      | 160     |   |     |   | 218 |   |
|      Total      assets                                                                                                     |   | $         | 1,343   |   |     | $      | 1,728 |   |
|                                                                                                                                                |   |      |    |   |     |   |   |   |
| LIABILITIES AND STOCKHOLDERS'      DEFICIT                                                                                                          |   |      |    |   |     |   |   |   |
| CURRENT      LIABILITIES:                                                                                                                           |   |      |    |   |     |   |   |   |
| Accounts      payable                                                                                                                               |   | $         | 833     |   |     | $      | 585 |   |
| Accrued      liabilities                                                                                                                            |   |      | 122     |   |     |   | 192 |   |
| Notes payable, net of unamortized      discount of $5 and $33, respectively                                                                         |   |      | 552     |   |     |   | 1,173 |   |
| Derivative      liability                                                                                                                           |   |      | 85      |   |     |   | - |   |
|      Total      current liabilities                                                                                        |   |      | 1,592   |   |     |   | 1,950 |   |
|                                                                                                                                                |   |      |    |   |     |   |   |   |
| LONG-TERM      LIABILITIES:                                                                                                                         |   |      |    |   |     |   |   |   |
| Notes    payable                                                                                                                                    |   |      | 700     |   |     |   | 291 |   |
| Derivative      liability                                                                                                                           |   |      | -       |   |     |   | 85 |   |
| Other                                                                                                                                               |   |      | 16      |   |     |   | 3 |   |
|      Total      long-term liabilities                                                                                      |   |      | 716     |   |     |   | 379 |   |
| Total      liabilities                                                                                                                              |   |      | 2,308   |   |     |   | 2,329 |   |
|                                                                                                                                                |   |      |    |   |     |   |   |   |
| STOCKHOLDERS'      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                                                                                                                     |   |      | 73,274  |   |     |   | 73,253 |   |
| Noncontrolling      interest                                                                                                                        |   |      | (138    | )      |     |   | (114 | ) |
| Accumulated      deficit                                                                                                                            |   |      | (74,148 | )      |     |   | (73,787 | ) |
| Other comprehensive      income                                                                                                                     |   |      | 1       |   |     |   | 1 |   |
|      Total      stockholders' deficit                                                                                      |   |      | (965    | )      |     |   | (601 | ) |
|      Total      liabilities and stockholders' deficit                                                                      |   | $         | 1,343   |   |     | $      | 1,728 |   |

----

|                                                                                             |   | Three months ended April 30, |       |   | Nine months ended April 30, |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|--------|-------------------------------------------------|--------|
|                                                                                             |   | 2010                                             |       |   | 2009                                            |   |   | 2010 |   |   | 2009 |   |
| OPERATING      REVENUES:                                                                         |   |                                             |       |   |                                            |   |   |   |   |   |   |   |
| VoIP    services                                                                                 |   | $                                                | 6,574      |   |                                            | $      | 3,660 |   |   | $ | 16,456 |   |   | $ | 16,250 |   |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Total operating      revenues                                                                    |   |                                             | 6,574      |   |                                            |   | 3,660 |   |   |   | 16,456 |   |   |   | 16,250 |   |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      EXPENSES:                                                                         |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost of services (exclusive of      depreciation and amortization)                               |   |                                             | 6,089      |   |                                            |   | 3,461 |   |   |   | 15,309 |   |   |   | 15,011 |   |
| Selling, general and      administrative expense (exclusive of legal and professional      fees) |   |                                             | 368        |   |                                            |   | 455 |   |   |   | 1,094 |   |   |   | 1,517 |   |
| Legal and professional      fees                                                                 |   |                                             | 52         |   |                                            |   | 61 |   |   |   | 191 |   |   |   | 230 |   |
| Bad debt      expense                                                                            |   |                                             | -          |   |                                            |   | - |   |   |   | - |   |   |   | 2 |   |
| Depreciation and amortization      expense                                                       |   |                                             | 44         |   |                                            |   | 33 |   |   |   | 131 |   |   |   | 117 |   |
| Total operating      expenses                                                                    |   |                                             | 6,553      |   |                                            |   | 4,010 |   |   |   | 16,725 |   |   |   | 16,877 |   |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME      (LOSS)                                                                     |   |                                             | 21         |   |                                            |   | (350 | ) |   |   | (269 | ) |   |   | (627 | ) |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME      (EXPENSE):                                                                     |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Gain on early extinguishment of      debt                                                        |   |                                             | -          |   |                                            |   | - |   |   |   | - |   |   |   | 108 |   |
| Investment    loss                                                                               |   |                                             | -          |   |                                            |   | (15 | ) |   |   | - |   |   |   | (42 | ) |
| Interest      expense                                                                            |   |                                             | (34        | )      |                                            |   | (53 | ) |   |   | (116 | ) |   |   | (146 | ) |
| Total other      expense                                                                         |   |                                             | (34        | )      |                                            |   | (68 | ) |   |   | (116 | ) |   |   | (80 | ) |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                                                         |   |                                             | (13        | )      |                                            |   | (418 | ) |   |   | (385 | ) |   |   | (707 | ) |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Net loss applicable to      noncontrolling interest                                              |   |                                             | -          |   |                                            |   | - |   |   |   | 24 |   |   |   | - |   |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS TO      COMMON  STOCKHOLDERS                                                  |   | $                                                | (13        | )      |                                            | $      | (418 | ) |   | $ | (361 | ) |   | $ | (707 | ) |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| LOSS PER SHARE TO COMMON      STOCKHOLDERS - BASIC AND DILUTED                                   |   | $                                                | (0.00      | )      |                                            | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|                                                                                             |   |                                             |       |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE COMMON SHARES      OUTSTANDING - BASIC AND DILUTED                              |   |                                             | 45,504,120 |   |                                            |   | 39,892,157 |   |   |   | 45,504,120 |   |   |   | 39,758,501 |   |

----

|                         |   |   |       |   |    |   |   | 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    |   |   | -          |   |    |   | -      |           |   |   | 21          |   |   |             | -      |   |        |   | -       |   |   |   | - |   |   |   | 21 |   |
| Net      loss                |   |   | -          |   |    |   | -      |           |   |   | -           |   |   |             | (24    | )      |        |   | (361    | )      |   |   | - |   |   |   | (385 | ) |
| BALANCE,      April 30, 2010 |   |   | 45,504,120 |   |    | $      | 46     |           |   | $      | 73,274      |   |   | $                | (138   | )      |        | $      | (74,148 | )      |   |   | 1 |   |   | $ | (965 | ) |

----

|                                                                                              |   | Nine months ended April 30, |   |
|---------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                                                              |   | 2010                                            |   |   | 2009 |   |
|                                                                                              |   |                                            |   |   |   |   |
| CASH FLOWS FROM OPERATING      ACTIVITIES:                                                        |   |                                            |   |   |   |   |
| NET LOSS                                                                                          |   | $                                               | (385   | ) |   | $ | (707 | ) |
| Adjustments to reconcile net loss      to cash used in operating activities:                      |   |                                            |   |   |   |   |   |   |
|       Investment      loss                                          |   |                                            | -      |   |   |   | 42 |   |
|       Gain      on early extinguishment of debt                     |   |                                            | -      |   |   |   | (108 | ) |
|       Depreciation      and amortization                            |   |                                            | 131    |   |   |   | 117 |   |
|       Issuance      of stock grants and options, for services       |   |                                            | 21     |   |   |   | 143 |   |
|       Provisions      for losses on accounts receivables            |   |                                            | -      |   |   |   | 2 |   |
|       Amortization      of debt discount                            |   |                                            | 28     |   |   |   | 46 |   |
|       Changes      in operating assets and liabilities:             |   |                                            |   |   |   |   |   |   |
|           Accounts      receivable              |   |                                            | (347   | ) |   |   | 568 |   |
|           Prepaid      expenses and other       |   |                                            | 34     |   |   |   | (52 | ) |
|           Accounts      payable                 |   |                                            | 248    |   |   |   | (1,151 | ) |
|           Wells      Fargo Factoring Collateral |   |                                            | -      |   |   |   | (6 | ) |
|           Accrued      liabilities              |   |                                            | 14     |   |   |   | 109 |   |
| Net cash used in operating      activities                                                        |   |                                            | (256   | ) |   |   | (997 | ) |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING      ACTIVITIES:                                                        |   |                                            |   |   |   |   |   |   |
|      Investment      in certificates of deposit                          |   |                                            | 301    |   |   |   | (7 | ) |
|      Note      receivable, related party                                 |   |                                            | -      |   |   |   | (70 | ) |
|      Purchases      of property & equipment                          |   |                                            | (61    | ) |   |   | (67 | ) |
| Net cash provided by / ( used in)      investing activities                                       |   |                                            | 240    |   |   |   | (144 | ) |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING      ACTIVITIES:                                                        |   |                                            |   |   |   |   |   |   |
|      Payments      on notes payable                                      |   |                                            | (561   | ) |   |   | (374 | ) |
|      Acquisition      of common stock                                    |   |                                            | -      |   |   |   | (48 | ) |
|      Proceeds      from Notes payables                                   |   |                                            | 250    |   |   |   | 1,275 |   |
|      Principal      payments on capital lease obligation                 |   |                                            | (1     | ) |   |   | (2 | ) |
| Net cash (used in) / provided by      financing activities                                        |   |                                            | (312   | ) |   |   | 851 |   |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| DECREASE IN CASH AND CASH      EQUIVALENTS                                                        |   |                                            | (328   | ) |   |   | (290 | ) |
| CASH AND CASH EQUIVALENTS,      beginning of period                                               |   |                                            | 637    |   |   |   | 1,338 |   |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, end of      period                                                     |   | $                                               | 309    |   |   | $ | 1,048 |   |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURES:                                                                    |   |                                            |   |   |   |   |   |   |
|     Cash paid      for interest                                               |   | $                                               | 69     |   |   | $ | 88 |   |
|     Cash paid      for income tax                                             |   |                                            | -      |   |   |   | - |   |
|                                                                                              |   |                                            |   |   |   |   |   |   |
| NON-CASH  INVESTING AND      FINANCING TRANSACTIONS                                     |   |                                            |   |   |   |   |   |   |
|     Issuance      of common stock for conversion of debt                      |   | $                                               | -      |   |   | $ | 172 |   |
|     Warrants      issued for services                                         |   |                                            | -      |   |   |   | 85 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | April      30, |                                                                         |   | July      31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|------------------------------------------------------------------------------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2010           |                                                                         |   | 2009          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |                                                                         |   |          |   |
| Note      payable to Alfonso Torres, payable upon maturity, bearing interest of      6.00% per annum, maturing October 31, 2011, unsecured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $              | 531                                                                          |   |          | $      | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |           | 18                                                                           |   |          |   | 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 $5 and      $33, respectively |   |           |                        260 |   |          |   |                     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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           | 225                                                                          |   |          |   | 328 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |                                                                         |   |          |   |   |   |
| Note      payable to ATV Texas Ventures payable in monthly installments, bearing      interest at 12.00% per annum, maturing November 10, 2011, collateralized      by ATSI's assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           | 81                                                                           |   |          |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |                                                                         |   |          |   |   |   |
| Note      payable to ATV Texas Ventures payable in monthly installments, bearing      interest at 12.00% per annum, maturing January 10, 2012, collateralized by      ATSI's assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           | 89                                                                           |   |          |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |                                                                         |   |          |   |   |   |
| Note      payable to ATV Texas Ventures payable in monthly installments, bearing      interest at 12.00% per annum, maturing March 10, 2012, collateralized by      ATSI's assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |           | 48                                                                           |   |          |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           |                                                                         |   |          |   |   |   |
| Total      outstanding debt long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           | 1,252                                                                        |   |          |   | 1,464 |   |
| Current      portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |           | (552                                                                         | )      |          |   | (1,173 | ) |
| Long-term      debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $              | 700                                                                          |   |          | $      | 291 |   |

----

|                |   | (in thousands) |   |
|---------------------|--------|---------------------|--------|
| Fiscal      2011    |   | $                   | 552    |   |
| Fiscal      2012    |   |                | 700    |   |
| Total      payments |   | $                   | 1,252  |   |

----

----

|                                                                                             |   | Three      months ended April 30, |   |   | Nine      months ended April 30, |   |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|--------|
|                                                                                             |   | 2010                              |   |   | 2009                             |   |   | Variances |   |   | % |   |   | 2010 |   |   | 2009 |   |   | Variances |   |   | % |   |
| OPERATING      REVENUES:                                                                         |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| VoIP      services                                                                               |   | $                                 | 6,574  |   |                             | $      | 3,660 |   |   | $ | 2,914 |   |   |   | 80 | % |   | $ | 16,456 |   |   | $ | 16,250 |   |   | $ | 206 |   |   |   | 1 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      operating revenues                                                                    |   |                              | 6,574  |   |                             |   | 3,660 |   |   |   | 2,914 |   |   |   | 80 | % |   |   | 16,456 |   |   |   | 16,250 |   |   |   | 206 |   |   |   | 1 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of services (exclusive of depreciation and amortization, shown      below)             |   |                              | 6,089  |   |                             |   | 3,461 |   |   |   | 2,628 |   |   |   | 76 | % |   |   | 15,309 |   |   |   | 15,011 |   |   |   | 298 |   |   |   | 2 | % |
| GROSS      MARGIN                                                                                |   |                              | 485    |   |                             |   | 199 |   |   |   | 286 |   |   |   | 144 | % |   |   | 1,147 |   |   |   | 1,239 |   |   |   | (92 | ) |   |   | -7 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expense (exclusive of legal and professional      fees) |   |                              | 368    |   |                             |   | 455 |   |   |   | (87 | ) |   |   | -19 | % |   |   | 1,094 |   |   |   | 1,517 |   |   |   | (423 | ) |   |   | -28 | % |
| Legal      and professional fees                                                                 |   |                              | 52     |   |                             |   | 61 |   |   |   | (9 | ) |   |   | -15 | % |   |   | 191 |   |   |   | 230 |   |   |   | (39 | ) |   |   | -17 | % |
| Bad      debt expense                                                                            |   |                              | -      |   |                             |   | - |   |   |   | - |   |   |   | 0 | % |   |   | - |   |   |   | 2 |   |   |   | (2 | ) |   |   | -100 | % |
| Depreciation      and amortization expense                                                       |   |                              | 44     |   |                             |   | 33 |   |   |   | 11 |   |   |   | 33 | % |   |   | 131 |   |   |   | 117 |   |   |   | 14 |   |   |   | 12 | % |
| OPERATING      INCOME (LOSS)                                                                     |   |                              | 21     |   |                             |   | (350 | ) |   |   | 371 |   |   |   | -106 | % |   |   | (269 | ) |   |   | (627 | ) |   |   | 358 |   |   |   | -57 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER      INCOME (EXPENSE):                                                                     |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain      on early extinguishment of debt                                                        |   |                              | -      |   |                             |   | - |   |   |   | - |   |   |   | 0 | % |   |   | - |   |   |   | 108 |   |   |   | (108 | ) |   |   | -100 | % |
| Minority      Interest                                                                           |   |                              | -      |   |                             |   | (15 | ) |   |   | 15 |   |   |   | -100 | % |   |   | - |   |   |   | (42 | ) |   |   | 42 |   |   |   | -100 | % |
| Interest      income (expense)                                                                   |   |                              | (34    | )      |                             |   | (53 | ) |   |   | 19 |   |   |   | -36 | % |   |   | (116 | ) |   |   | (146 | ) |   |   | 30 |   |   |   | -21 | % |
| Total      other income (expense), net                                                           |   |                              | (34    | )      |                             |   | (68 | ) |   |   | 34 |   |   |   | -50 | % |   |   | (116 | ) |   |   | (80 | ) |   |   | (36 | ) |   |   | 45 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS                                                                                    |   | $                                 | (13    | )      |                             | $      | (418 | ) |   | $ | 405 |   |   |   | -97 | % |   | $ | (385 | ) |   | $ | (707 | ) |   | $ | 322 |   |   |   | -46 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss applicable to noncontrolling interest                                              |   |                              | -      |   |                             |   | - |   |   |   | - |   |   |   | 0 | % |   |   | 24 |   |   |   | - |   |   |   | 24 |   |   |   | 100 | % |
|                                                                                             |   |                              |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS TO COMMON STOCKHOLDERS                                                             |   | $                                 | (13    | )      |                             | $      | (418 | ) |   | $ | 405 |   |   |   | -97 | % |   | $ | (361 | ) |   | $ | (707 | ) |   | $ | 346 |   |   |   | -49 | % |

----

----

----

----

| Number |   | Description                                                                                                                                         |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                |
| 10.1   |   | Promissory note payable and      security agreement with ATV Texas Ventures III, LP., dated March 16, 2010      in the principal amount of $50,000. |
|   |   |                                                                                                                                                |
| 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.            |

|                     | ATSI COMMUNICATIONS,      INC. |
|--------------------------|--------------------------------|
|                     | (Registrant)                   |
|                     |                           |   |
| Date:      June 09, 2010 | By:                            | /s/ Arthur L. Smith |
|                     | Name:                          | Arthur      L. Smith |
|                     | Title:                         | President      and |
|                     |                           | Chief      Executive Officer |
|                     |                           |   |
| Date:      June 09, 2010 | By:                            | /s/ Antonio Estrada Jr. |
|                     | Name:                          | Antonio      Estrada Jr. |
|                     | Title:                         | Sr.      VP of Finance & Corporate Controller |
|                     |                           | (Principal      Accounting and Principal FinancialOfficer) |

----

| Number |   | Description                                                                                                                                         |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                |
| 10.1   |   | Promissory note payable and      security agreement with ATV Texas Ventures III, LP., dated March 16, 2010      in the principal amount of $50,000. |
|   |   |                                                                                                                                                |
| 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.            |

----