Document:

EXHIBIT 10.1
                                                                    ------------
                        EXTENSION OF CONSULTING AGREEMENT
                                (AMENDMENT NO. 1)

1.  PARTIES.

1.1. This Extension of Consulting Agreement Amendment No. 1 (the "Amendment") is
made  and  entered  into  effective  as  of  March  1, 2005, by and between ATSI
Communications, Inc. (the "Company"), a Nevada corporation whose address is 8600
Wurzbach  Road,  Suite  700W,  San  Antonio, Texas 78240 and Donald W. Sapaugh &
Hunter  M.  Carr,  natural  persons (the "Consultant's"), whose address is 10750
Hammerly,  Suite  300,  Houston,  Texas  77043  and  amends certain Extension of
Consulting  Agreement as of November 1, 2004 (the "Consulting Agreement") by and
between  the  Company  and  the  Consultant.

2.  RECITALS.

2.1.  This  Agreement  is  made  with  reference  to  the  following  facts  and
circumstances:

     (a)  The  Consulting  Agreement  provides  for  the payment of a Consulting
          Fee  (as  defined in the Consulting Agreement) in the form of warrants
          to purchase the Company's common stock pursuant to a Warrant Agreement
          attached as an exhibit to the Consulting Agreement.

     (b)  As  a  result  of  the  Restructure  and additional work undertaken by
          the Consultants that, neither of which were anticipated at the time of
          the  Consulting  Agreement,  the  parties wish to amend the Consulting
          Agreement  to  establish  a new Consulting Fee and change the terms of
          the warrants to purchase the common stock.

2.2.  In  consideration  of  the  premises,  and  for  other  good  and valuable
consideration,  the receipt of which is hereby acknowledged, the Company and the
Consultant  agree  as  follows.

3.  CONSULTING  FEE.

Section  4.1  of  the  Extension  of  Consulting Agreement is amended to read as
follows  in  its  entirety:

     4.1.  The  Company  shall  pay  the  Consultant  as  a fee for his services
     under  this  Agreement  (the  "Consulting  Fee") warrants to purchase up to
     1,250,000  shares of the Company's common stock in the denominations and at
     the  price per share identified in Exhibit 4.1, which shall be deemed to be
     fully earned upon execution of this Agreement.

4.  TERM  OF  EXTENSION.

Section  3.1  of  the  Extension  of  Consulting Agreement is amended to read as
follows  in  its  entirety:

<PAGE>
     3.1.  The  Company  herby  engages  the  services  of the consultant, as an
     independent  contractor  for  twelve (12) months from March 1, 2005 through
     February 28, 2006.

5.  REPLACEMENT  OF  EXHIBIT  4.1

Section  4.1  to  the Extension of Consulting Agreement is hereby deleted in its
entirety  and  replaced  with  Exhibit  4.1  attached  to  this  Amendment.

6.  REVOCATION  OF  THE  WARRANT  AGREEMENT  AND  REPLACEMENT  OF  EXHIBIT  A.

The  Warrant  Agent  Agreement attached as Exhibit A to the Consulting Agreement
and  signed  by the Company and the Consultant is hereby revoked in its entirety
and  deemed  to  be  of  no  further force or effect.  Exhibit A attached to the
Extension  of  Consulting Agreement is deleted in its entirety and replaced with
Exhibit  A  attached  to  this  Amendment.

7.  RATIFICATION  OF  THE  CONSULTING  AGREEMENT.

The  Company  and  the  Consultant  hereby  ratify  and  confirm  the Consulting
Agreement  as  amended  by  this  Amendment.

IN  WITNESS  WHEREOF,  the parties have executed this Agreement, effective as of
the  date  first  above  written.

The  Consultants:                              The  Company:

/S/  Donald  W.  Sapaugh                       ATSI  Communications,  Inc.,
------------------------
Donald  W.  Sapaugh                            a  Nevada  corporation
                                               By  /S/  Arthur  L.  Smith
                                                   ----------------------
/S/  Hunter  M.  Carr                          Arthur  L.  Smith
---------------------
Hunter  M.  Carr                               President  &  CEO

<PAGE>
<TABLE>
<CAPTION>
                             EXHIBIT 4.1
                           CONSULTING FEE

<S>                              <C>
               -------------------------------------------
               NUMBER OF SHARES  EXERCISE PRICE PER SHARE
               -------------------------------------------
                   650,000               $ .35
               -------------------------------------------
                   300,000               $ .30
               -------------------------------------------
                   300,000               $ .40
               -------------------------------------------
</TABLE>EXHIBIT 10.2
                                                                    ------------
                             CAUSE NO 2003-CI-19967

ATSI COMMUNICATIONS, INC.,              )     IN THE DISTRICT COURT
(DELAWARE),                             )
                                        )
          Plaintiff,                    )
                                        )
vs.                                     )
                                        )
JAMES C. CUEVAS, RAYMOND G.             )     407TH JUDICIAL DISTRICT
ROMERO, TEXAS WORKFORCE                 )
COMMISSION, ATSI COMMUNICA-             )
TIONS, INC. (TEXAS), ATSI COMMU-        )
NICATIONS, INC. and MARTIN W.           )
SEIDLER,                                )
                                        )
              Defendants.               )     BEXAR COUNTY, TEXAS

                       SETTLEMENT AGREEMENT (AT MEDIATION)
                       -----------------------------------

     The  parties hereto agree on this 28th day of March 2005, that this lawsuit
and all claims and controversies between them are hereby settled and resolved in
their  entirety  in  accordance  with  the  following  terms  of this Settlement
Agreement:

     The  parties  acknowledge  that  bona fide disputes and controversies exist
between them, both as to liability and the amount thereof, if any, and by reason
of  such  disputes  and  controversies  they desire to compromise and settle all
claims and causes of action of any kind whatsoever which the parties have or may
have  arising  out of the transaction or occurrence which is the subject of this
litigation.  It  is further understood and agreed that this is a compromise of a
disputed  claim, and nothing contained herein shall be construed as an admission
of  liability  by  any  party,  all  such  liability  being  expressly  denied.

     Each  signatory  hereby  warrants  and  represents  that  such  person  has
authority  to  bind  the  party  or  parties  for whom such person acts; and the
claims,  suits,  rights, and/or interest which are the subject matter hereto are
owned  by the party asserting same, have not been assigned, transferred or sold,
and  are  free  of  any  encumbrance.

                          THIS SETTLEMENT AGREEMENT IS
                          ----------------------------
                            NOT SUBJECT TO REVOCATION
                            -------------------------

<PAGE>
     The  handwritten  portions  of  this Settlement Agreement shall control and
supersede  any  conflict with the printed portion.  The terms of this Settlement
Agreement  are  as  follows:

     1.     In  full and complete compromise and settlement of all claims by and
     between  the  parties,  including  those  that are the subject of Cause No.
     2003-CI-19967  and  the  Counterclaims  asserted  therein,  including  all
     attorney's  fees  and  costs,  ATSI  Communications,  Inc.  (Nevada  f/k/a
     Delaware)  (hereinafter  "ATSI")  shall pay the equivalent of $90,000.00 to
     Defendants  Cuevas  and  Romero,  pro-rata  based  upon the amount of their
     respective  allowed  TWC claim. This sum shall be payable in ATSI stock, in
     the  number  of shares that is the result of dividing the sum of $90,000.00
     by  the average closing price of said stock from Tuesday, March 29, 2005 to
     next Tuesday, April 5, 2005. Such stock which shall be publicly traded ATSI
     common  stock,  shall be issued directly to Defendants Cuevas and Romero or
     for their account in six equal monthly installments, beginning on April 15,
     2005,  with each such installment being an amount of shares equal to 1/6 of
     the  aggregate  amount  of  such  shares. The shares delivered in each such
     installment will be unrestricted and freely tradable when delivered.

     2.   This  settlement  and  compromise  is  subject  to the approval of the
          Board  of  Directors of ATSI, but such approval will be recommended by
          Mr. Smith.

Except  for the agreements set forth herein, Defendants Cuevas and Romero hereby
agree  to  forever release and discharge ATSI and its affiliates and any related
party  from  any  and  all claims, demands, or suits, known or unknown, fixed or
contingent,  liquidated  or  un-liquidated, whether or not asserted in the above
case,  as  of  this date, arising from or related to the events and transactions
which are the subject matter of this cause.  This release runs to the benefit of
all  attorneys,  agents, employees, insurers, officers, directors, shareholders,
partners,  heirs,  assigns,  and  legal  representatives  of  ATSI.  The parties
further  agree  to present an Agreed Motion for or Stipulation to Dismissal with
Prejudice  to  the  Court, along with an Agreed Order of Dismissal (or Non-suit)
with  Prejudice.

     The  parties  contemplate  a  more  comprehensive  compromise  settlement
agreement  and  releases.  Counsel shall promptly deliver drafts of such further
documentation,  and on April 15, 2005, if necessary a closing of this settlement
transaction  shall  occur  and  all  further  documents  shall  be  executed and
exchanged.  The  parties  and  their  counsel  agree  to  fully cooperate in the
drafting  and execution of such additional documents as are reasonably necessary
to  implement  the  provisions  and  spirit  of  this  Settlement  Agreement.
Notwithstanding  any such additional documents, the parties confirm that this is
a  written  Settlement Agreement as contemplated by Section 154.071 of the Texas

<PAGE>
Civil  Practice and Remedies Code, is a complete, valid and binding contract, is
intended  to be an enforceable agreement as contemplated by Rule 11, Texas Rules
of  Civil  Procedure, is hereby "filed" with the Court through this Mediator and
may be used as the basis for a motion for judgment, motion for summary judgment,
motion  to  enforce,  or  a  suit on this agreement, with each party waiving all
rights  to  a  jury  trial.  The  Court  is  specifically  authorized,  in  its
discretion,  to  incorporate  the  terms  of  this agreement in its final decree
disposing  of  this  case.

     If  any dispute arises with regard to the interpretation and/or performance
of this Agreement or any of its provisions, the parties agree to submit any such
dispute  to  the  Mediator  who  facilitated this settlement, as Arbitrator, for
final and binding arbitration.  If arbitration is brought to construe or enforce
this  Agreement,  the  prevailing  party shall be entitled to recover attorney's
fees  as  well  as  court  costs  and  expenses,  and  fees  of the mediator and
arbitrator.

     Although  the  Mediator  has  provided  this  form  and  has  drafted  this
Settlement  Agreement  for  the  parties  as  a courtesy to facilitate the final
resolution  of  this  dispute,  the  parties  and  their counsel have thoroughly
reviewed  such  outline and have, where necessary, modified it to conform to the
terms  of  their agreement.  All signatories to this Settlement Agreement hereby
release  the  Mediator from any and all responsibility arising from the drafting
of  this  Settlement  Agreement,  and  by  signing  this  Settlement  Agreement
acknowledge  that  they  have  been advised by the Mediator in writing that this
Settlement  Agreement  should  be  independently  reviewed  by  counsel  before
executing the Agreement.  The parties and their counsel expressly agree that the
Mediator  shall not be called as a witness in the event of any dispute over this
Settlement  Agreement  or  otherwise,  in accordance with Section 154.073 of the
Civil  Practice  and  Remedies  Code,  and  further  agree that in the event any
attempt  is  made  to  call  the Mediator as a witness, the Mediator shall be a)
compensated for all of his time involvement (at his then-applicable rate) in any
way  caused  by or relating in any way thereto, and b) reimbursed all attorney's
fees,  expenses  and costs incurred in connection therewith or pertaining in any
way  thereto.

     This  Settlement Agreement may be executed in counterparts and by facsimile
copies  and  is  made  and  performable  in  Bexar  County,  Texas, and shall be
construed  in  accordance  with  the  laws  of  the  State  of  Texas.

<PAGE>
ATSI COMMUNICATIONS, INC.
(NEVADA f/k/a DELAWARE)
                                            /S/  James  C.  Cuevas
                                            ----------------------
                                            JAMES C. CUEVAS

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

Title: President and CEO

                                            /S/ Raymond G. Romero
                                            ---------------------
                                            RAYMOND G. ROMERO

/s/ Kala S. Dumont,                         /S/ Royal B. Lea
-------------------                         ----------------
KALA S. DUMONT, ESQ.                        ROYAL B. LEA, III, ESQ,

COUNSEL FOR PLAINTIFF                       COUNSEL FOR MR. CUEVAS
ATSI COMMUNICATIONS, INC.                   AND MR. ROMERO
(NEVADA f/k/a DELAWARE)

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