-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G7C6cj+9LEb+k/HOxz5Yf/YNBWovcgiBZUg2+k8Fz3aqMOJl7U2qbT4A94EOT3dP oYkAUzCFFijFJWOUfIH21A== /in/edgar/work/0000930661-00-003012/0000930661-00-003012.txt : 20001116 0000930661-00-003012.hdr.sgml : 20001116 ACCESSION NUMBER: 0000930661-00-003012 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN TELESOURCE INTERNATIONAL INC CENTRAL INDEX KEY: 0001014052 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 742698095 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-50008 FILM NUMBER: 770708 BUSINESS ADDRESS: STREET 1: 12500 NETWORK BLVD STREET 2: SUITE 407 CITY: SAN ANTONIO STATE: TX ZIP: 78249 BUSINESS PHONE: 2105471000 S-3 1 0001.txt FORM S-3 As filed with the Securities and Exchange Commission on November 15, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AMERICAN TELESOURCE INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 74-2849955 (I.R.S. Employer Identification Number) 6000 Northwest Parkway, Suite 110 San Antonio, Texas 78249 (210) 547-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Arthur L. Smith, Chief Executive Officer 6000 Northwest Parkway, Suite 110 San Antonio, Texas 78249 (210) 547-1000 (Name, address, including zip code and telephone number, including area code, of agent for service) Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration statement. If only the securities being registered on this Form are being offered pursuant to a dividend or interest reinvestment plans, please check the following box. /__/ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / X / --- If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /___/ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /___/ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. /___/ CALCULATION OF REGISTRATION FEE
========================================================================================================== Proposed Maximum Proposed Title of Amount Offering Maximum Amount of Securities To be Price Aggregate Registration To be Registered Registered Per Share Offering Price Fee (1) (2) (1)(2) - ---------------------------------------------------------------------------------------------------------- Resale of common stock issuable upon conversion of convertible preferred stock 12,121,212 $1.50 $18,181,818 $4,800.00 - ---------------------------------------------------------------------------------------------------------- Resale of common stock issuable upon exercise of warrants granted as finder's fee 175,000 $1.50 $ 262,500 $ 69.30 - ---------------------------------------------------------------------------------------------------------- Resale of common stock issued upon the exercise of warrants 7,272,728 $1.50 $10,909,092 $2,880.00 ==========================================================================================================
(1) For purposes of estimating the number of shares of common stock to be included in this Registration Statement, the registrant calculated 200% of the number of shares of common stock issuable in connection with the conversion of the Company's Series E Convertible Preferred Stock (based on a conversion price of $1.65 which is 120% of the closing bid price on October 12, 2000) and the exercise of the Warrants. In addition to the shares set forth in the table, the amount to be registered includes an undetermined number of shares issuable upon conversion of or in respect of the Series E Convertible Preferred Stock and the Warrants, as such number may be adjusted as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416. (2) Calculated pursuant to Rule 457 (c), using the average of the high and low prices reported on November 10, 2000, solely for the purpose of calculating the Registration Fee The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a) may determine. PROSPECTUS NOT COMPLETE [Not Yet Issued] 19,568,940 Shares of Common Stock AMERICAN TELESOURCE INTERNATIONAL, INC. Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 3. The selling stockholders identified on page 26 of this prospectus are offering these shares of common stock for resale. We will not receive any of the proceeds from the sale of the common stock by the selling stockholders. Our common stock is traded on the American Stock Exchange under the symbol "AI". On November 10, 2000, the closing price of our common stock was $1.50 per share. The shares of common stock described in this prospectus are issuable upon the conversion of our Series E Preferred Stock and warrants that we sold to the selling stockholders in a private placement. If all of the shares of our Series E Preferred Stock were converted and all of the warrants exercised on November 10, 2000, these shares would have converted into or been exercised for 9,696,970 shares of our common stock. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS RELY ONLY UPON THIS PROSPECTUS............................ 1 ATSI...................................................... 1 RISK FACTORS.............................................. 3 DESCRIPTION OF OUR CAPITAL STOCK.......................... 17 USE OF PROCEEDS........................................... 25 COMMON STOCK ISSUED....................................... 25 SELLING STOCKHOLDERS...................................... 26 PLAN OF DISTRIBUTION...................................... 27 LEGAL MATTERS............................................. 29 EXPERTS................................................... 29 WHERE YOU CAN FIND MORE INFORMATION....................... 29
FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated by reference in this prospectus contain "forward-looking statements." "Forward looking statements" are those statements, which describe management's beliefs and expectations about the future. We have identified forward-looking statements in this prospectus by using words such as "anticipate," "believe," "could," "estimate," "may," "could," "expect," and "intend." Although we believe these expectations are reasonable, our operations involve a number of risks and uncertainties, including those described in the Risk Factors section of this prospectus. Therefore, these types of statements may prove to be incorrect. RELY ONLY ON THIS PROSPECTUS You should rely only on the information provided or incorporated by reference in this prospectus or any supplement. We have not authorized anyone to provide you with different information. This prospectus may be used only in states and other jurisdictions where it is legal to sell the common stock. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or the sale of any shares. ATSI American TeleSource International, Inc., or ATSI, is a communications company focusing on the market for wholesale and retail services between the United States and Latin America, and within Latin America. In 1993, we began assembling a framework of licenses, interconnection and service agreements, network facilities and distribution channels so that we would be in a position to take advantage of the de-monopolization of the Latin American telecommunications market, as well as the increasing demand for services in this market. Most of our current operations involve services between the U.S. and Mexico or within Mexico. We have some operations in Central America as well, and may expand our operations in the rest of Latin America as the regulatory environment permits. Our 70% - owned subsidiary, GlobalSCAPE, Inc., sells proprietary Internet productivity software, CuteFTP(R,) CuteHTML(R) , CuteZIP(TM), CuteMAP and CuteMX(TM). On September 12, 2000 we distributed approximately 30% of the stock of GlobalSCAPE to our stockholders of record on July 14, 2000. We have had operating losses for almost every quarter since we began operations in 1994. Our auditors' opinion on our financial statements as of July 31, 2000 calls attention to substantial doubt as to our ability to continue as a going concern. This means that they question whether we can continue in business. We have experienced difficulty in paying our vendors and lenders on time in the past, and may experience difficulty in the future. If we are unable to pay our vendors and lenders on time, they may stop providing critical services or repossess critical equipment that we need to stay in business. We do not know when we will achieve profitability, so to stay in business we will almost certainly have to borrow money or sell additional stock. We do not know if we will be able to borrow money or sell additional stock on terms we find acceptable. Our strategy for the future is to maximize the use of our current infrastructure between Mexico and the United States, while focusing on expanding our retail customer base in Mexico and the United States. We also want to expand our network infrastructure in Mexico to reduce costs. We want to increase the ratio of retail traffic vs. wholesale traffic because we believe that retail traffic is less volatile than wholesale traffic, and retail customers pay more for our services than wholesale customers. Retail traffic should therefore produce greater profit margins than wholesale traffic. Our defined retail target market will be Mexico's underserved and underdeveloped markets and Latino markets in the United States, where we plan to offer services that will function regardless of the user's location north or south of the U.S./Mexico border, such 1 as enhanced prepaid calling services. Our marketing term for these types of services is "borderless." For the year ended July 31, 2000, the percentage of revenues generated by our wholesale, retail and Internet e-commerce business was 63%, 24% and 13%, respectively. Additional financial information can be found in our Form 10-K filed November 14, 2000 for the year ended July 31, 2000. In July 2000 we acquired Grupo Intelcom, S.A. de C.V., a Mexican company, which owns a long distance license issued by the Mexican government, for a total purchase price of approximately $4,176,000 consisting of $755,000 in cash, $500,000 in the form of a note and 400,000 shares of our common stock. We also issued 100,000 warrants exercisable at $6.00 for a period of three years to the principal owner of Grupo Intelcom. Prior to acquiring Grupo Intelcom and its long distance license we relied on other Mexican-licensed long distance carriers to transport our traffic between our facilities in Mexico and the local telephone company in Mexico. By obtaining our own long distance license, we will be able to connect directly to the local telephone company in Mexico. We expect this to reduce our costs significantly beginning in the first calendar quarter of 2001. This will also allow us to implement our retail strategy more effectively and efficiently. We have also signed a definitive agreement to acquire Genesis Communications International, Inc., a privately owned telecommunications company focusing on the Latino market in the United States. The acquisition of Genesis will allow us to expand our retail presence in the United States. Potential Dilution As of November 10, 2000, we had 67,986,944 shares of common stock outstanding. The table below shows the potential dilution of our common stock resulting from the issuance of the shares of common stock that are included for resale in the registration statement of which this prospectus is a part. The table assumes a conversion price of $1.65 per share and the issuance of all 10,000 shares of Series E Preferred Stock. For more information on the calculation of the conversion price, you should read the information under "Our Capital Stock - Features of Series E Preferred Stock."
- --------------------------------------------------------------------------------------- # of shares issued at % of total number Name conversion price of $ of shares 1.65 outstanding - --------------------------------------------------------------------------------------- Common stock resulting from conversion of Series E 6,060,606 7.78% Preferred Stock - --------------------------------------------------------------------------------------- Common stock resulting from the exercise of warrants associated with the equity line of credit 175,000 Less than 1% - --------------------------------------------------------------------------------------- Common stock resulting from the exercise of warrants associated with the Series E Preferred 3,636,364 4.67% Stock - ---------------------------------------------------------------------------------------
2 - ---------------------------------------------------------------------------------------- Total 9,871,970 12.68% - ----------------------------------------------------------------------------------------
Additionally, our Series A Preferred Stock converts to 1,754,517 shares of common stock and our Series D Preferred Stock converts to common stock at a discount to market. We do not know how many shares of common stock will be issued upon conversion of the Series D Preferred Stock. The Series D Preferred Stock is convertible into common stock based on a floating rate that is a discount of the common stock price at the time of conversion. The conversion price for the Series D Preferred Stock as of November 10, 2000 was $1.25, which means that if the holder had converted all of its Series D Preferred Stock on that date we would have issued 2,409,639 shares of common stock. However, due to the fluctuating conversion rate, we do not know the number of shares of common stock that will be issued on conversion of the Series D Preferred Stock, and the number of shares may be materially higher or lower than this. We also have the right, but not the obligation, to issue up to 5 million shares of common stock under an equity line of credit at 92% of the market price of our common stock at the time of issuance. As of November 10, 2000, the total number of shares that would be issued upon full conversion of the Series A, D and E Preferred Stock and all outstanding options and warrants to purchase common stock, and if we issued the full 5.0 million shares of common stock under our equity line of credit would be 17,171,204 shares, which would represent approximately 20% of the total outstanding shares of common stock. RISK FACTORS The purchase of our common stock is very risky. You should not invest any money that you cannot afford to lose. Before you buy our stock, you should carefully read this entire prospectus. We have highlighted for you below all of the material risks to our business that we are aware of. RISKS RELATED TO OPERATIONS . Our auditors have questioned our viability Our auditors' opinion on our financial statements as of July 31, 2000 calls attention to substantial doubts as to our ability to continue as a going concern. This means that they question whether we can continue in business. If we cannot continue in business, our common stockholders would likely lose their entire investment. Our financial statements are prepared on the assumption that we will continue in business. They do not contain any adjustments to reflect the uncertainty over our continuing in business. . We expect to incur losses, so if we do not raise additional capital we may go out of business We have never been profitable and do not expect to become profitable in the near future. We have invested and will continue to invest significant amounts of money in our network and personnel in order to maintain and develop the infrastructure we need to compete in the 3 markets for our services and achieve profitability. Our investment in our network may not generate the savings and revenues that we anticipate because of a variety of factors, such as: - delays in negotiating acceptable interconnection agreements with Telefonos de Mexico, the former monopoly carrier in Mexico; - delays in construction of our network; and - operational delays caused by our inability to obtain additional financing in a timely fashion. In the past we have financed our operations almost exclusively through the private sales of securities. Since we are losing money, we must raise the money we need to continue operations and expand our network either by selling more securities or borrowing money. We are not able to sell additional securities or borrow money on terms as desirable as those available to profitable companies, and may not be able to raise money on any acceptable terms. If we are not able to raise additional money, we will not be able to implement our strategy for the future, and we will either have to scale back our operations or stop operations. As of July 31, 2000 we had negative working capital of approximately $5.3 million. In order to maintain our financial position going forward it will be necessary for us to raise funds necessary to cover our recurring negative cash flows from operations. We cannot estimate what that amount will be with reasonable certainty. For the twelve months ended July 31, 2000, our negative cash flows from operations prior to debt service and capital expenditures were approximately $4.7 million. Conservatively, we will need to be able to raise similar capital over the next nine to twelve months. . We must expand and operate our network. Our success and ability to increase our revenues depends upon our ability to deliver telecommunication services which, in turn, depends on our ability to integrate new and emerging technologies and equipment into our network and to successfully expand our network. Our ability to continue to expand, operate and develop our network will depend on, among other factors, our ability to accomplish the following: - obtain switch sites; - interconnect with the local, public switched telephone network and/or other carriers; and - obtain access to or ownership of transmission facilities that link our switches to other network switches. When we expand our network, we will incur additional fixed operating costs that will exceed revenues until we generate additional traffic. We may not be able to expand our network in a cost effective manner, generate additional revenues which cover or exceed the expansion costs or operate the network efficiently. Our network and operations face risks that we cannot control, such as damages caused by 4 fire, power loss and natural disasters. Any failure of our network or other systems our hardware could damage our reputation, result in loss of customers and harm our ability to obtain new customers. . It is difficult for us to compete with much larger companies such as AT&T, Sprint, MCI-Worldcom and Telmex The large carriers such as AT&T, Sprint and MCI/Worldcom in the U.S., and Telmex in Mexico, have more extensive owned networks than we do, which enables them to control costs more easily than we can. They are also able to take advantage of their large customer base to generate economies of scale, substantially lowering their per-call costs. Therefore, they are better able than we are to lower their prices as needed to retain customers. In addition, these companies have stronger name recognition and brand loyalty, as well as a broader portfolio of services, making it difficult for us to attract new customers. Our competitive strategy in the U.S. revolves around targeting markets that are largely underserved by the big carriers. However, some larger companies are beginning efforts or have announced that they plan to begin efforts to capture these markets. Mergers, acquisitions and joint ventures in our industry have created and may continue to create more large and well-positioned competitors. These mergers, acquisitions and joint ventures could increase competition and reduce the number of customers that purchase wholesale service from us. . Competition could harm us International telecommunications providers like ourselves compete on the basis of price, customer service, transmission quality and breadth of service offerings. Our carrier and prepaid card customers are especially price sensitive. Many of our larger competitors enjoy economies of scale that can result in lower termination and network costs. This could cause significant pricing pressures within the international communications industry. In recent years, prices for international and other telecommunications services have decreased as competition continues to increase in most of the markets in which we currently compete or intend to compete. For example, from October 1999 to October 2000, the prevailing price per minute to carry traffic from the U.S. to Mexico declined by approximately 41%. Although we carried more than twice as much wholesale traffic in fiscal year 2000 than in fiscal year 1999, we only recognized an increase in revenues of approximately 60%. If these pricing pressures continue, we must continue to lower our costs in order to maintain sufficient profits to continue in this market. We believe competition will intensify as new entrants increase as a result of the new competitive opportunities created by the Telecommunications Act of 1996, implementation by the Federal Communications Commission of the United States' commitment to the World Trade Organization, and privatization, deregulation and changes in legislation and regulation in many of our foreign target markets. We cannot assure you that we will be able to compete successfully in the future, or that such intense competition will not have a material adverse effect on our business, financial condition and results of operations. 5 . Competition in Mexico Mexican regulatory authorities have granted concessions to 20 companies, including Telmex and Telereunion, to construct and operate public, long distance telecommunications networks in Mexico. Some of these new competitive entrants have as their partners major U.S. telecommunications providers including AT&T (Alestra), MCIWorldcom (Aventel) and Bell Atlantic Corp. (Iusatel). Mexican regulatory authorities have also granted concessions to provide local exchange services to several telecommunications providers, including Telmex and Telefonia Inalambrica del Norte S.A. de C.V., Megacable Comunicaciones de Mexico and several of Mexico's long distance concessionaires. We compete or will compete to provide services in Mexico with numerous other systems integration, value-added and voice and data services providers, some of which focus their efforts on the same customers we target. In addition to these competitors, recent and pending deregulation in Mexico may encourage new entrants. Moreover, while the WTO Agreement could create opportunities to enter new foreign markets, the United States' and other countries' implementation of the WTO Agreement could result in new competition from operators previously banned or limited from providing services in the United States. For example, the FCC granted the Sprint/Telmex joint venture authority, subject to various conditions, to enter the United States market and to provide resold international switched services between the United States and Mexico. This and other competitive developments could result in increased competition, which could materially and adversely effect our business, financial condition and results of operations. . Our Mexican facilities-based license poses risks Our Mexican concession is regulated by the Mexican government. The Mexican government could grant similar concessions to our competitors, or affect the value of our concessions. In addition, the Mexican government also has (1) authority to temporarily seize all assets related to the Mexican concession in the event of natural disaster, war, significant public disturbance and threats to internal peace and for other reasons of economic or public order and (2) the statutory right to expropriate any concession and claim all related assets for public interest reasons. Although Mexican law provides for compensation in connection with losses and damages related to temporary seizure or expropriation, we cannot assure you that the compensation will be adequate or timely. The Mexican concession contains several restraints. Specifically, it limits the scope and location of our Mexican network and has minimum invested capital requirements and specific debt to equity requirements. We cannot assure you that: - we will be able to obtain financing to finish the Mexican network; - if we obtain financing it will be in a timely manner or on favorable terms; or - we will be able to comply with the Mexican concession's conditions. If we fail to comply with the terms of the concession, the Mexican government may terminate it without compensation to us. A termination would prevent us from engaging in our 6 proposed business. . Rapid changes in technology could place us at a competitive disadvantage The markets that we service are characterized by: - rapidly changing technology; - evolving industry standards; - emerging competition; and - the frequent introduction of new services, software and other products. Our success partially depends upon our ability to enhance existing products, software and services and to develop new products, software and services that meet changing customer requirements on a timely and cost-effective basis. We cannot assure you that we can successfully identify new opportunities and develop and bring new products, software and services to the market in a timely and cost effective manner. We also cannot assure you that the products, software, services or technologies that others develop will not render our products, software, services or technologies non-competitive or obsolete. Furthermore, there is no guarantee that products, software or service developments or enhancements we introduce will achieve or sustain market acceptance or that they will effectively address the compatibility and interoperability issues raised by technological changes or new industry standards. . We may not be able to collect large receivables, which could create serious cash flow problems Our wholesale network customers generate large receivable balances, often over $500,000 for a two-week period. We incur substantial direct costs to provide this service since we must pay our carriers in Mexico to terminate these calls. If a customer fails to pay a large balance on time, our cash flow may be substantially reduced and we would have difficulty paying our carriers in Mexico on time. If our Mexican carriers suspend services to us, it may affect all our customers. . We may not be able to pay our suppliers on time, causing them to discontinue critical services We have not always paid all of our suppliers on time due to temporary cash shortfalls. Our critical suppliers are SATMEX for satellite transmission capacity and Bestel for fiber optic cable. We also rely on various Mexican and U.S. long distance companies to complete the intra-Mexico and intra-U.S. long distance portion of our calls. For fiscal 2000, the monthly average amount due to these suppliers as a group was approximately $1,372,000. We currently have overdue outstanding balances with long distance carriers for fiscal 2000 of $300,000 on which we are making payments. Critical suppliers may discontinue service if we are not able to make payments on time in the future. In addition, equipment vendors may refuse to provide critical technical support for their products if they are not paid on time 7 under the terms of support arrangements. Our ability to make payments on time depends on our ability to raise additional capital or improve our cash flow from operations. . We may not be able to make our debt payments on time or meet financial covenants in our loan agreements, causing our lenders to repossess critical equipment We purchased some of our significant equipment with borrowed money, including a substantial number of our payphones located in Mexico, our DMS 250/350 International gateway switch from Nortel, and packet-switching equipment from Network Equipment Technologies. We pay these three lenders approximately $171,165 on a monthly basis. Our Form 10-K, which is incorporated by reference in this prospectus, includes more information about our equipment, equipment debt and capital lease obligations. The lenders have a security interest in the equipment to secure repayment of the debt. This means that the lenders may take possession of the equipment and sell it to repay the debt if we do not make our payments on time. We have not always paid all of our equipment lenders on time due to temporary cash shortfalls. These lenders may exercise their right to take possession of certain critical equipment if we are not able to make payments on time in the future. Our ability to make our payments on time depends on our ability to raise additional capital or improve our cash flow from operations. We defaulted on our Nortel switch loan agreement as of the end of our fiscal year, July 31, 2000, by failing to meet financial covenants related to revenues, gross margins and EBITDA. The lender granted us a waiver of that default, but it appears likely that we will be in default of those financial covenants again at the end of the quarter ending October 31, 2000. This lender may not grant us a waiver of this expected default, meaning that the lender would have the right to repossess this equipment under the terms of the loan agreement. For more information on this expected default, you should see the Liquidity and Capital Resources section of our 10-K for the year ending July 31, 2000. For more information on our other loans and capital leases you should see the footnotes of our 10-K for the year ended July 31, 2000. . A large portion of our revenue is concentrated among a few customers, making us vulnerable to sudden revenue declines. Our revenues from wholesale services currently comprise about 63% of our total revenues. The volume of business sent by each customer fluctuates, but this traffic is often heavily concentrated among three or four customers. During some periods in the past, two of these customers have been responsible for 50% of this traffic. Generally, our wholesale customers are able to re-route their traffic to other carriers very quickly in response to price changes. If we are not able to continue to offer competitive prices, these customers will find some other supplier and we will lose a substantial portion of our revenue very quickly. In addition, mergers and acquisitions in our industry may reduce the already limited number of customers for our wholesale services. . We may not be able to lease transmission facilities we need at cost- effective rates We do not own all of the transmission facilities we need to complete calls. Therefore, we depend on contractual arrangements with other telecommunications companies to complete 8 our network. For example, although we own the switching and transport equipment needed to receive and transmit calls via satellite and fiber optic lines, we do not own a satellite or any fiber optic lines and must therefore lease transmission capacity from other companies. We may not be able to lease facilities at cost-effective rates in the future or enter into contractual arrangements necessary to expand our network or improve our network as necessary to keep up with technological change. . The carriers on whom we rely for intra-Mexico long distance may not stay in business leaving us fewer and more expensive options to complete calls There are only 21-licensed Mexican long distance companies, and we currently have agreements with four of them. One of these, Avantel, S.A. de C.V. has said publicly that it may not continue in the business because of its difficulty in achieving a desired profit margin. If the number of carriers who provide intra-Mexico long distance is reduced, we will have fewer route choices and may have to pay more for this service. . We may have service interruptions and problems with the quality of transmission, causing us to lose call volume and customers To retain and attract customers, we must keep our network operational 24 hours per day, 365 days per year. We have experienced service interruptions and other problems that affect the quality of voice and data transmission. We may experience more serious problems. In addition to the normal risks that any telecommunications company faces (such as fire, flood, power failure, equipment failure), we may have a serious problem if a meteor or space debris strikes the satellite that transmits our traffic, or a volcanic eruption or earthquake interferes with our operations in Mexico City. If a portion of our network is affected by such an event, a significant amount of time could pass before we could re-route traffic from one portion of our network to the other, and there may not be sufficient capacity on only one portion of the network to carry all of our traffic at any given time. To stay competitive, we will attempt to integrate the latest technologies into our network. We are currently implementing "packet switching" transport capabilities such as Asynchronous Transfer Mode and we will continue to explore new technologies as they are developed. Our 10-K describes these technologies. The risk of network problems increases during periods of expansion and transition to new technologies. . Changes in telecommunications regulations may harm our competitive position Historically, telecommunications in the U.S. and Mexico have been closely regulated under a monopoly system. As a result of the Telecommunications Act of 1996 in the U.S. and new Mexican laws enacted in the 1990's, the telecommunications industry in the U.S. and Mexico are in the process of a revolutionary change to a fully competitive system. U.S. and Mexican regulations governing competition are evolving as the market evolves. For example, FCC regulations now permit the regional Bell operating companies (former local telephone monopolies such as Southwestern Bell) to enter the long distance market if certain conditions are met. The entry of these formidable competitors into the long distance market 9 will make it more difficult for us to establish a retail customer base. There may be significant regulatory changes that we cannot even predict at this time. We cannot be sure that the governments of the U.S. and Mexico will even continue to support a migration toward a competitive telecommunications market. . Regulators may challenge our compliance with laws and regulations causing us considerable expense and possibly leading to a temporary or permanent shut down of some operations Government enforcement and interpretation of the telecommunications laws and licenses is unpredictable and is often based on informal views of government officials and ministries. This is particularly true in Mexico and certain of our target Latin American markets, where government officials and ministries may be subject to influence by the former telecommunications monopoly, such as Telmex. This means that our compliance with the laws may be challenged. It could be very expensive to defend this type of challenge and we might not win. If we were found to have violated the laws that govern our business, we could be fined or denied the right to offer services. . Our operations may be affected by political changes in Mexico and other Latin American countries The majority of our foreign operations are in Mexico. The political and economic climate in Mexico is more uncertain than in the United States and unfavorable changes could have a direct impact on our operations in Mexico. The Mexican government exercises significant influence over many aspects of the Mexican economy. For example, a newly elected set of government officials could decide to quickly reverse the deregulation of the Mexican telecommunications industry economy and take steps such as seizing our property, revoking our licenses, or modifying our contracts with Mexican suppliers. A period of poor economic performance could reduce the demand for our services in Mexico. There might be trade disputes between the United States and Mexico that result in trade barriers such as additional taxes on our services. The Mexican government might also decide to restrict the conversion of pesos into dollars or restrict the transfer of dollars out of Mexico. These types of changes, whether they occur or are only threatened, could have a material adverse effect on our results of operations and would also make it more difficult for us to obtain financing in the United States. . If the value of the Mexican Peso declines relative to the Dollar, we will have decreased earnings as stated Dollars Approximately 20% of ATSI's revenue is collected in Mexican Pesos. If the value of the Peso relative to the Dollar declines, that is, if Pesos are convertible into fewer Dollars, then our earnings, which are stated in dollars, will decline. We do not engage in any type of hedging transactions to minimize this risk and do not intend to do so. . We may not successfully integrate the operations of Genesis 10 If we are unable to integrate the operations of Genesis Communications International, Inc. upon completion of the acquisition, it may adversely affect our future operations, specifically, the shift towards and implementation of our retail strategy. RISKS RELATED TO FINANCING . The terms of our preferred stock include disincentives to a merger or other change of control, which could discourage a transaction that would otherwise be in the interest of our stockholders. In the event of a change of control of ATSI, the terms of the Series D and E Preferred Stock permit the holder to choose either to receive whatever cash or stock the common stockholders receive in the change of control transaction as if the Series D and E Preferred Stock had been converted, or to require us to redeem the Series D and E Preferred Stock at $1,560 and $1,250 per share, respectively. If all 3,000 and 10,000 shares of the Series D and E Preferred Stock were outstanding at the time of a change of control, this could result in a payment to the holders of $4,680,000 and $12,500,000, respectively. The possibility that we might have to pay this large amount of cash would make it more difficult for us to agree to a merger or other opportunity that might arise even though it would otherwise be in the best interest of the stockholders. . We may have to redeem the Series D and Series E Preferred Stock for a substantial amount of cash, which would severely restrict the amount of cash available for our operations. The terms of the Series D Preferred Stock require us to redeem the stock for cash in two circumstances in addition to the change of control situation described in the immediately preceding risk factor. First, the terms of the Series D Preferred Stock prohibit the holder from acquiring more than 11,509,944 shares of our common stock, which is 20% of the amount of shares of common stock outstanding at the time we issued the Series D Preferred Stock. The terms of the Series D Preferred Stock also prohibit the holder from holding more than 5% of our common stock at any given time. Due to the floating conversion rate, the number of shares of common stock that may be issued on the conversion of the Series D Preferred Stock increases as the price of our common stock decreases, so we do not know the actual number of shares of common stock that the Series D Preferred Stock will be convertible into. On the second anniversary of the issuance of the Series D Preferred Stock we are required to convert all remaining unconverted Series D Preferred Stock. If this conversion would cause the holder to exceed either of these limits, then we must redeem the excess shares of Series D Preferred Stock for cash equal to $1,270 per share, plus accrued but unpaid dividends. Second, if we refuse to honor a conversion notice or a third party challenges our right to honor a conversion notice by filing a lawsuit, the holder may require us to redeem any shares it then holds for $1,270 per share. If all 3,000 shares were outstanding at the time of a redemption, this would result in a cash payment of $3,810,000 plus accrued and unpaid 11 dividends. If we were required to make a cash payment of this size, it would severely restrict our ability to fund our operations. Similarly, the Series E Preferred Stock requires mandatory redemption if (a) we fail to: issue shares of common stock upon conversion, remove legends on certificates representing shares of common stock issued upon conversion or to fulfill certain covenants set forth in the Securities Purchase Agreement between ATSI and the holders of the Series E Preferred Stock; (b) We fail to obtain effectiveness of the registration statement covering the shares of common stock to be issued upon the conversion of the Series E Preferred Stock prior to March 11, 2001; (c) certain bankruptcy and similar events occur; (d) we fail to maintain the listing of the common stock on the Nasdaq National Market, the Nasdaq Small Cap Market, the AMEX or the NYSE; or (e) our long distance concession license from the Republic of Mexico is terminated or limited in scope by any regulatory authorities. The Redemption Price equals the greater of (x) 125% of the stated value ($1,000) plus 6% per annum of the stated value plus any conversion default payments due and owing by ATSI and (y) the product of (i) the highest number of shares of common stock issuable upon conversion times (ii) the highest closing price for the common stock during the period beginning on the date of first occurrence of the mandatory redemption event and ending one day prior to the date of redemption minus the amount of money we receive upon the exercise of the investment options provided in the Series E Preferred Stock which, upon conversion allows the holders to purchase an additional 0.8 share of ATSI common stock for each share of ATSI common stock received upon conversion. . We may redeem our preferred stock only under certain circumstances, and redemption requires us to pay a significant amount of cash and issue additional warrants; therefore we are limited as to what steps we may take to prevent further dilution to the common stock if we find alternative forms of financing We may redeem the Series A Preferred Stock only after the first anniversary of the issue date, and only if the market price for our common stock is 200% or more of conversion price for the Series A Preferred Stock. The redemption price for the Series A stock is $100 per share plus accrued and unpaid dividends. We may redeem the Series D Preferred Stock only if the price of our common stock falls below $9.00, the price on the date of closing the Series D Preferred Stock. The redemption price is $1,270 per share, plus accrued but unpaid dividends, plus an additional warrant for the purchase of 150,000 shares of common stock. Subject to certain conditions, we have the right to redeem the Series E Preferred Stock if, at any time after October 11, 2001, on any trading day and for a period of 20 consecutive trading days prior thereto, the closing bid price is less than $1.24. In the event that we are able to find replacement financing that does not require dilution of the common stock, these restrictions would make it difficult for us to "refinance" the preferred stock and prevent dilution to the common stock. 12 RISKS RELATING TO MARKET FOR OUR COMMON STOCK . The price of our common stock has been volatile and could continue to fluctuate substantially Our common stock is traded on the AMEX. The market price of our common stock has been volatile and could fluctuate substantially based on a variety of factors, including the following: - announcements of new products or technologies innovations by us or others; - variations in our results of operations; - the gain or loss of significant customers; - the timing of acquisitions of businesses or technology licenses; - legislative or regulatory changes; - general trends in the industry; - market conditions; and - analysts' estimates and other events in our industry. . Future sales of our common stock in the public market could lower our stock price. Future sales of our common stock in the public market could lower our stock price and impair our ability to raise funds in new stock offerings. As of November 10, 2000, we had 67,986,944 shares of common stock outstanding, of which our affiliates held approximately 7,000,000 shares, and 2,091,056 shares issuable upon exercise of outstanding options and warrants, of which approximately 1,113,000 were held by affiliates. In addition, we had 19,582,203 shares reserved for issuance upon conversion of our outstanding Series A, D and E Preferred Stock (subject to adjustment). The shares held by our affiliates are "restricted shares" and, accordingly, may not be sold publicly except in compliance with Rule 144. The remaining outstanding shares of our common stock and the shares issuable upon conversion of our preferred stock and exercise of warrants are freely tradable. In addition, we may issue a significant number of additional shares of common stock as consideration for acquisitions or other investments as well as for working capital. For example, we have agreed to issue approximately 9.6 million shares of our common stock in connection with our acquisition of Genesis. Sales of a substantial amount of common stock in the public market, or the perception that these sales may occur, could adversely affect the market price of our common stock prevailing from time to time in the public market and could impair our ability to raise funds in additional stock offerings. . We will likely continue to issue common stock or securities convertible into common stock to raise funds we need, which will further dilute your ownership of ATSI and may put additional downward pricing pressure on the common stock Since we continue to operate at a loss, we will continue to need additional funds to stay in business. At this time, we are not likely to be able to borrow enough money to continue operations on terms we find acceptable so we expect to have to sell more shares of common stock or more securities convertible in common stock. Convertible securities will likely have 13 similar features to our existing preferred stock, including conversion at a discount to market. The sale of additional securities will further dilute your ownership of ATSI and put additional downward pricing pressure on the stock. From January 1, 1999 to November 10, 2000, we issued 29,793,437 new shares of common stock on a fully diluted basis, which represents approximately 33% of our fully diluted outstanding common stock. The fully diluted outstanding common stock includes an assumed number of shares of common stock that have not yet been issued, but are issuable upon conversion of convertible preferred stock, warrants and stock options. Our convertible preferred stock has a conversion price that floats with the market price of our common stock. We calculated the number of shares included in this amount by using an assumed conversion price based on our market price as of November 10, 2000. The actual number of shares that may be issued may be materially higher or lower. For more information on dilution, please see page 19. . We have signed an agreement for a private equity line of credit, which could further dilute your ownership of ATSI. We signed an agreement on April 10, 2000 with an investor under which we may require the investor to purchase up to 5 million shares of common stock over an eighteen month period at 92% of the market price for our common stock at the time of purchase. We are not required to use this credit line facility, but if we do use this facility, we must issue to the investor warrants for 1,500 shares of common stock for every $100,000 that is invested at an exercise price of 120% of the average of the five closing sale prices preceding the date of the investment, and an additional 1,000 warrants per 100,000 invested as a finder's fee on the same terms. The sale of additional securities would further dilute your ownership of ATSI and put additional downward pricing pressure on the stock. . The potential dilution of your ownership of ATSI will increase as our stock price goes down, since our preferred stock is convertible at a floating rate that is a discount to the market price. Our Series A, D and E Preferred Stock is convertible into common stock based on a conversion price that is a discount to the market price for ATSI's common stock. The conversion price for the Series A Preferred Stock is reset each year on the anniversary of the issuance of the stock, and the conversion price for the Series D and Series E Preferred Stock floats with the market on a day-to-day basis. For each series, the number of shares of common stock that will be issued on conversion increases as the price of our common stock decreases. Therefore, as our stock price falls, the potential dilution to the common stock increases, and the amount of pricing pressure on the stock resulting from the entry of the new common stock into the market increases. . Sales of common stock by the preferred holders may cause the stock price to decrease, allowing the preferred stock holders to convert their preferred stock into even greater amounts of common stock, the sales of which would further depress the stock price. 14 The terms of the preferred stock may amplify a decline in the price of our common stock since sales of the common stock by the preferred holders may cause the stock price to fall, allowing them to convert into even more shares of common stock, the sales of which would further depress the stock price. . The potential dilution of your ownership of ATSI resulting from our Series D and Series E Preferred Stock will increase if we sell additional common stock for less than the conversion price applicable to the Series D and Series E Preferred Stock. The terms of the Series D and Series E Preferred Stock require us to adjust the conversion price if we sell common stock or securities convertible into common stock at a greater discount to market than that provided for the Series D Preferred Stock and at less than the lower of the market price or the conversion price with respect to the Series E Preferred Stock. Therefore, if we sell common stock or securities convertible into common stock in the future on more favorable terms than the discounted terms, we will have to issue even more shares of common stock to the holders than initially agreed on. . The issuance of our convertible preferred stock may violate the rules of The American Stock Exchange, which could result in the delisting of our common stock causing us to be traded as an on over-the-counter bulletin board stock which could negatively impact our stock price and our ability to raise additional capital. The rules of The American Stock Exchange, or the AMEX, require that the voting rights of existing stockholders may not be disparately reduced or restricted through any corporate action or issuance. The AMEX has stated in its interpretive materials relating to the exchange rules that floating priced convertible securities that vote on an as converted basis, such as our Series A Preferred Stock, raise voting rights concerns because of the possibility that, due to a decline in the price of the underlying common stock the preferred stock holder will having voting rights disproportionate to its investment in our company. These interpretive materials also indicate that the AMEX may view the issuance of floating rate convertible securities, such as our Series A, D or E Preferred Stock as a violation of their rule against engaging in operations which are contrary to the public interest since the returns on securities of this type may become excessive compared with those of public investors in our common stock. Should we be delisted from the AMEX, it would be necessary for us to trade as an over-the-counter bulletin board stock. It is likely that the act of being delisted would depress our stock price allowing preferred stock holders to convert their preferred stock into greater amounts of common stock, the sale of which could further depress our stock price. Additionally, it is likely that it may be more difficult for us to raise additional capital on favorable terms if we were no longer listed on a national exchange. We expect to issue additional shares of common stock to pay dividends on the preferred stock, further diluting your ownership of ATSI and putting additional downward pricing pressure on the common stock. 15 The Series A Preferred Stock requires quarterly dividends of 10% per annum, and the Series D Preferred Stock requires quarterly dividends of 6% per annum. We have the option of paying these dividends in shares of common stock instead of cash and we expect to use that option. The number of shares of common stock that are required to pay the dividends is calculated based on the same floating conversion price applicable to the conversion of the preferred stock, so the lower our common stock price, the more shares of common stock it takes to pay the dividends. The issuance of these additional shares of common stock will further dilute your ownership of ATSI and put additional downward pricing pressure on the common stock. The amount of dividends accrued as of October 31, 2000 is approximately $146,000 on Series A Preferred Stock, and approximately $135,000 on the Series D Preferred Stock. . We have agreed to issue additional shares as consideration for the purchase of Genesis Communications International, Inc. We will have to issue up to an additional 9.6 million shares upon the closing of this transaction. The entry of these shares will put further market pressure on the price of common stock. You will almost certainly not receive any cash dividends on the common stock in the foreseeable future. Sometimes investors buy common stock of companies with the goal of generating periodic income in the form of dividends. You may receive dividends from time to time on stock you own in other companies. We have no plan to pay dividends in the near future. . If the price of common stock falls to a low price for a substantial period of time, the AMEX may delist our common stock The AMEX has in the past delisted stock that fell below $4 per share for an extended period of time. If our common stock falls to this level and is delisted, trading in our common stock would be conducted in the over-the- counter market on the electronic bulletin board or in the pink sheets administered by the NASD. This would likely adversely affect the liquidity of the common stock because it would be more difficult for stockholders to obtain accurate stock quotations. In addition, if our stock were not traded on a national exchange, sales of our stock would likely be subject to the SEC's penny stock rules which generally create a delay between the time that a stockholder decides to sell shares and the time that the sale may be completed. . The partial distribution of shares of our subsidiary GlobalSCAPE will tend to decrease the price of our common stock On September 14, 2000 we completed a partial distribution of GlobalSCAPE to our stockholders. Completion of this transaction partially separates the value of GlobalSCAPE that was historically inherent in our stock price and may reduce the price of our stock price. 16 . A delay or failure to complete a public offering may have a negative impact on us If we experience a delay or fail to complete a public offering we may inhibit GlobalSCAPE's ability to accelerate the implementation of their business plan. Additionally, a delay or failure to complete a public offering may adversely impact the influx of further capital into ATSI and/or GlobalSCAPE. . Our Certificate of Incorporation and Bylaws and Delaware law could make it less likely that our stockholders receive a premium for their shares in an unsolicited takeover attempt Certain provisions of our certificate of incorporation, our bylaws and the Delaware General Corporation Law could, together or separately, discourage potential acquisition proposals or delay or prevent a change in control. Currently, those provisions include a classified board of directors, a prohibition on written consents in lieu of meetings of the stockholders and the authorization to issue up to 10,000,000 shares of preferred stock and up to 100,000,000 shares of common stock. Our board of directors has the power to issue any or all of these additional shares without stockholder approval, subject to the rules of the AMEX that require stockholder approval of the issuance of common stock or securities convertible into common stock equal to or in excess of 20.0% of the number of shares of common stock or the voting power outstanding before the issuance. The preferred shares can be issued with such rights, preferences and limitations as may be determined by the board. The rights of the holders of common stock will be subject to, and may be adversely affected by, the commitments or contracts to issue any additional shares of common stock or any shares of preferred stock. Authorized and unissued preferred stock and common stock could delay, discourage, hinder or preclude our unsolicited acquisition, could make it less likely that the stockholders receive a premium for their shares as a result of any such attempt and could adversely affect the market price of, and the voting and other rights of, the holders of outstanding shares of common stock. DESCRIPTION OF ATSI CAPITAL STOCK As of November 10, 2000, the authorized and outstanding capital stock of ATSI consisted of 100,000,000 shares of ATSI common stock, of which 67,986,944 shares were issued and outstanding, and 10,000,000 shares of preferred stock of which 50,000 shares have been designated as Series A Preferred Stock, of which 17,703 were issued and outstanding, 2,000 shares have been designated as Series B Preferred Stock, of which no shares were issued and outstanding, 500 have been designated as Series C Cumulative Convertible Preferred Stock, of which no shares are issued and outstanding, 3,000 shares have been designated as Series D Preferred Stock, all of which are issued and outstanding and 15,000 shares of Series E Cumulative Convertible Preferred Stock, of which 2,500 were issued and outstanding. At November 10, 2000, the total number of shares and issuable upon conversion of the Series A, Series D and Series E Preferred Stock, and ATSI's private equity line of credit was approximately 24.6 million shares of common stock. ATSI also has an aggregate of 1,540,136 warrants outstanding with an average exercise price of $1.95 per share and options to purchase 1,460,011 shares of common stock outstanding at an average exercise price of $1.12 per share. 17 The following description provides a summary of the material rights and limitations relating to ownership of ATSI's common stock. Common Stock Subject to the rights of holders of preferred stock then outstanding, holders of common stock are entitled to receive such dividends as may from time to time be declared by the Board of Directors of ATSI. Holders of common stock are entitled to one vote per share on all matters on which the holders of common stock are entitled to vote. Because holders of common stock do not have cumulative voting rights, the holders of a majority of the shares of common stock represented at a meeting can select all of the directors. In addition, super majority voting requirements apply in respect of certain stockholder actions. Holders of common stock have no preemptive rights to subscribe for any additional securities that ATSI may issue and there are no redemption provisions or sinking fund provisions applicable to the common stock, nor is the common stock subject to calls or assessments by ATSI. All shares of common stock are legally issued, fully paid and nonassessable. Upon the liquidation, dissolution or winding up of ATSI, holders of the common stock are entitled to share equally, share-for-share, in the assets available for distribution after payment to all creditors of ATSI, subject to the rights, if any, of the holders of any outstanding shares of preferred stock. Preferred Stock Pursuant to the ATSI Certificate of Incorporation, the Board of Directors of ATSI is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of preferred stock from time to time in one or more Series and to establish the number of shares to be included in each such Series and to fix the designation, powers, preferences and relative, participating, optional and other special rights of the shares of each such Series and any qualifications, limitations or restrictions thereof. Because the Board of Directors has such power to establish the powers, preferences and rights of each Series, it may afford the holders of preferred stock preferences, powers and rights (including voting rights) senior to the rights of the holders of common stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. There are currently three Series of preferred stock outstanding: Series A Preferred Stock, Series D Preferred Stock and Series E Preferred Stock. The descriptions of the features of the Series A, Series D and Series E Preferred Stock set forth below are summaries only and are qualified by ATSI's Certificate of Incorporation, copies of which are available from ATSI. Features of Series E Preferred Stock - ------------------------------------ You can find definitions of certain terms used in this description of the features of our Series E Preferred Stock under the subheading "Certain Definitions." - ------------------------------------------------------------------------------ Series E - ------------------------------------------------------------------------------ Shares Outstanding 2,500; an additional 7,500 shares to be issued at 2/nd/ Closing, - ------------------------------------------------------------------------------ 18 - ------------------------------------------------------------------------------ subject to the satisfaction of certain conditions outside of the investors's control. The Company is registering common stock for both closings. - ------------------------------------------------------------------------------ Amount Paid Per Share $1,000 - ------------------------------------------------------------------------------ Dividends None - ------------------------------------------------------------------------------ Liquidation Preference Prior to common stock, shares ratably with Series A and D Preferred Stock; liquidation payment of $1,000 per share outstanding plus 6% per annum. - ------------------------------------------------------------------------------ Voting Rights None, except as required by Delaware law. - ------------------------------------------------------------------------------ Conversion Price Lesser of the Market Price and the Fixed Conversion Price but the Conversion Price shall not be less than the Floor Price. - ------------------------------------------------------------------------------ Conversion Time By the Holders: At any time and from time to time; provided, however, that, subject to certain exceptions, prior to the date which is the later of (a) February 11, 2001 and (b) the date this registration statement (of which this prospectus is a part) is declared effective, the holders may not convert at a price less than $1.24. By ATSI: Subject to certain exceptions, at any time after October 11, 2001. - ------------------------------------------------------------------------------ Adjustments to The conversion price is subject to adjustment for Conversion Price stock splits, stock dividends and similar events. In addition, if ATSI sells common stock or securities convertible into or exchangeable for common stock at a price less than the conversion price in effect, the conversion price will be adjusted on a weighted average basis. - ------------------------------------------------------------------------------ Change of Control of ATSI Holder may convert to whatever type of security the common stockholders received in the change of control transaction. - ------------------------------------------------------------------------------ Mandatory Redemption Holder may elect redemption at the greater of (i) $1,250 per share plus 6% per annum plus all default payments and liquidated damages, if any, and (ii) the Parity Value if: ATSI refuses to: honor conversion notice, ATSI fails to obtain an effective registration statement prior to March 11, 2001, if bankruptcy proceedings are initiated against ATSI, if the Mexican government limits or terminates the scope of ATSI's concession or if ATSI fails to maintain a listing on NASDAQ, NYSE or AMEX. - ------------------------------------------------------------------------------ Optional Redemption Subject to certain conditions, at ATSI's option if closing bid price is below $1.3125 and has been for the 20 preceding trading days, at a price equal to $1,150 per share plus 6% per annum plus all default payments and liquidated damages, if any. - ------------------------------------------------------------------------------ Liquidated Damages for If (i) the Registration Statement is not declared Failure to Meet effective by February 11, 2001, (ii) sales of the Registration ATSI common stock - ------------------------------------------------------------------------------ 19 - ------------------------------------------------------------------------------ Registration cannot be made pursuant to this registration statement (of which this prospectus is a part) after it is declared effective or (iii) the common stock is not traded on the Nasdaq National Market, the Nasdaq Small Cap Market, the NYSE or the AMEX, ATSI shall pay to each holder an amount equal to $1,000 times .03 times the sum of the number of months that any of the conditions specified above exists. - ------------------------------------------------------------------------------ Investment Option On any conversion date relating to a conversion of the Series E Preferred Stock, the holder has the option to purchase eight tenths (.80) of one additional share of common stock for every share of common stock issuable upon conversion, at an exercise price equal to the conversion price then in effect. - ------------------------------------------------------------------------------ Other No issuances of common stock that would cause the holder to own more than 4.9% of ATSI's total common stock at any given time; Total issuances of common stock during term of Series E not to exceed 13,590,590 (19.99% of ATSI's total shares outstanding at closing date), without prior stockholder approval; Ten day right of first refusal on issuance of common stock, warrants for common stock, or securities convertible into common stock except for issuance in a firm commitment underwritten public offering, issuances in connection with a merger or acquisition or upon conversion or exercise of outstanding options, warrants or other convertible securities. For issuances under ATSI's equity line of credit, the right of first refusal is for 15 trading days. - ------------------------------------------------------------------------------ Certain Definitions. "Fixed Conversion Price" means $ 1.65 per share; provided, however, that if the Reset Price is lower than the Fixed Conversion Price on the Reset Date, then the Fixed Conversion Price will be the Reset Price but if ATSI issues or sells --- equity securities under its equity line of credit, the Fixed Conversion Price will be the lowest of (i) the Fixed Conversion Price otherwise in effect, (ii) the price at which common stock is issued under the equity line or (iii) the average closing bid price for the common stock during the 10 consecutive trading days prior to the issuance under the Equity Line. "Floor Price" means $ 1.24 per share but if the closing bid price of the common stock is less than $1.24 per share for any 10 trading days during any 20 consecutive trading day period, then the Floor Price will be eliminated. 20 "Market Price" means the average of the 5 lowest closing bid prices during the 10 consecutive trading dates before the date of a notice of conversion. "Parity Value" means (i) the product of (x) the highest number of shares of common stock issuable upon conversion of the Series E Preferred Stock times (y) the highest closing price for the common stock during the period from the date that a mandatory redemption event first occurred and ending on the day prior to the date of the mandatory redemption minus (ii) the aggregate exercise price payable upon full exercise of investment option described above. "Reset Price" means the average of the closing bid prices for the lowest 5 consecutive trading days during the 20 consecutive trading day period ending on the Reset Date. "Reset Date" means the date which is the later of (i) February 11, 2001 and (ii) the date the Registration Statement is declared effective by the SEC. Features of Series A Preferred Stock - ------------------------------------ - ------------------------------------------------------------------------------ Series A - ------------------------------------------------------------------------------ Shares Outstanding 17,703 - ------------------------------------------------------------------------------ Amount Paid Per Share $100 - ------------------------------------------------------------------------------ Dividends 10% per annum payable quarterly in arrears beginning June 1, 1999; payable in shares of ATSI common stock participate in distributions to common stock holders as if preferred stock had been converted into common stock on record date for distribution. - ------------------------------------------------------------------------------ Dividend Preference Prior to common stock, ratably with Series D Preferred Stock. - ------------------------------------------------------------------------------ Liquidation Preference Prior to common stock, shares ratably with Series D Preferred Stock; liquidation payment of $100 per share outstanding plus accrued and unpaid dividends. - ------------------------------------------------------------------------------ Voting Rights Votes as if conversion of outstanding shares occurred on record date for vote; majority approval required for significant corporate events such as merger or sale. - ------------------------------------------------------------------------------ Conversion Price Average of closing sale prices for the 20 trading days preceding issuance times $100 per share, plus accrued and unpaid dividends; reset on each anniversary date to greater of 75% of initial conversion price or 75% of 20 day trading average prior to anniversary date. - ------------------------------------------------------------------------------ Conversion Time From date of issuance to February 28, 2005; mandatory conversion on February 28, 2005. - ------------------------------------------------------------------------------ Adjustments to As appropriate in event of stock split, reverse Conversion Price stock split or stock dividend. - ------------------------------------------------------------------------------ Change of Control of ATSI no special provision - ------------------------------------------------------------------------------ Mandatory Redemption N/A - ------------------------------------------------------------------------------ Optional Redemption At ATSI's option after first anniversary of issue date if - ------------------------------------------------------------------------------ 21 - ------------------------------------------------------------------------------ market price of common stock is 200% or more of conversion price, for $100 per share plus accrued and unpaid dividends. - ------------------------------------------------------------------------------ Trading/ Restricted, common shares issued on conversion Conversion Restrictions restricted with exception of common shares underlying 10,000 shares of Series A which ATSI has agreed to register. - ------------------------------------------------------------------------------ Registration Rights For 10,000 shares issued February 4, 2000 registration statement declared effective September 8, 2000. - ------------------------------------------------------------------------------ Liquidated Damages for A total of $50,000 accrued prior to effectiveness Failure to Meet on September 8, 2000. Registration Deadlines - ------------------------------------------------------------------------------ Other N/A - ------------------------------------------------------------------------------ Features of Series D Preferred Stock - ------------------------------------------------------------------------------ Series D - ------------------------------------------------------------------------------ Shares Outstanding 3,000 - ------------------------------------------------------------------------------ Amount Paid Per Share $1,000 - ------------------------------------------------------------------------------ Dividends 6% per annum payable quarterly in arrears, beginning March 31, 2000; payable in cash or registered shares of ATSI common stock, at ATSI's election. - ------------------------------------------------------------------------------ Dividend Preference Prior to common stock, ratably with Series A Preferred Stock. - ------------------------------------------------------------------------------ Liquidation Preference Prior to common stock, ratably with Series A Preferred Stock; liquidation payment of $1,300 per share outstanding plus accrued and unpaid dividends. - ------------------------------------------------------------------------------ Voting Rights None, except as required by Delaware law. - ------------------------------------------------------------------------------ Conversion Price Lesser of $5.4375 or 83% of the average of the lowest 5 closing bid prices for the common stock during the 10 trading days prior to conversion. - ------------------------------------------------------------------------------ Conversion Time Any time after February 22, 2000, except for a single 30 day lock out if common stock price falls below $2.50; mandatory conversion of any remaining shares on February 22, 2002. - ------------------------------------------------------------------------------ Adjustments to Upon notice of stock split, dividend, or issuance Conversion Price of additional shares at a discount to market, holder may elect to convert based on average closing bid price during five or fewer trading days preceding conversion; If common stock becomes ineligible for trading on OTCBB, AMEX or NASDAQ, conversion price adjusted to 65% of average of five lowest closing bid prices during ten trading days preceding conversion. If ATSI issues common stock, common stock warrants or securities convertible into common stock at a lower price - ------------------------------------------------------------------------------ 22 - ------------------------------------------------------------------------------- than conversion price for Series D Preferred Stock, and agrees to register the common stock, holder's conversion price is adjusted to lowest price for new issuance. - ------------------------------------------------------------------------------- Change of Control of ATSI holder may elect redemption at 120% of sum of $1,300 per share and accrued and unpaid dividends, or convert to whatever type of security the common stockholders received in the change of control;. - ------------------------------------------------------------------------------ Mandatory Redemption Upon change of control of ATSI, holder may elect redemption at 120% of sum of $1,300 per share and accrued and unpaid dividends, or convert to whatever type of security the common stockholders received in the change of control; Holder may elect redemption at $1,270 per share plus accrued and unpaid dividends if ATSI refuses to honor conversion notice or third party brings suit challenging conversion. - ------------------------------------------------------------------------------ Optional Redemption At ATSI's option if price of common stock falls below price at closing date, for $1,270 per share plus accrued but unpaid dividends plus additional warrant for 150,000 shares of common stock (on same terms as warrant issued to the holder on February 22, 2000). - ------------------------------------------------------------------------------ Trading/ Restricted; common shares issued on conversion to Conversion Restrictions be restricted until registration; one time 30 day lock out if price of common stock is $2.50 or less. - ------------------------------------------------------------------------------ Registration Rights Registration statement declared effective September 8, 2000. - ------------------------------------------------------------------------------ Liquidated Damages for $300,000 accrued before effectiveness on September Failure to Meet 8, 2000. Registration Deadlines - ------------------------------------------------------------------------------ Other Ten day right of first refusal on issuance of common stock, warrants for common stock, or securities convertible into common stock for price less than then-current market price, or debt with interest greater than 9.9%. No issuances of common stock that would cause holder to own more than 5% of ATSI's total common stock at any given time; if 5% limit would be exceeded on mandatory conversion date ATSI may redeem excess shares or extend conversion date for one year. Total issuances of common stock during term of Series D not to exceed 11,509,944 (20% of ATSI's total shares outstanding at closing date); ATSI must redeem any excess. - ------------------------------------------------------------------------------ 23 - ------------------------------------------------------------------------------ May not create new stock having liquidation preference over Series D. - ------------------------------------------------------------------------------ Provisions having possible anti-takeover effects The ATSI Certificate of Incorporation and the ATSI Bylaws contain provisions that could have an anti-takeover effect. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors and in the policies formulated by the Board of Directors and to discourage certain types of transactions which may involve an actual or threatened change of control of ATSI. The provisions are designed to reduce the vulnerability of ATSI to an unsolicited proposal for a takeover of ATSI that does not contemplate the acquisition of all of its outstanding shares or an unsolicited proposal for the restructuring or sale of all or part of ATSI. The provisions are also intended to discourage certain tactics that may be used in proxy contests. Set forth below is a description of such provisions in the ATSI Certificate and the ATSI Bylaws. Pursuant to the ATSI Certificate, directors, other than those, if any, elected by the holders of preferred stock, can be removed from office by the affirmative vote of the holders of preferred stock, owning 66 2/3% of the voting power of the then outstanding shares of capital stock entitled to vote thereon ("Voting Stock"). Vacancies on the Board of Directors may be filled by the remaining directors without stockholder approval. The ATSI Certificate provides for the Board of Directors to be divided into three classes, with staggered three-year terms. As a result, only one class of directors will be elected at each annual meeting of stockholders of ATSI, with the other classes continuing for the remainder of their respective three-year term. The classification of the Board of Directors makes it more difficult to replace the Board of Directors as well as for another party to obtain control of ATSI by replacing the Board of Directors. Since the Board of Directors has the power to retain and discharge officers of ATSI, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. The ATSI Certificate provides that except as otherwise provided for with respect to the rights of holders of preferred stock, no action that is required or permitted to be taken by the stockholders of ATSI at any annual or special meeting of the stockholders may be effected by written consent of the stockholders in lieu of a meeting of stockholders, unless the action by such written consent has been expressly approved in advance by the Board of Directors. This provision makes it difficult for stockholders to initiate or effect an action by written consent, and thereby effect an action opposed by the Board of Directors. The ATSI Certificate and ATSI Bylaws also provide that special meetings of stockholders may be called only by the President or a majority of the Board of Directors of ATSI. In addition, the ATSI Bylaws set forth an advance notice procedure with regard to business to be brought before an annual meeting of stockholders of ATSI. The ATSI Certificate further provides that the Board of Directors, by a majority vote, may adopt, alter, amend or repeal provisions of the ATSI Bylaws. However, stockholders may only adopt, alter, amend or repeal provisions of the ATSI Bylaws by a vote of 66 2/3% or more 24 of the combined voting power of the then outstanding Voting Stock. In addition, the ATSI Certificate provides that whenever any vote of voting stock is required by law to amend, alter, repeal or rescind ("Change") any provision thereof, then, in addition to any affirmative vote required by law the affirmative vote of 66 2/3% or more of the combined voting power of the then outstanding shares of Voting Stock is required to Change certain provisions of the ATSI Certificate, including the provisions referred to above relating to interested stockholder transactions, the filling of vacancies on the Board of Directors, the removal of directors, the limitations on stockholders and the approval of amendments to the ATSI Bylaws. USE OF PROCEEDS The selling stockholders will receive the proceeds from the shares of common stock. We will not receive any of the proceeds. COMMON STOCK ISSUED The common stock offered by this prospectus has been or may be issued to the selling stockholders pursuant to the terms of the following securities: . up to 6,060,606 shares of common stock that may be issued upon the conversion of 2,500 shares of our Series E Preferred Stock issued to RGC International Investors, LDC on October 13, 2000 (the "First Closing") and the conversion of 7,500 shares of our Series E Preferred Stock to be issued to RGC International Investors, LDC (the "Second Closing"), based upon an initial conversion price of $1.65. The actual number of shares issued may be materially higher. You should read the material under "Our Capital Stock -Features of Series E Preferred Stock" for more information on how the conversion price is calculated. . 3,636,364 shares of common stock that may be issued upon the exercise of warrants issued to RGC International Investors, LDS at an exercise price of $1.72. . 75,000 shares of common stock that may be issued upon the exercise of warrants issued to Jesup & Lamont Securities Corporation at an exercise price of $7.17. . 100,000 shares of common stock that may be issued upon the exercise of warrants issued to Binkley LLC at an exercise price of $7.17. The terms of our various preferred stock issuances include many potentially adverse effects for us and our stockholders as described in the Risk Factors section of this prospectus. However, as described in our risk factor captioned, "If we do not raise additional capital, we may go out of business," we are not able to raise funds on terms as favorable as those available to profitable companies. At the time these issuances were made, we needed funds to continue operations and were not able to find financing on more favorable terms. Our Board of Directors believed it to be in the best interest of the stockholders to raise the funds needed to continue operations. 25 You should carefully review this information and the discussion in the Risk Factors section describing the risks arising from the uncertainty regarding the number of shares that may be issued and the potential dilution to your ownership of our common stock. SELLING STOCKHOLDERS The name of the selling stockholders, the amount of common stock owned is as of November 10, 2000, the maximum amount of common stock that may be offered under this registration statement (of which this prospectus is a part), and the percentage ownership in ATSI upon completion of the offering is shown in the table below.
- -------------------------------------------------------------------------------------- Amount of Common Stock Maximum Amount of % of Common Beneficially Amount of Common Stock Stock Owned Owned as of Common Owned upon upon November 10, Stock that may completion completion Name 2000 be Offered of offering of offering - -------------------------------------------------------------------------------------- Jesup & Lamont Securities Corporation 75,000(1) 75,000 (1) 0 0% - -------------------------------------------------------------------------------------- Binkley LLC 100,000(2) 100,000 (2) 0 0% - -------------------------------------------------------------------------------------- RGC International Investors, LDC 19,393,940(3) 19,393,940 (3) 0 0% - --------------------------------------------------------------------------------------
(1) The amount of shares listed in the table as the amount beneficially owned and the maximum amount of common stock that may be offered by Binkley LLC represent the number of shares that they may purchase upon the exercise of warrants issued as a finder's fee in connection with our equity line of credit. (2) The amount of shares listed in the table as the amount beneficially owned and the maximum amount of common stock that may be offered by Jesup & Lamont Securities Corporation represent the number of shares that they may purchase upon the exercise of warrants issued as a finder's fee in connection with our equity line of credit. (3) The number of shares set forth in the table for RGC International Investors represents an estimate of the number of shares of common stock to be offered by RGC International Investors. The actual number of shares of common stock issuable upon conversion of the Series E Preferred Stock and exercise of the related warrants is indeterminate, is subject to adjustment and could be materially less or more than such estimated number depending on factors which cannot be predicted by us at this time, including, among other factors, the future market price of the common stock. The actual number of shares of common stock offered in this prospectus, and included in the registration statement of which this prospectus is a part, includes such additional number of shares of common stock as may be issued or issuable upon conversion of the Series E Preferred Stock and exercise of the related warrants by reason of any stock split, stock dividend or similar transaction involving the common 26 stock, in accordance with Rule 416 under the Securities Act. Under the terms of the Series E Preferred Stock, if the Series E Preferred Stock had been actually converted on November 10, 2000, the conversion price would have been $1.65, which is 120% of the closing bid price on October 12, 2000, at which price the Series E Preferred Stock would have been converted into approximately 6,060,606 shares of common stock. The warrants issued in connection with the Series E Preferred Stock are exercisable into 3,636,364 shares of common stock at an exercise price of $1.72. Under the terms of the Series E Preferred Stock and the related warrants, the shares of Series E Preferred Stock are convertible and the warrants are exercisable by any holder only to the extent that the number of shares of common stock issuable pursuant to such securities, together with the number of shares of common stock owned by such holder and its affiliates (but not including shares of common stock underlying unconverted shares of Series E Preferred Stock or unexercised portions of the warrants) would not exceed 4.9% of the then outstanding common stock as determined in accordance with Section 13(d) of the Exchange Act. Accordingly, the number of shares of common stock set forth in the table for RGC International Investors exceeds the number of shares of common stock that RGC International Investors could own beneficially at any given time through their ownership of the Series E Preferred Stock and the warrants. In that regard, the beneficial ownership of the common stock by RGC International Investors set forth in the table is not determined in accordance with Rule 13d-3 under the Exchange Act. PLAN OF DISTRIBUTION The shares being offered by the selling stockholders or their respective pledgees, donees, transferees or other successors in interest, will be sold from time to time in one or more transactions (which may involve block transactions): . on the American Stock Exchange or on such other market on which the common stock may from time to time be trading; . in privately-negotiated transactions; . through the writing of options on the shares; . short sales; or . any combination thereof. The sale price to the public may be: . the market price prevailing at the time of sale; . a price related to such prevailing market price; . at negotiated prices; or 27 . such other price as the selling stockholders determine from time to time. The shares may also be sold pursuant to Rule 144. The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time. The selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling stockholders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholders. The selling stockholders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed "underwriters" as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts. The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into. If a selling stockholder enters into such an agreement or agreements, the relevant details will be set forth in a supplement or revisions to this prospectus. The selling stockholders and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any other such person. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited form simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. All of these limitations may affect the marketability of the shares. We have agreed to indemnify the selling stockholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities." 28 LEGAL MATTERS The validity of the shares of common stock offered hereby is being passed upon by Raymond G. Romero, San Antonio, Texas. Mr. Romero is ATSI's General Counsel and is an employee. EXPERTS The financial statements and schedules incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. Reference is made to said reports, which include an explanatory paragraph with respect to the uncertainty regarding the Company's ability to continue as a going concern as discussed in Note 2 to the financial statements. WHERE YOU CAN FIND MORE INFORMATION Government Filings. We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). You may read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. The SEC public reference room in Washington D.C. is located at 450 Fifth Street, N.W., Washington D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the pubic reference rooms. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov. ------------------- Information Incorporated by Reference. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and replace information previously filed, including information contained in this prospectus. We incorporate by reference the documents listed below and any future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering has been completed. . Our Annual Report on Form 10-K for the year ended July 31, 2000; . Our current report on Form 8-K dated October 19, 2000; . Our wholly-owned subsidiary GlobalSCAPE's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 You may request a free copy of these filings by writing or telephoning us at the following address: 29 American TeleSource International, Inc. Investor Relations 6000 Northwest Parkway San Antonio, Texas 78249 (210) 547-1000. We will not send exhibits to these documents unless the exhibits are specifically incorporated by reference in this document. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following are the expenses (estimated except for the SEC registration fee) for the issuance and distribution of the securities being registered, all of which will be paid by ATSI: SEC Registration $ 6,309.30 Legal $ 5,000.00 Printing $ 5,000.00 Miscellaneous 500.00 ---------- Total: $16,809.30 ATSI will not pay commissions and discounts of underwriters, dealers or agents, if any, or any transfer taxes. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS As permitted by Section 145 of the Delaware General Corporation Law, ATSI's Amended and Restated Certificate of Incorporation includes a provision that eliminates the personal liability of its directors for monetary damages for breach or alleged breach of their duty of care. In addition, the DGCL and ATSI's Bylaws provide for indemnification of ATSI's directors and officers for certain liabilities and expenses that they may incur in such capacities. In general, directors and officers are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of ATSI, and with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. ATSI has purchased insurance with respect to, among other things; the liabilities that may arise under the provisions referred to above. The directors and officers of ATSI are also insured against liabilities, including liabilities arising under the Securities act of 1933, as amended, which might be incurred by them in their capacities as directors and officers of ATSI and against which they are not indemnified by ATSI. 30 In connection with this offering, RGC International Investors, LDC (or its assignees under a Registration Rights Agreement signed by ATSI and RGC International Investors, LDC) has agreed to indemnify ATSI, and its officers, directors and controlling persons, against any losses, claims, damages or liabilities to which they may become subject that arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in this prospectus or the Registration statement any omission or alleged omission to state in this prospectus or the Registration statement material fact required to be stated or necessary to make the statements in this prospectus or the Registration statement not misleading, to the extent that such statement or omission was made in reliance on the written information furnished to ATSI by RGC International Investors, LDC. ITEM 16. EXHIBITS. 4.1 Securities Purchase Agreement between American TeleSource International, Inc. (ATSI) and RGC International Investors, LDC dated October 11, 2000 (Exhibit 10.1 to Form 8-K filed on October 18, 2000) 4.2 Certificate of Designation, Preferences and Rights of 6% Series E Cumulative Convertible Preferred Stock (Exhibit 10.2 to Form 8-K filed on October 18, 2000) 4.3 Certificate of Correction of Certificate of Designation, Preferences and Rights of 6% Series E Cumulative Convertible Preferred Stock (Exhibit 10.3 to Form 8-K filed on October 18, 2000) 4.4 2nd Certificate of Correction of Certificate of Designation, Preferences and Rights of 6% Series E Cumulative Convertible Preferred Stock (Exhibit 10.4 to Form 8-K filed on October 18, 2000) 4.5 Registration Rights Agreement between American TeleSource International, Inc. and RGC International Investors, LDC (Exhibit 10.5 to Form 8-K filed on October 18, 2000) 4.6 Securities Purchase Warrant between American TeleSource International, Inc. and RGC International Investors, LDC (Exhibit 10.6 to Form 8-K filed on October 18, 2000) 4.7 Securities Purchase Warrant between American TeleSource International, Inc. and Jesup and Lamont Securities Corporation (Exhibit to this Registration statement on Form S-3 filed November 15, 2000) 4.8 Securities Purchase Warrant between American TeleSource International, Inc. and Binkley LLC (Exhibit to this Registration Statement on Form S-3 filed November 15, 2000) 5.1 Opinion of Raymond G. Romero (Exhibit to this Registration statement on Form S-3 filed November 15, 2000) 23 Consent of Arthur Andersen LLP (Exhibit to this Registration statement on Form S-3 filed November 15, 2000) 24 Power of Attorney (included on signature page to the Registration statement) ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: 31 A. Undertakings Regarding Amendments to this Prospectus and the Registration statement 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" in the effective Registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration statement or any material change to such information in the Registration statement. Provided, however, that the undertakings set forth in paragraphs (1)(A)(i) and (ii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by ATSI pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration statement. 2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. Undertaking Regarding Filings Incorporating Subsequent Exchange Act Documents by Reference. ATSI hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of ATSI's Annual Report on Form 10-K pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of any employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration statement shall be deemed to be a new registration statement relating to the securities offered 32 therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Undertaking in Respect of Indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling person of ATSI pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by ATSI of expenses incurred or paid by a director, officer or controlling person of ATSI in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of San Antonio, State of Texas on the 15th day of November 2000. AMERICAN TELESOURCE INTERNATIONAL, INC. By: /s/ H. Douglas Saathoff ------------------------ H. Douglas Saathoff Chief Financial Officer (Duly authorized officer) POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints H. Douglas Saathoff as attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign this Registration statement and any amendments to this Registration statement and to file the same, with exhibits thereto and other documents in connection therewith, with the SEC, granting to said attorney in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. In witness whereof, each of the undersigned has executed this Power of Attorney as of the date indicted. 33 Pursuant to the requirements of the Securities Act of 1933, this Registration statement has been signed by the following persons in the capacities and on the date indicated. /s/ Arthur L. Smith Chairman of the Board of Directors November 15, 2000 - ------------------------ Arthur L. Smith Chief Executive Officer Director (Principal Executive Officer) /s/ H. Douglas Saathoff Chief Financial Officer November 15, 2000 - ------------------------ H. Douglas Saathoff Senior Executive Vice President Treasurer (Principal Accounting and Financial Officer) /s/Richard C. Benkendorf Director November 15, 2000 - ------------------------ Richard C. Benkendorf /s/Carlos K. Kauachi Director November 15, 2000 - ------------------------ Carlos K. Kauachi /s/ Murray R. Nye Director November 15, 2000 - ------------------------ Murray R. Nye /s/ Tomas Revesz Director November 15, 2000 - ------------------------ Tomas Revesz 34 EX-4.7 2 0002.txt SECURITIES PURCHASE WARRANT- JESUP, LAMONT Exhibit 4.7 THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION. AMERICAN TELESOURCE INTERNATIONAL, INC. COMMON STOCK PURCHASE WARRANT 1. Issuance; Certain Definitions. In consideration of good and ------------------------------ valuable consideration, the receipt of which is hereby acknowledged by AMERICAN TELESOURCE INTERNATIONAL, INC. a Delaware corporation (the "Company"), JESUP & LAMONT SECURITIES CORPORATION, or registered assigns (the "Holder") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on March 31, 2003 (the "Expiration Date"), Seventy Five Thousand (75,000) fully paid and nonassessable shares of the Company's Common Stock, $.001 par value per share (the "Warrant Shares"), at an initial exercise price per share (the "Exercise Price") of Seven Dollars and seventeen cents ($7.17) subject to further adjustment as set forth herein. Capitalized terms not defined in this document shall have the meanings ascribed to them in the Private Equity Credit Agreement executed by the Company and the Holder on even date herewith. 2. Exercise of Warrants. This Warrant is exercisable in whole or in --------------------- part at any time and from time to time at the Exercise Price per share of Common Stock, payable in cash or by certified or official bank check, or by "cashless exercise," by means of tendering this Warrant Certificate to the Company to receive a number of shares of Common Stock equal to the difference between the aggregate Market Value of the shares of Common Stock issuable upon exercise of this Warrant Certificate with the annexed Notice of Exercise Form duly executed (which Notice of Exercise Form may be submitted either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof), together with payment of the Exercise Price for the shares of Common Stock purchased, if applicable, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. For the purposes of this Section 2, "Market Value" shall be an amount equal to the average closing bid price of a share of Common Stock, as reported by Bloomberg, LP, for the five (5) trading days preceding the Company's receipt of the Notice of Exercise Form duly executed. 3. Reservation of Shares. The Company hereby agrees that at all times --------------------- during the term of this Warrant there shall be reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant (the "Warrant Shares"). 4. Mutilation or Loss of Warrant. Upon receipt by the Company of ------------------------------ evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 6. Protection Against Dilution. ---------------------------- Capital Adjustments. In case of any stock split or reverse stock split, stock - -------------------- dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original purchase had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering of the Company's stock to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights. 6.2 Adjustment for Spin Off. If, for any reason, prior to the ------------------------ exercise of this Warrant in full, the Company spins off or otherwise divests itself of a part of its business or operations or disposes all or of a part of its assets in a transaction (the "Spin Off") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "Spin Off Securities") to be issued to security holders of the Company, then the Company shall cause (i) to be reserved Spin Off Securities equal to the number thereof which would have been issued to the Holder had all of the Holder's unexercised Warrants outstanding on the record date (the "Record Date") for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (the "Outstanding Warrants") been exercised as of the close of business on the Trading Day immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of the Outstanding Warrants then being exercised, and (II) the denominator is the amount of the Outstanding Warrants. 7. Transfer to Comply with the Securities Act; Registration Rights. ---------------------------------------------------------------- (a) The Company agrees that if it files a registration statement under the Registration Rights Agreement, it shall include the Warrant Shares. (b) If the Company is not required to file a Registration Statement under the Registration Rights Agreement, but the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holder) any of its stock under the Securities Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities to participants in a Company stock plan, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the same of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company, the Company shall cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. (c) This Warrant has not been registered under the Securities Act of 1933, as amended, (the "Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. 8. Notices. Any notice or other communication required or permitted -------- hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, two days after the date of deposit in the United States mails, as follows: (i) if to the Company, to: American TeleSource International, Inc. 6000 Northwest Parkway Suite 110 San Antonio, Texas 78249 ATTN: Chief Financial Officer Telephone No.: (210) 547-1000 Telecopier No.: (210) 547-1001 (ii) if to the Holder, to: Binkley LLC c/o Navigator Management P.O. Box 972 Road Town Tortola, British Vigin Islands Telephon: (284) 494-4770 with a copy to: Krieger & Prager, LLP 39 Broadway - Suite 1440 New York, New York 10006 Telecopier No.: (212) 363-2999 Telephone No.: (212) 689-3322 Any party may be notice given in accordance with this Section to the other parties designate another address or person for receipt of notices hereunder. 9. Supplements and Amendments; Whole Agreement. This Warrant may be -------------------------------------------- amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant of even date herewith contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein. 10. Governing Law. This Warrant shall be deemed to be a contract made -------------- under the laws of the State of Delaware for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the state of Delaware or the State courts of the State of in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Documents. 11. Descriptive Headings. Descriptive headings of the several Sections of --------------------- this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the Company has executed this Warrant as of the 10th day of April, 2000. AMERICAN TELESOURCE INTERNATIONAL, INC. By: /s/ H. Douglas Saathoff ----------------------- Name: H. Douglas Saathoff Its: Chief Financial Officer Attest: /s/ H. Douglas Saathoff ------------------- Name: H. Douglas Saathoff Title: Secretary NOTICE OF EXERCISE OF WARRANT The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate, dated as of April 10, 2000, to purchase ________ shares of the Common Stock, $.001 par value per share, of AMERICAN TELESOURCE INTERNATIONAL, INC., and tenders herewith payment in accordance with Section 1 of said Common Stock Purchase Warrant. Please deliver the stock certificate to: Dated: _____________________ [Name of Holder] By: Name: Its: [_] CASH $ __________________ [_] CASHLESS EXERCISE MARKET VALUE times _______ SHARES $____________________ minus EXERCISE PRICE times _______ SHARES $____________________ equals $____________________ MARKET VALUE $____________________ equals NUMBER OF SHARES ISSUABLE = ___________________ EX-4.8 3 0003.txt SECURITIES PURCHASE WARRANT - BINKLEY LLC Exhibit 4.8 THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION. American TeleSource International, Inc. COMMON STOCK PURCHASE WARRANT 1. Issuance; Certain Definitions. In consideration of good and ------------------------------ valuable consideration, the receipt of which is hereby acknowledged by AMERICAN TELESOURCE INTERNATIONAL, INC. a Delaware corporation (the "Company"), BINKLEY LLC, or registered assigns (the "Holder") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on March 31, 2003 (the "Expiration Date"), One Hundred Thousand (100,000) fully paid and nonassessable shares of the Company's Common Stock, $.001 par value per share (the "Warrant Shares"), at an initial exercise price per share (the "Exercise Price") of Seven Dollars and seventeen cents ($7.17) subject to further adjustment as set forth herein. Capitalized terms not defined in this document shall have the meanings ascribed to them in the Private Equity Credit Agreement executed by the Company and the Holder on even date herewith. 2. Exercise of Warrants. This Warrant is exercisable in whole or in --------------------- part at any time and from time to time at the Exercise Price per share of Common Stock, payable in cash or by certified or official bank check, or by "cashless exercise," by means of tendering this Warrant Certificate to the Company to receive a number of shares of Common Stock equal to the difference between the aggregate Market Value of the shares of Common Stock issuable upon exercise of this Warrant Certificate with the annexed Notice of Exercise Form duly executed (which Notice of Exercise Form may be submitted either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof), together with payment of the Exercise Price for the shares of Common Stock purchased, if applicable, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. For the purposes of this Section 2, "Market Value" shall be an amount equal to the average closing bid price of a share of Common Stock, as reported by Bloomberg, LP, for the five (5) trading days preceding the Company's receipt of the Notice of Exercise Form duly executed. 3. Reservation of Shares. The Company hereby agrees that at all times ---------------------- during the term of this Warrant there shall be reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant (the "Warrant Shares"). 4. Mutilation or Loss of Warrant. Upon receipt by the Company of ------------------------------ evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 5. Rights of the Holder. The Holder shall not, by virtue hereof, be --------------------- entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 10. Protection Against Dilution. ---------------------------- 6.1 Capital Adjustments. In case of any stock split or reverse -------------------- stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original purchase had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering of the Company's stock to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights. 6.2 Adjustment for Spin Off. If, for any reason, prior to the ------------------------ exercise of this Warrant in full, the Company spins off or otherwise divests itself of a part of its business or operations or disposes all or of a part of its assets in a transaction (the "Spin Off") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "Spin Off Securities") to be issued to security holders of the Company, then the Company shall cause (i) to be reserved Spin Off Securities equal to the number thereof which would have been issued to the Holder had all of the Holder's unexercised Warrants outstanding on the record date (the "Record Date") for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (the "Outstanding Warrants") been exercised as of the close of business on the Trading Day immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of the Outstanding Warrants then being exercised, and (II) the denominator is the amount of the Outstanding Warrants. 11. Transfer to Comply with the Securities Act; Registration Rights. ---------------------------------------------------------------- (a) The Company agrees that if it files a registration statement under the Registration Rights Agreement, it shall include the Warrant Shares. (d) If the Company is not required to file a Registration Statement under the Registration Rights Agreement, but the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holder) any of its stock under the Securities Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities to participants in a Company stock plan, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the same of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company, the Company shall cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered . (e) This Warrant has not been registered under the Securities Act of 1933, as amended, (the "Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. 12. Notices. Any notice or other communication required or permitted -------- hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, two days after the date of deposit in the United States mails, as follows: (iii) if to the Company, to: American TeleSource International, Inc. 6000 Northwest Parkway Suite 110 San Antonio, Texas 78249 ATTN: Chief Financial Officer Telephone No.: (210) 547-1000 Telecopier No.: (210) 547-1001 (iv) if to the Holder, to: Binkley LLC c/o Navigator Management P.O. Box 972 Road Town Tortola, British Vigin Islands Telephon: (284) 494-4770 with a copy to: Krieger & Prager, LLP 39 Broadway - Suite 1440 New York, New York 10006 Telecopier No.: (212) 363-2999 Telephone No.: (212) 689-3322 Any party may be notice given in accordance with this Section to the other parties designate another address or person for receipt of notices hereunder. 13. Supplements and Amendments; Whole Agreement. This Warrant may be -------------------------------------------- amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant of even date herewith contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein. 10. Governing Law. This Warrant shall be deemed to be a contract made -------------- under the laws of the State of Delaware for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the state of Delaware or the State courts of the State of in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Documents. 11. Descriptive Headings. Descriptive headings of the several --------------------- Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the Company has executed this Warrant as of the 10th day of April, 2000. AMERICAN TELESOURCE INTERNATIONAL, INC. By: /s/ H. Douglas Saathoff ----------------------- Name: H. Douglas Saathoff Its: Chief Financial Officer Attest: /s/ _______________________ Name: H. Douglas Saathoff Title: Secretary NOTICE OF EXERCISE OF WARRANT The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate, dated as of April 10, 2000, to purchase ________ shares of the Common Stock, $.001 par value per share, of AMERICAN TELESOURCE INTERNATIONAL, INC., and tenders herewith payment in accordance with Section 1 of said Common Stock Purchase Warrant. Please deliver the stock certificate to: Dated: _____________________ [Name of Holder] By: Name: Its: [_] CASH $ __________________ [_] CASHLESS EXERCISE MARKET VALUE times _______ SHARES $____________________ minus EXERCISE PRICE times _______ SHARES $____________________ equals $____________________ MARKET VALUE $____________________ equals NUMBER OF SHARES ISSUABLE = ___________________ EX-5.1 4 0004.txt OPINION OF RAYMOND G. ROMERO Exhibit 5.1 November 15, 2000 American TeleSource International, Inc. 6000 Northwest Parkway, Suite 110 San Antonio, Texas 78249 Re: American TeleSource International, Inc. Registration statement on Form S-3 (the "Registration statement") Ladies and Gentlemen: I have acted as counsel to American TeleSource International, Inc., a Delaware corporation, ("ATSI") in connection with the registration for resale of 19,568,940 shares of common stock of ATSI (the "Shares") on Form S-3. This opinion is being furnished in accordance with the requirements of Item 16 of Form S-3. I have reviewed the following: 1. ATSI's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"); 2. ATSI's Amended and Restated Bylaws (the "Bylaws"); 3. ATSI's Certificate of Designation, Preferences and Rights of 10% Series E Cumulative Convertible Preferred Stock (the "Series A Certificate of Designation"); 4. Registration Rights Agreement between ATSI and RGC International Investors, LDC dated October 11, 2000 (the "RGC Registration Agreement"); 5. Securities Purchase Warrant between ATSI and RGC International Investors, LDC 6. Securities Purchase Warrant between ATSI and Binkley LLC 7. Securities Purchase Warrant between ATSI and Jesup and Lamont Securities Corporation 8. Certificate of Good Standing for ATSI issued by the Secretary of State of the State of Delaware dated April 26, 2000. In such examination, I have assumed the genuineness of all signatures and the authenticity of all documents, instruments, records, and certificates submitted to me as originals. Based on my review of these documents, it is my opinion that the Shares issuable to RGC International Investors, LDC pursuant to the terms of the Series E Preferred Stock and the Warrants issued on October 13, 2000 will be duly authorized, validly issued, fully paid and nonassessable. I consent to the filing of this opinion as an Exhibit to the Registration statement and to the reference to me under the caption "Legal Matters" in the prospectus which is part of the Registration statement. In giving this consent, I do not admit that I come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the Rules and Regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Raymond G. Romero Raymond G. Romero V.P. General Counsel EX-23 5 0005.txt CONSENT OF ARTHUR ANDERSEN Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated September 29, 2000, included in American TeleSource International, Inc.'s Form 10-K for the year ended July 31, 2000 and to all references to our Firm included in this registration statement. /s/ ARTHUR ANDERSEN LLP San Antonio, Texas November 14, 2000 -----END PRIVACY-ENHANCED MESSAGE-----