<PAGE>
As filed with the Securities and Exchange Commission on July 14, 2000
Registration File No. 333-35846
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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)
12500 Network Boulevard, Suite 407, San Antonio, Texas 78249
(210) 558-6090
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Arthur L. Smith, Chief Executive Officer
12500 Network Boulevard, Suite 407, San Antonio, Texas 78249
(210) 558-6090
(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 continuos 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. [_]
<PAGE>
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
<TABLE>
<CAPTION>
====================================================================================================
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
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Resale of common stock issued to
refinance debt 533,774 $5.125 $ 2,735,591.75 $ 722.20
----------------------------------------------------------------------------------------------------
Resale of common stock issued upon
conversion of debt 2,099,155 $5.125 $10,758,169.38 $2,840.16
----------------------------------------------------------------------------------------------------
Resale of common stock issuable upon
conversion of convertible preferred
stock 540,833 $5.125 $ 2,562,500 $ 676.50
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Resale of common stock to be paid as
dividend on convertible preferred stock 54,083 $5.125 $ 256,250 $ 67.65
====================================================================================================
</TABLE>
Calculated pursuant to Rule 457 (c), using the average of the high and low
prices reported on April 26, 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.
<PAGE>
PROSPECTUS NOT COMPLETE
[Not Yet Issued]
3,227,845 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 shareholders identified on page 21 of this prospectus are
offering these shares of common stock. For additional information on the
methods of sale, you should refer to the section entitled "Plan of Distribution"
on page 24. We will not receive any of the proceeds from the sale of the common
stock by the selling shareholders.
Our common stock is traded on the American Stock Exchange under the symbol
"AI". On July 12, 2000, the closing price of our common stock was $5.8125 per
share.
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.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
RELY ONLY ON THIS PROSPECTUS........................................ 1
ATSI................................................................ 1
RISK FACTORS........................................................ 3
FORWARD LOOKING STATEMENTS.......................................... 14
OUR CAPITAL STOCK................................................... 14
USE OF PROCEEDS..................................................... 18
COMMON STOCK ISSUED................................................. 18
SELLING SHAREHOLDERS................................................ 21
PLAN OF DISTRIBUTION................................................ 24
LEGAL MATTERS....................................................... 25
EXPERTS............................................................. 25
WHERE YOU CAN FIND MORE INFORMATION................................. 25
</TABLE>
ii
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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.
We also own a subsidiary, GlobalSCAPE, Inc. which sells its proprietary
Internet productivity software, CuteFTP(R), CuteHTML(R), CuteZIP(TM), CuteMAP
and CuteMX(TM). We have announced plans to distribute approximately 27% of the
stock of GlobalSCAPE to our existing shareholders with a record date of 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, 1999 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. 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 the underserved and underdeveloped Latino markets in the Mexico
and 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
as
1
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enhanced prepaid calling services. Our marketing term for these types of
services is "borderless."
For the nine months ended April 30, 2000, the percentage of revenues
generated by its wholesale, retail and Internet e-commerce business was 63%, 25%
and 12%, respectively. Additional financial information can be found in our Form
10-Q filed June 14, 2000 for the three and nine months ended April 30,
2000.
We have signed agreements to acquire a company, which owns a long distance
license issued by the Mexican government. On July 11, 2000 we received final
regulatory approval from the Mexican government to acquire this company.
Currently we must rely 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 six to nine months after the closing of
the acquisition. This will also allow us to implement our retail strategy more
effectively.
We have also signed an 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. We expect the acquisition to
be completed in the first quarter of fiscal 2001.
Our capital stock
As of July 12, 2000 we have 67,018,661 shares of common stock
outstanding.
In addition to the 3,227,845 shares of common stock included in the
registration statement of which this prospectus is a part, on October 26, 1999
as amended on April 14, 2000 and again on July 17, 2000 we filed a registration
statement on Form S-3 to register an additional 2,076,001 shares of common stock
for resale.
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 series A
preferred stock converts to common stock at an initial conversion price of
$1.8490 until December 8, 2001 at which time the conversion price will be
reset.
<TABLE>
<CAPTION>
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# of shares issued at % of total number of
Name conversion price of $ 1.8490 shares outstanding
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock resulting from
conversion of series A preferred
stock 540,833 Less than 1%
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Total 540,833 Less than 1%
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</TABLE>
In addition to the series A preferred stock, we have a series D preferred
stock that also converts at a discount to market. We also have the right, but
not the obligation, to issue up to 5
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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 purchase. As of July 12, 2000,
the total number of shares that would be issued upon full conversion of the
series D, the outstanding series A, and if we issued the full 5 million shares
of common stock under our equity line of credit would be 7,729,657 shares, which
would represent approximately 10% 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, 1999 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 markets for our services and achieve
profitability. 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 April 30, 2000 we had positive working capital of approximately $1.2
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 can not estimate what that amount will be with
reasonable certainty. For the nine months ended April 30, 2000, our negative
cash flows from operations prior to debt service and capital expenditures
were approximately $3.8 million. Conservatively, we will need to be able to
raise similar capital over the next nine to twelve months.
3
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In the near term we expect to sell additional common stock or securities
convertible into common stock, which will dilute our existing shareholders'
percentage ownership of ATSI and depress the price of our common stock. See
the risk factors below under the heading "Risks Related to Market for Common
Stock."
. 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.
. The market for wholesale services is extremely price sensitive and there is
downward pricing pressure in this market making it difficult for us to retain
customers and generate adequate profit from this service
Industry capacity along the routes serviced by ATSI is generally growing as
fiber optic cable is activated. There have also been changes in the
international regulatory scheme that have permitted large carriers such as
AT&T and MCI/WorldCom to reduce the amount they may charge for international
services. These factors, along with intense competition among carriers in
this market, have created severe downward pricing pressure. For example, from
October 1998 to October 1999, the prevailing price per minute to carry
traffic from the U.S. to Mexico declined by approximately 45%. Although we
carried almost twice as much wholesale traffic in fiscal year 1999 than in
fiscal year 1998, we recognized about the same amount of revenue. If these
pricing pressures continue, we must continue to lower our costs in order to
maintain sufficient profits to continue in this market.
. 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, we will have
difficulty paying our carriers in Mexico on time. If our carriers suspend
services to us, it may affect all our customers.
4
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. 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 the first two quarters of fiscal
2000, the monthly average amount due to these suppliers as a group was
approximately $1,724,000. We currently have overdue outstanding balances
with long distance carriers for the first three quarters of fiscal 2000 of
approximately $1.1 million 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
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 amended 10-K, which is
incorporated by reference in this prospectus, includes more information
about our equipment, equipment debt and capital lease obligations - see
footnote 6 to our amended 10-K. 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 3rd quarter, April 30, 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 quarter and
year ending July 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-Q for the quarter ending April 30, 2000. For more
information on our other loans and capital leases you should see our amended
10-K for the year ended July 31, 1999.
. 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 60% of our
total revenues.
5
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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.
. The telecommunications industry has been characterized by steady technological
change. We may not be able to raise the money we need to acquire the new
technology necessary to keep our services competitive.
To compete successfully in the wholesale and retail markets, we must maintain
the highest quality of service. Therefore, we must continually upgrade our
network to keep pace with technological change. This is expensive, and we do
not have the substantial resources that our large competitors have.
. We may not be able to generate the sales volume we need to recover our
substantial capital investment in our infrastructure.
We have made a substantial investment in our network and personnel to position
ourselves in our target markets and will continue to do so. Therefore, we must
achieve a high volume of sales to make this investment worthwhile. We compete
for wholesale and retail customers with larger, and better known companies
making it relatively more difficult for us to attract new customers for our
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 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.
In 1999 we experienced difficulty in obtaining fiber optic cable due to a
supplier's default under the terms of a lease agreement. This difficulty was
central to our failure to meet our revenue goals for 1999 since our goals were
based on implementing a new fiber optic route in January of 1999. We were
required to lease fiber optic lines from a different supplier at a higher
price, with the alternative fiber becoming operational in June 1999 - delaying
the new revenues by six months. This difficulty is described in more detail
in our amended 10-K in Legal Proceedings.
6
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. 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 15 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 volumes 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 effected 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 amended 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 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.
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. 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.
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, 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
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.
8
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RISKS RELATED TO FINANCING
. We owe $330,000 to the holder of our series D preferred stock for taking too
long to obtain an effective registration statement, and we will owe it even
more money if the registration statement is not declared effective soon.
Under the terms of registration rights agreements we signed with The Shaar
Fund at the time we issued our series C preferred stock on September 24, 1999
we are required to pay liquidated damages to The Shaar Fund of $25,000 for
failing to file a registration statement for the underlying common stock by
October 24, 2000 or failing to obtain effectiveness by December 23, 2000, and
an additional $25,000 for each subsequent 30 day period that we fail to meet
those targets. We initially filed our registration statement for the common
stock underlying the series C preferred stock on October 26, 2000, 2 days
late. The Shaar Fund has waived the penalty resulting from that late filing.
As of June 30, 2000, we have not obtained effectiveness of the registration
statement, resulting in liquidated damages owing to The Shaar Fund of
$150,000, with another $25,000 to accrue if the registration statement is not
effective by July 20, 2000.
Under the terms of registration rights agreements we signed with The Shaar
Fund at the time we issued our series D preferred stock on February 22, 2000
we are required to pay liquidated damages to The Shaar Fund of $60,000 for
failing to file a registration statement for the underlying common stock by
April 1, 2000 or failing to obtain effectiveness by June 1, 2000 and an
additional $60,000 for each subsequent 30 day period that we fail to meet
those targets. We filed a registration statement including the common stock
underlying the series D preferred stock late, resulting in liquidated damages
of $60,000. As of July 1, 2000 we have not obtained effectiveness of the
registration statement resulting in an additional $120,000.
. The terms of our preferred stock includes 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
preferred stock permit The Shaar Fund to choose either to receive whatever
cash or stock the common stockholders receive in the change of control as if
the series D stock had been converted, or to require us to redeem the series
D preferred stock at $1560 per share. If all 3,000 shares of the series D
preferred stock were outstanding at the time of a change of control, this
could result in a payment to The Shaar Fund of $4,680,000. 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 shareholders.
. We may have to redeem the series D preferred stock for a substantial amount
of cash, which would severely restrict the amount of cash available for our
operations.
9
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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 prohibits The Shaar Fund
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 Shaar Fund 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 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 Shaar Fund to
exceed these limits, then we must redeem the excess shares of Series D
preferred stock for cash equal to $1270 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 Shaar fund
may require us to redeem any shares it then holds for $1270 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 dividends. If we were
required to make a cash payment of this size, it would severely restrict our
ability to fund our operations.
. 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 $1270 per share, plus
accrued but unpaid dividends, plus an additional warrant for the purchase of
150,000 shares of common stock. 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.
. The partial distribution and public offering of shares of our subsidiary
GlobalSCAPE will have a negative impact on our operating results and cash
flows.
Because GlobalSCAPE currently contributes significantly to our consolidated
EBITDA results, we expect our consolidated operating and cash flow results to
decline after the distribution and offering.
10
<PAGE>
RISKS RELATING TO MARKET FOR OUR COMMON STOCK
. We expect the holders of our preferred stock and warrants and our employees
who have stock options to convert their stock and exercise their warrants and
options, which will result in significant dilution to the common stock
Page 18 of this prospectus contains an explanation of all of the outstanding
securities that are convertible into or exercisable for ATSI's common stock.
The table on page 15 describes the features of the preferred stock in more
detail. Given the current market price of our stock, the holders of most of
these securities will realize a financial benefit by converting or exercising
their securities, so we expect that almost all of the common stock that may
be issued under the terms of each of these securities will be issued. Even if
the holders of the preferred stock do not elect to convert, the terms of the
preferred stock require conversion after a certain time. Since the conversion
price of our preferred stock floats at a discount to market price, we do not
know how many shares will ultimately be issued.
. The sale of the common stock issued upon conversion of preferred stock and
exercise of the warrants will put downward pricing pressure on ATSI's common
stock; any potential short sales by those converting will also put downward
pressure on ATSI's common stock
Most of the common stock issued upon conversion of preferred sock has been or
will be registered with the SEC, meaning that the common stock will be freely
tradable in the near term. We expect many of the stockholders will sell their
holdings in the near term, and in particular we expect The Shaar Fund to sell
its shares of common stock resulting from the conversion of the series D
preferred stock very shortly after it is issued to them. The addition of this
substantial number of shares of common stock to the market will put downward
pricing pressure on out stock.
. 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 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 July 5, 2000, we issued 13,945,475 new shares of
common stock on a fully diluted basis, which represents 19.37% 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
11
<PAGE>
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 July 12, 2000. The
actual number of shares that may be issued may be materially higher or lower.
For more information on dilution, please see page 18.
. We have signed an agreement for a private equity line of credit.
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 common stock for an aggregate
investment of at least $1.5 million over the term of the facility. If ATSI
elects to use this facility, it 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. To use this facility, we must file a
registration statement for the common stock that we would issue and obtain
effectiveness of the registration statement.
If we elect to raise funds by selling shares of common stock under our 5
million share credit line facility described above, those shares will be
issued at an 8% discount to the market price for our common 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 and D 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 stock is reset each year on the
anniversary of the issuance of the stock, and the conversion price for the
series D 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.
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.
12
<PAGE>
. The potential dilution of your ownership of ATSI resulting from our series D
preferred stock will increase if we sell additional common stock for less
than the conversion price applicable to the series D preferred stock.
The terms of the series D 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 provided for the series D 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 Shaar Fund 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
The rules of The American Stock Exchange, or the Amex, require that the
voting rights of existing shareholders 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 it 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 or D 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.
. 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.
The series A stock requires quarterly dividends of 10% per annum, and the
series D 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 June 30,
2000 is $71,275 on series A preferred stock, and $60,000 on the series D
preferred stock.
. We have agreed to issue additional shares as consideration for the purchase
of Genesis Communications International, Inc.
13
<PAGE>
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.
. 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.
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.
OUR CAPITAL STOCK
As of July 12, 2000 we have 67,018,661 shares of common stock outstanding.
In addition to our common stock, we currently have two series of preferred
stock outstanding. The series of preferred stock were issued in private
placements and are not freely tradable,
14
<PAGE>
but are convertible into shares of common stock. We also have warrants
outstanding for the purchase of common stock. The registration statement of
which this prospectus is a part includes 594,916 shares of common stock that
have not been issued, but will likely be issued upon conversion of preferred
stock, payment of dividends on preferred stock, and exercise of warrants. Our
registration statement filed on October 26, 1999 as amended on April 14, 2000
and July 12, 2000, includes 1,564,000 shares of common stock that have not
been issued, but will likely be issued upon conversion of preferred stock,
payment of dividends on preferred stock and exercise of warrants.
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 facility, but if we
do use this facility, we must issue common stock for an aggregate investment
of at least $1.5 million over the term of the facility. If ATSI elects to use
this facility, it 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
finders fee on the same terms. To use this facility, we must file a
registration statement for the common stock that we would issue and obtain
effectiveness of the registration statement. The investor has the right to
terminate this facility if we have not filed a registration statement by July
11, 2000. As of the date of this fililng, the investor has not chosen to
exercise their right to terminate the facility. Accordingly, we have begun
discussions with the investor to extend the termination date.
The features of our common stock are described in our registration
statement on Form S-4 filed with the SEC on March 6, 1998 and incorporated by
reference in this prospectus. The features of the preferred stock and the
registration status of the common stock into which they may be converted are
summarized in the table below.
Features of Series A Preferred Stock
------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Series A
--------------------------------------------------------------------------------
<S> <C>
Shares Outstanding 25,511
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
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 Conversion Price As appropriate in event of stock split,
reverse 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 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 Restrictions conversion 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 for underlying common
stock to be filed by April 30, 2000; with
agreement that first third may not be
converted into common stock until April 30,
2000, second third until July 31, 2000 and
final third until October 31, 2000.
--------------------------------------------------------------------------------
Liquidated Damages for $25,000 for failure to file registration
Failure to Meet Registration statement by April 30, 2000 or obtain
Deadlines effectiveness by 90 days from filing, and
$25,000 for each subsequent 30 day period
that targets are not met
--------------------------------------------------------------------------------
Other N/A
--------------------------------------------------------------------------------
</TABLE>
Other Securities not covered by this prospectus
<TABLE>
<CAPTION>
Series D
--------------------------------------------------------------------------------
<S> <C>
Shares Outstanding 3,000
--------------------------------------------------------------------------------
Amount Paid Per Share $1000
--------------------------------------------------------------------------------
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 $1300
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
--------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
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 Conversion Price Upon notice of stock split, dividend, or
issuance 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 than conversion
price for Series D preferred, 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
$1300 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 $1300 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 $1270 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 $1270
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 Shaar Fund on February 22, 2000)
--------------------------------------------------------------------------------
Trading/ Restricted; common shares issued on
Conversion Restrictions conversion to be restricted until
registration;
one time 30 day lock out if price of common
stock is $2.50 or less
--------------------------------------------------------------------------------
Registration Rights Registration statement for underlying common
stock to be filed by April 1, 2000 and
effective by June 1, 2000
--------------------------------------------------------------------------------
Liquidated Damages for $60,000 for failing to file by April 1, 2000
or obtain
--------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Failure to Meet Registration by June 1, 2000; $60,000 for each subsequent
Deadlines 30 day period by June 1, 2000; $60,000 for
each subsequent 30 day period
--------------------------------------------------------------------------------
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
May not create new stock having liquidation
preference over Series D
--------------------------------------------------------------------------------
</TABLE>
Potential Dilution of all Securities
In addition to our Series A and Series D convertible preferred stock we
have various securities outstanding which could be converted to common stock and
could further dilute your ownership as a shareholder. As of July 12, 2000, we
had 1,645,214 options outstanding at a weighted exercise price of $0.89 and
541,045 warrants outstanding (220,000 of which are related to convertible
preferred stock issuances) at a weighted exercise price of $1.56. At July 12,
2000 if common stock shares were issued for all these potentially dilutive
transactions, the additional shares issued would be approximately 9,915,916
representing approximately 13% of our then outstanding common stock.
Additionally, the Company is obligated to issue an additional 400,000
shares and an additional 100,000 warrants now that it has obtained final
regulatory approval of its acquisition of the Mexican company with a long
distance concession and may be required to issue up to 9.6 million shares of
common stock upon closing of it announced acquisition of Genesis Communications
International, Inc.
USE OF PROCEEDS
The selling shareholders 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 shareholders pursuant to the terms of the following securities:
18
<PAGE>
. 1,728,552 shares of common stock issued on March 13, 2000 in exchange for
convertible notes having a balance of $2,065,719;
. 533,774 shares of common stock issued on March 13, 2000 to raise funds to
retire convertible notes having a balance of $632,202;
. 370,603 shares of common stock issued on March 13, 2000 in exchange for a
note having an outstanding balance of $439,000;
. up to 540,833 shares of common stock that may be issued upon conversion of
10,000 shares of our series A preferred stock issued to Kings Peak, LLC. on
February 4, 2000, based upon an initial conversion price of $1.8490, the
actual number of shares may be materially higher or lower.
. up to 54,083 shares of common stock that may be issued in payment of
dividends on the series A preferred stock issued to Kings Peak, LLC on
February 4, 2000; based upon an initial conversion price of $1.8490; the
actual number of shares may be materially higher or lower.
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.
Convertible Notes
On March 17, 1997, ATSI issued notes to 23 investors for an aggregate of
$2.2 million. The notes had a maturity of March 17, 2000 and provided for
interest at 10% per annum to be paid on a semi-annual basis on March 1 and
September 1 of each year. The notes provided that ATSI could issue a series of
redeemable preferred stock and convert the notes to the preferred stock prior to
maturity. In October 1997, the holders of the notes agreed to a modification
permitting ATSI to defer payment of accrued interest until maturity.
Each note holder was also issued warrants to purchase common stock of ATSI
for no additional consideration. The warrants had an exercise price per share
of $.27, and were exercisable for three years. Note holders were issued
warrants for the purchase of 108,549 shares of common stock for each $50,000
invested in the convertible notes. Total warrants issued were 4,776,156 on the
total convertible notes of $2.2 million.
By letters to the note holders dated December 30, 1999 and January 24,
2000, ATSI offered the note holders the right to exercise outstanding warrants
to purchase ATSI's common stock by offsetting the exercise price against amounts
accrued on their note, and the right to convert any remaining balance of the
note into common stock of ATSI at a conversion price equal to a 20% discount to
the average closing price of ATSI's common stock during the month of January
2000. ATSI also agreed to register the shares of common stock issued upon
conversion of the notes. Note holders having an accrued balance of
approximately $2.27 million
19
<PAGE>
elected to accept ATSI's offer. Of the $2.27 million, approximately $200,000 was
applied to the exercise price of warrants held by the note holders, and the
remaining balance was converted to ATSI common stock at a conversion price of
$1.1844 resulting in the issuance of 1,728,552 shares.
The note holders who did not accept ATSI's offer were paid in full with
the proceeds of a private placement completed on January 31, 2000. ATSI issued
533,774 shares or common stock in the private placement at a purchase price of
$1.1844, the same as the conversion price offered to the converting note
holders.
Beachcraft Note
On October 14, 1997, ATSI borrowed $1 million from the predecessor of
Beachcraft Limited Partnership and issued a note for this amount. The note had
a maturity of October 14, 2004 and provided for interest at 13% per annum. The
principal and interest were to be paid in equal quarterly installments beginning
on January 14, 1998. ATSI made scheduled payments on the note and also offset
amounts due from the holder for the exercise of warrants against amount due
under the note. The outstanding balance of the note on January 31, 2000 was
approximately $440,000. ATSI offered Beachcraft the option to convert the
outstanding balance to shares of ATSI common stock at a conversion price of
$1.1844. Beachcraft accepted the offer, and ATSI issued 319,286 shares of
common stock to Beachcraft Limited Partnership and 51,317 shares to Beachcraft's
designee Data Processing Services.
Series A Preferred Stock
On February 4, 2000, ATSI issued 10,000 shares of its series A preferred
stock to Kings Peak, LLC. ATSI agreed to register the common stock into which
the series A preferred stock may be converted.
Kings Peak may convert each share of series A preferred stock into that
number of shares of common stock that is equal to $1000 plus accrued but unpaid
dividends, divided by a conversion price that is a discount to market, as
described below. The conversion price is reset on each annual anniversary of
the issuance.
The conversion price is the greater of:
. 75% of the average of the price of ATSI's common stock for the twenty
trading days preceding the issuance of the shares, or the anniversary
of the issuance of the shares as applicable
or
. 75% of the initial conversion price.
The initial conversion price is $1.849, which is the average of the market price
of ATSI's common stock for the twenty trading days ending on February 4, 2000.
The price of ATSI's
20
<PAGE>
common stock for each of these days is the closing price on the American Stock
Exchange. The conversion price will be reset on February 4, 2001. The market
price on February 4, 2000 was $4.1250.
The series A preferred stock provides for a dividend of 10% per annum,
payable each June, September, December, and March. Accrued but unpaid dividends
at the time of conversion will be converted to common stock using the conversion
price stated above.
If Kings Peak elects to convert all of its series A preferred stock prior
to February 4, 2001, the first anniversary of its issuance, we will issue
540,833 shares of common stock, plus shares of common stock equal to accrued but
unpaid dividends divided by the conversion price. Since we do not know when
Kings Peak will convert its preferred stock, we do not know how many shares may
be issued with respect to dividends. As of June 1, accrued but unpaid dividends
equaled approximately $33,333, with another $25,000 to accrue quarterly. We
have included 54,083 shares of common stock in the prospectus for the conversion
of dividends, which is the number of shares that would be issued if Kings Peak
converted its preferred stock on the day prior to the first anniversary of the
issue date, and we had not paid any dividends in cash during that time.
We do not know if Kings Peak will convert its series A preferred stock
prior to the first anniversary of it issuance. The conversion price will be
reset on the first anniversary, so if Kings Peak does not convert its preferred
stock prior to this time, we do not know how many shares of common stock we will
issue upon conversion since the conversion price floats with the market.
Under the terms of the registration rights agreement we signed with Kings
Peak at the time we issued our series A preferred stock we are required to pay
liquidated damages of $25,000 for failing to file a registration statement for
the underlying common stock by April 30, 2000. We filed a registration statement
on April 28, 2000. If the registration statement is not effective by July 29,
2000 we will have to pay damages of $25,000, with an additional $25,000 for each
30 day period that we fail to meet this target.
The original terms of the series A preferred stock are described in more
detail in the section captioned "Features of Series A Preferred Stock.
SELLING SHAREHOLDERS
During fiscal 1998, 1999 and the first nine months of fiscal 2000 we have
issued 4,882,008 shares of common stock and 1,721,832 warrants in private
placements of common and preferred stock.
There are 24 selling shareholders. The selling shareholders who acquired
their shares by conversion of convertible notes are: William H. and
Deborah M. Ford, JoAnne Ford, Mathew Clyde Gray, Elizabeth Gray, Larry P.
Baker, Emerson Banack, Jr., Ben J. Chilcutt, Dan Gostylo, William A.
Jeffers, Jr., Peter Kilpatrick, Peter A. Leininger, Darren E. Meyer, Mary
T. Meyer, Bruce Hall, Gene Meyer, and Robert Voelker. The selling
shareholders who acquired their shares on conversion of the Beachcraft
Note are
21
<PAGE>
Beachcraft and Data Processing Services. The selling shareholders who
acquired their shares in the private placement of common stock to raise
funds to retire convertible debt are Beachcraft, Larry Peterson, and E.
Andrew Sensenig.
The selling shareholders and their affiliates have not held any position,
office or other material relationship with ATSI, other than as described
below during the three years preceding the date of this prospectus.
. The selling shareholders that acquired their shares of common stock
upon conversion of the convertible notes were issued warrants for the
purchase of ATSI common stock at the time of the issuance of the
convertible notes. See the section entitled "Convertible Notes,"
above. Each of these selling shareholders has since exercised these
warrants.
. Peter Kilpatrick and Emerson Banack, Jr. are shareholders with the law
firm Langley & Banack, Inc. and William Jeffers, Jr. is a withdrawn
shareholder with that firm. Peter Kilpatrick, Emerson Banack, Jr., and
other attorneys at Langley & Banack perform legal services for us,
primarily in connection with litigation matters. A member of our Board
of Directors, Robert B. Werner is also a shareholder with the firm.
During the twelve months ending April 28, 2000, the firm performed
services for which we have been billed approximately $87,000. Peter
Kilpatrick and Emerson Banack, Jr. have exercised warrants during the
past three years that were issued in private placements.
. E. Andrew Sensenig is a member of the Board of Directors and Vice
Chairman of Travis Morgan Securities, Inc., and is a member of the
Board of Directors of the parent of Travis Morgan. Travis Morgan
assisted us in obtaining conversion of a portion of the convertible
notes and placing the 533,774 shares of common stock that were issued
to raise funds to retire a portion of the convertible notes as
described in the section of this prospectus captioned "Convertible
Notes" on page 22. We issued Travis Morgan 118,800 shares of common
stock as a fee for these services. Mr. Sensenig has exercised warrants
during the past three years that were issued in private placements.
. Dan Gostylo is an employee of Providence Commercial Real Estate
Services, and has acted as a broker in connection with our office
lease for approximately 15,000 square feet having a one hundred and
two-month term. Mr. Gostylo's commission in connection with this lease
was paid by the landlord. Mr. Gostylo has exercised warrants during
the past three years that were issued in a private placement. Mr.
Gostylo has also been issued common stock during the past three years
pursuant to ATSI's call of warrants that were issued in a private
placement.
. David Strolle, Larry A. Peterson and Larry Baker have each been issued
common stock during the past three years pursuant to ATSI's call of
warrants that were issued in a private placement.
22
<PAGE>
The shareholders, the amount of common stock owned as of July 12, 2000 the
maximum amount of common stock that may be offered under the Registration
statement, and the percentage ownership in ATSI upon completion of the offering
is shown in the table below.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Amount of Maximum Amount of % of Common
Common Stock Amount of Common Stock Stock Owned
Name Owned as of Common Stock Owned upon upon
July 12, that may be completion of completion of
2000 Offered offering offering
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beachcraft Limited Partnership 3,324,301 1,659,278 1,665,023 2.48%
---------------------------------------------------------------------------------------------------
Data Processing Services 202,076 51,317 150,759 Less than 1%
---------------------------------------------------------------------------------------------------
Larry Peterson 401,866 25,329 376,577 Less than 1%
---------------------------------------------------------------------------------------------------
E. Andrew Sensenig 368,554 276,260 92,264 Less than 1%
---------------------------------------------------------------------------------------------------
William H & Deborah M. Ford 35,443 12,443 23,000 Less than 1%
---------------------------------------------------------------------------------------------------
JoAnne Ford 8,539 3,111 5,428 Less than 1%
---------------------------------------------------------------------------------------------------
Mathew Clyde Gray 6,982 1,555 5,427 Less than 1%
---------------------------------------------------------------------------------------------------
Elizabeth Gray 6,982 1,555 5,427 Less than 1%
---------------------------------------------------------------------------------------------------
Larry P. Baker 215,829 15,554 200,275 Less than 1%
---------------------------------------------------------------------------------------------------
Emerson Banack, Jr. 100,994 27,531 73,463 Less than 1%
---------------------------------------------------------------------------------------------------
Ben J. Chilcutt 569,467 62,213 507,254 Less than 1%
---------------------------------------------------------------------------------------------------
Dan Gostylo 170,850 11,170 159,680 Less than 1%
---------------------------------------------------------------------------------------------------
William A. Jeffers, Jr. 248,956 55,852 193,104 Less than 1%
---------------------------------------------------------------------------------------------------
Peter Kilpatrick 21,029 10,094 10,965 Less than 1%
---------------------------------------------------------------------------------------------------
Peter A. Leininger 55,852 55,852 0 Less than 1%
---------------------------------------------------------------------------------------------------
Darren E. Meyer 83,792 9,332 65,128 Less than 1%
---------------------------------------------------------------------------------------------------
Mary T. Meyer 83,792 9,332 65,128 Less than 1%
---------------------------------------------------------------------------------------------------
Bruce Hall 122,953 6,221 116,732 Less than 1%
---------------------------------------------------------------------------------------------------
Gene Meyer 45,216 3,111 42,105 Less than 1%
---------------------------------------------------------------------------------------------------
Robert Voelker 35,855 3,111 32,744 Less than 1%
---------------------------------------------------------------------------------------------------
Steve Tsengas 496,167 31,107 465,060 Less than 1%
---------------------------------------------------------------------------------------------------
Adam Vorberg 640,711 245,749 394,962 Less than 1%
---------------------------------------------------------------------------------------------------
Christopher Vorberg 55,852 55,852 0 Less than 1%
---------------------------------------------------------------------------------------------------
Kings Peak LLC 0 540,833 0 Less than 1%
---------------------------------------------------------------------------------------------------
</TABLE>
Explanation of Table
--------------------
. The amount of shares listed in the table, as "owned" by all selling
shareholders is their beneficial ownership of ATSI stock as represented to us
as of July 12, 2000.
. The amount of shares listed in the table as the maximum amount of common
stock that may be offered by Kings Peak LLC represent the number of shares
that they may purchase under the Series A preferred stock assuming a
conversion price of $1.849 per share, the initial conversion price of the
Series A preferred stock until February 4, 2001.
23
<PAGE>
. The amount of shares listed in the table as the maximum amount of common
stock that may be offered by all other selling shareholders is the number of
shares being registered as a part of this prospectus representing the shares
issued to them on March 13, 2000 in exchange for convertible notes, to raise
funds necessary to pay off certain convertible notes and in exchange for an
outstanding notes payable.
. The percentage ownership of each of the selling shareholders in the table
above was calculated as the number of beneficial shares which would be held
by each shareholder assuming they sold all shares related to this prospectus
as a percentage of our total shares outstanding.
PLAN OF DISTRIBUTION
The registration statement of which this prospectus forms a part has been
filed to satisfy registration rights held by the selling shareholders under
agreements between ATSI and the selling shareholders. To ATSI's knowledge, as
of this date, none of the selling shareholders has entered into any agreement,
arrangement or understanding with any particular broker or market maker with
respect to the shares offered by them, nor does ATSI know the identity of the
brokers or market makers which might participate in such an offering. We have
not agreed to pay any underwriting discounts or commissions. We have agreed to
pay the expenses of registration of the shares of common stock included in this
prospectus. Our expenses as of July 12, 2000 for the registration of the common
stock are approximately $40,000.00.
The shares being registered and offered may be sold from time to time by
the selling shareholders while the Registration statement is in effect. The
selling shareholders will act independently of ATSI in making decisions with
respect to the timing, manner, and size of each sale. The sales may be made on
the American Stock Exchange or otherwise, at prices and on terms then prevailing
or at prices related to the market price, or in negotiated transactions.
The shares may be sold by one or more of the following methods:
(1) A block trade in which the broker-dealer engaged by a selling
shareholder would attempt to sell shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction.
(2) Purchases by the broker-dealer as principal and resale by such broker
or dealer for its account according to this prospectus.
(3) ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
To our knowledge, none of the selling shareholders has, as of the date of
this prospectus, entered into any arrangement with a broker or dealer for the
sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales, broker-
dealers engaged by a selling shareholder may arrange for other broker-dealers to
24
<PAGE>
participate. Broker-dealers may receive commissions or discounts from a selling
shareholder in amounts to be negotiated.
In offering the shares, the selling shareholders and any broker-dealers
who execute sales for the selling shareholders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales, and any profits realized by the selling shareholders and the
compensation of such broker-dealers may be deemed to be underwriting discounts
and commissions.
We have agreed to keep the Registration statement of which this prospectus
is a part effective until the Selling Shareholders sell the shares of common
stock offered under this prospectus or until one year following the effective
date of the Registration statement of which this prospectus is a part, whichever
comes first. No sales may be made pursuant to this prospectus after this date
unless we amend or supplement this prospectus to indicate that we have agreed to
extend the effective period.
We cannot assure you that any of the selling shareholders will sell any or
all of the shares of common stock registered in the Registration statement.
LEGAL MATTERS
The validity of the shares of common stock offered hereby is being passed
upon by Alice King, Esq., San Antonio, Texas. Alice King is ATSI's Corporate
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 public 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
25
<PAGE>
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 Amended Annual Report on Form 10-K/A for the year ended July 31, 1999
. Our Amended Quarterly Reports on Form 10-Q/A for the quarters ended October
31, 1999 and January 31, 2000;
. Our Quarterly Report on Form 10-Q for the quarter ended April 30, 2000
. Our Proxy Statement dated October 25, 1999 for our annual meeting of
shareholders;
. The description of our common stock included in our Registration statement on
Form S-4 filed on March 6, 1998.
You may request a free copy of these filings by writing or telephoning us at the
following address:
American TeleSource International, Inc.
Investor Relations
12500 Network Blvd., Suite 407
San Antonio, Texas 78249
(210) 558-6090.
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:
<TABLE>
<S> <C>
SEC Registration $ 4,306.51
Legal $25,000.00
Printing $10,000.00
Miscellaneous 500.00
----------
Total: $39,806.51
</TABLE>
ATSI will not pay commissions and discounts of underwriters, dealers or agents,
if any, or any transfer taxes.
26
<PAGE>
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.
In connection with this offering, Kings Peak LLC (or its assignees under a
Registration Rights Agreement signed by ATSI and Kings Peak LLC) 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 The Shaar Fund.
ITEM 16. EXHIBITS.
4.1 Form of letter dated December 30, 1999 from H. Douglas Saathoff, Chief
Financial Officer of American TeleSource International, Inc. to holders of
Convertible Notes (Exhibit 4.1 to Registration Statement on Form S-3 (No.
333-35846) filed April 28, 2000)
4.2 Form of letter dated January 24, 2000 from H. Douglas Saathoff, Chief
Financial Officer of American TeleSource International, Inc. to holders of
Convertible Notes (Exhibit 4.2 to Registration Statement on Form S-3 (No.
333-35846) filed April 28, 2000)
4.3 Certificate of Designation Preferences and Rights of 10% Series A
Cumulative Convertible Preferred Stock (Exhibit 10.43 to Annual Report on
Form 10-K for the year ending July 31, 1999 filed on October 26, 1999)
4.4 Registration Rights Agreement between American TeleSource International,
Inc. and Kings Peak, LLC dated February 4, 2000 (Exhibit 4.4 to
Registration Statement on Form S-3(No. 333-35846) filed April 28, 2000)
4.5 Form of Convertible Note for $2.2 million principal issued March 17, 1997
(Exhibit 4.5 to Registration Statement on Form S-3 (No. 333-35846) filed
April 28, 2000)
4.6 Form of Modification of Convertible Note (Exhibit 4.6 to Registration
Statement on Form S-3 (No. 333-35846) filed April 28, 2000)
27
<PAGE>
4.7 Promissory Note issued to Four Holdings Ltd. dated October 17, 2000
(Exhibit 4.7 to Registration Statement on Form S-3 (No. 333-35846) filed
April 28, 2000)
4.8 Certificate of Designation, Preferences and Rights of 6% Series B
Cumulative Convertible Preferred Stock (Exhibit 10.34 to Registration
Statement on Form S-3 (No. 333-84115) filed August 18, 1999)
4.9 Certificate of Designation, Preferences and Rights of 6% Series C
Cumulative Convertible Preferred Stock (Exhibit 10.40 to Registration
Statement on Form S-3 (No. 333-84115) filed October 26, 1999)
4.10 Securities Purchase Agreement between The Shaar Fund Ltd. and ATSI dated
July 2, 1999 (Exhibit 10.33 to Registration Statement on Form S-3 (No. 333-
84115) filed August 18, 1999)
4.11 Common Stock Purchase Warrant issued to The Shaar Fund Ltd. by ATSI dated
July 2, 1999 (Exhibit 10.35 to Registration Statement on Form S-3 (No. 333-
84115) filed August 18, 1999)
4.12 Registration Rights Agreement between The Shaar Fund Ltd. and ATSI dated
July 2, 1999 (Exhibit 10.36 to Registration Statement on Form S-3 (No. 333-
84115) filed August 18, 1999)
4.13 Securities Purchase Agreement between The Shaar Fund Ltd. and ATSI dated
September 24, 1999 (Exhibit 10.39 to Registration Statement on Form S-3
(No. 333-89683) filed October 26, 1999)
4.14 Common Stock Purchase Warrant issued to The Shaar Fund Ltd. by ATSI dated
September 24, 1999 (Exhibit 10.41 to Registration Statement on Form S-3
(No. 333-89683) filed October 26, 1999)
4.15 Registration Rights Agreement between The Shaar Fund Ltd. and ATSI dated
September 24, 1999 (Exhibit 10.42 to Registration Statement on Form S-3
(No. 333-89683) filed October 26, 1999)
4.16 Amended ad Restated 1997 Option Plan (Exhibit 10.30 to Registration
Statement on Form S-4 (No. 333-47511) filed March 6, 1998)
4.17 Form of 199 Option Plan Agreement (Exhibit 10.7 to Registration Statement
on Form 10 (No. 000-3007) filed August 22, 1997)
4.18 American TeleSource International, Inc. 1998 Stock Option Plan (Exhibit
4.7 to Registration Statement on Form S-8 filed January 11, 2000)
4.19 Securities Purchase Agreement between The Shaar Fund Ltd. and ATSI dated
February 22, 2000 (Exhibit 4.5 to Registration Statement on Form S-3(No.
333-89683) filed on April 13, 2000
4.20 Certificate of Designation, Preferences and Rights of 6% Series D
Cumulative Convertible Preferred Stock of American TeleSource
International, Inc. (Exhibit 4.6 to Registration Statement on Form S-3(No.
333-89683) filed on April 13, 2000)
4.21 Common Stock Purchase Warrant issued to The Shaar Fund Ltd. by American
TeleSource International dated February 22, 2000 (Exhibit 4.7 to
Registration Statement on Form S-3(No. 333-89683) filed on April 13,
2000)
4.22 Common Stock Purchase Warrant issued to Corporate Capital Management LLC by
American TeleSource International dated February 22, 2000 (Exhibit 4.8 to
Registration Statement on Form S-3(No. 333-89683) filed on April 13,
2000)
28
<PAGE>
4.23 Registration Rights Agreement between The Shaar Fund Ltd. and ATSI dated
February 22, 2000 (Exhibit 4.9 to Registration Statement on Form S-3 (No.
333-89683) filed on April 13, 2000)
5.1 Opinion regarding legality
23 Consent of Arthur Andersen LLP (Exhibit to this Registration statement on
Form S-3 filed July 14, 2000)
24 Power of Attorney (included on signature page to the Registration
statement)
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
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.
29
<PAGE>
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
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 14th day of July
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
30
<PAGE>
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.
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 April 28, 2000
--------------------------
Arthur L. Smith Chief Executive Officer
Director
(Principal Executive Officer)
/s/ H. Douglas Saathoff Chief Financial Officer April 28, 2000
--------------------------
H. Douglas Saathoff Senior Vice President
Secretary Treasurer
(Principal Accounting
and Financial Officer)
/s/ Richard C. Benkendorf Director April 28, 2000
--------------------------
Richard C. Benkendorf
/s/ Carlos K. Kauachi Director April 28, 2000
--------------------------
Carlos K. Kauachi
/s/ Murray R. Nye Director April 28, 2000
--------------------------
Murray R. Nye
/s/ Tomas Revesz Director April 28, 2000
--------------------------
Tomas Revesz
/s/ Robert B. Werner Director April 28, 2000
--------------------------
Robert B. Werner
31
