<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
----------------------------------------------------------------------------------------------------
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.
<PAGE>

                               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
<PAGE>

                         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
<PAGE>

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>
----------------------------------------------------------------------------------------------------
                                     # 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%

 ----------------------------------------------------------------------------------------------------
 Total                                                   540,833           Less than 1%
----------------------------------------------------------------------------------------------------
</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

                                       2
<PAGE>


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
<PAGE>

   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
<PAGE>

 .   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
<PAGE>

  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
<PAGE>

 .  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.

                                       7
<PAGE>

 . 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
<PAGE>

                          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
<PAGE>

   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