As filed with the Securities and Exchange Commission on December 23, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
RSI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-176721
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7400 Metro Boulevard
Minneapolis, Minnesota 55439
(612) 896-3020
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Copies to:
Donald C. Lies Robert R. Ribeiro, Esq.
Chief Executive Officer Popham, Haik, Schnobrich & Kaufman, Ltd.
RSI Systems, Inc. 3300 Piper Jaffray Tower
7400 Metro Boulevard 222 South Ninth Street
Minneapolis, Minnesota 55439 Minneapolis, Minnesota 55402
(612) 896-3020 (612) 334-8025
(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 the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================
Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share* Offering Price* Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($.01 par value) 1,500,000 $1.75 $2,625,000 $905
========================================================================================================
</TABLE>
* Estimated solely for purposes of computing the registration fee and
based upon the average of the high and low sales prices for such Common
Stock on December 19, 1996, as reported on the Nasdaq Small Cap market
system.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion: dated December 23, 1996
PROSPECTUS
RSI SYSTEMS, INC.
1,500,000 SHARES
OF
COMMON STOCK
($.01 PAR VALUE)
This Prospectus relates to an aggregate of 1,500,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of RSI
Systems, Inc., a Minnesota corporation ("RSI" or the "Company"), that may be
sold from time to time by the shareholders named herein (the "Selling
Shareholders"). See "Selling Shareholders." The Company will not receive any
proceeds from the sale of the Shares. The Company has agreed to pay the expenses
of registration of the Shares, including certain legal and accounting fees. The
Shares were purchased by the Selling Shareholders from the Company in September
1996 in a private placement at a price of $3.00 per share.
Any or all of the Shares may be offered from time to time in
transactions on the over-the-counter market, in brokerage transactions at
prevailing market prices or in transactions at negotiated prices. See "Plan of
Distribution."
The Shares offered hereby have not been registered under the blue sky
or securities laws of any jurisdiction, and any broker or dealer should assure
the existence of an exemption from registration or effectuate such registration
in connection with the offer and sale of the Shares.
The Common Stock is traded in the over-the-counter market and is quoted
on the Nasdaq SmallCap Market System under the symbol "RSIS." On December 19,
1996, the last reported sale price of the Common Stock as reported on the Nasdaq
SmallCap Market System was $1.75 per share.
FOR INFORMATION CONCERNING CERTAIN RISKS RELATED TO THIS
OFFERING, SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities offered hereby in any jurisdiction in which
it is not lawful or to any person to whom it is not lawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
The date of this Prospectus is ___________, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission. The address of the web site is http://www.sec.gov. In addition,
the Common Stock of the Company is quoted on the Nasdaq SmallCap Market System,
and reports, proxy statements and other information concerning the Company can
also be inspected at the offices of the National Association of Securities
Dealers, 1735 K. Street N.W., Washington, D.C. 20006. This Prospectus does not
contain all the information set forth in the Registration Statement and exhibits
thereto which the Company has filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), and to which reference is hereby
made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus:
(a) the Annual Report on Form 10-KSB for the year ended June 30,
1996;
(b) the Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1996;
(c) the description of RSI's Common Stock contained in the
Company's Registration Statement filed pursuant to Section 12
of the Exchange Act and any amendment or report filed for the
purpose of updating any such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or part of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Mr. Donald C. Lies, RSI Systems, Inc., 7400 Metro Blvd., Suite 475,
Minneapolis, Minnesota 55439, telephone number (612) 896-3020.
RISK FACTORS
The following risk factors should be considered carefully in addition
to the other information contained in or incorporated by reference into this
Prospectus before purchasing the Common Stock offered hereby. This Prospectus,
including the information incorporated herein by reference, contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-
looking statements represent the Company's expectations or beliefs concerning
future events, including the following: any statements regarding future sales
and gross profit percentages, any statements regarding the continuation of
historical trends, any statements regarding the sufficiency of the Company's
cash balances and cash generated from operating and financing activities for the
Company's future liquidity and capital resource needs. The Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those projected in the forward-looking
statements as a result, in part, of the risk factors set forth below. In
connection with the forward-looking statements which appear in this Prospectus,
including the information incorporated herein by reference, prospective
purchasers of RSI Common Stock offered hereby should carefully review the
factors set forth below.
FUTURE CAPITAL NEEDS
The Company believes that it has sufficient cash balances to cover cash
needs until cash generated from sales exceeds operating expenses. The Company,
however, has failed to meet its business plan in the past and there can be no
assurance that it will meet its current plan. In the event sales do not
materialize at the expected rates, management would conserve cash by reducing
administrative expenses as well as product development and sales and marketing
efforts. The Company's working capital requirements may vary substantially from
those planned depending on numerous factors, including a failure to generate
significant revenues in fiscal 1997, an unexpected increase in expenses, growth
of product sales beyond the Company's current plan and other unplanned events.
Required additional capital may be sought from a number of sources and could
include sales of additional shares of capital stock or other securities or loans
from banks or other sources. Any additional sales of capital stock may be
dilutive to holders of the Company's Common Stock. The Company's ability to
obtain additional funding will depend substantially on operating results in
future periods. The Company will be materially adversely affected if it is not
able to achieve positive cash flow or profitability or to obtain any necessary
financing on satisfactory terms.
QUOTATION BY NASDAQ
The Company's Common Stock is currently traded in the national
over-the-counter market and quoted on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") SmallCap Market System. Nasdaq
rules require that companies quoted on the Nasdaq SmallCap Market System have
total assets of at least $2,000,000 and capital and surplus of at least
$1,000,000. As of September 30, 1996, the Company had total assets of $6,914,000
and capital and surplus of $5,720,000. If the Company's Common Stock is not
quoted by Nasdaq in the future, it will be quoted in the local over-the-counter
"pink sheets" and may also be reported on the Nasdaq OTC Bulletin Board.
However, in such event, the public trading market for the Company's Common Stock
could be adversely affected. There can be no assurance that the Company will be
able to meet the applicable requirements for maintaining its Nasdaq SmallCap
Market quotation in the future.
LIMITED SALES
To date, the Company has had only limited sales of its Eris System,
generating revenues for the year ended June 30, 1996 of $1,626,000. As of
September 30, 1996, the Company had an accumulated deficit of $8,605,000. The
Company believes that its future success will be dependent on the successful
marketing and sale of the Eris System and future generations of the Company's
products. There can be no assurance that the Company will generate sufficient
sales to achieve positive cash flow or profitable operations in 1997 or
thereafter.
SUCCESS DEPENDENT ON MARKET ACCEPTANCE
The Company's ultimate success will be highly dependent on its ability to
capitalize on the currently existing market opportunity for desktop conference
systems and to successfully market its Eris and Video Flyer Systems. The Company
believes that the market leaders of desktop conferencing equipment will be
determined during the next several years. To establish its market presence
during this period, the Company must convince a significant number of business
and individual personal computer users that the Eris System, Video Flyer and
other products which may be developed by the Company in the future offer
superior features at a reasonable price as compared to desktop conferencing
systems which have been or will become available from the Company's many
competitors. There can be no assurance that the Company will be able to obtain
sufficient acceptance of its products by individual and business computer users
sufficient to achieve profitable operations.
COMPETITION
The desktop conferencing market and other segments of the overall
market for videoconferencing equipment are characterized by intense competition.
The Company's major competitors in the desktop conferencing market in the United
States presently include AT&T Corporation, PictureTel Corporation, Apple
Computer, Inc. and Intel Corporation. All offer (or in Apple's case, will soon
offer) standards-based systems. These and other companies provide desktop
conferencing systems that provide videoconferencing, document collaboration and
high-speed data transfer capabilities in various forms. In addition, the Company
anticipates that new competitors will attempt to enter the market and that
existing or new competitors will develop systems in the future that duplicate or
improve on various features of the Company's system, including its
cross-platform interoperability. Most of the Company's competitors are well
established, better known and significantly larger, with substantially greater
technical, manufacturing, marketing and financial resources, than the Company.
The greater financial as well as other resources of many of the Company's
present and potential competitors may permit such competitors to respond more
rapidly than the Company to changes in technology which are expected to occur in
the desktop conferencing market. The Company's ultimate ability to compete in
the market will depend upon a number of factors, including its success in
generating market acceptance of the Eris System and the success of its marketing
efforts. The Company intends to compete based upon the quality, reliability and
ease of use of its products. The Company also intends to compete on value
relative to the features its product offers. However, competitive price
reductions may adversely affect the Company's revenues and profitability.
LIMITED HISTORY OF MARKETING, DISTRIBUTION AND SALES
To date, the Company has sold a limited number of systems. During the
first quarter of fiscal year 1997, the Company placed additional emphasis on the
continued development of its direct sales force, which included the hiring of
experienced sales representatives and the announcement of a new incentive-based
compensation plan. The Company also revised its distributor sales program and
established what it believes are important relationships with additional
distributors, both in the U.S. and abroad. Although the Company's marketing
personnel have significant experience in marketing new products and services in
the industry, such personnel have only limited experience in marketing the
Company's product. There can be no assurance that the Company's marketing and
distribution strategy will be successful. In addition, the Company has signed
agreements with only a limited number of distributors and dealers to date. Due
to the limited experience the Company has had with each of its distributors and
dealers, there can be no assurance that any of them will continue to meet their
respective minimum purchase obligations or otherwise perform satisfactorily.
TECHNICAL OBSOLESCENCE
Computer-based technology in the telecommunications industry is
undergoing, and is expected to continue to undergo, rapid and significant
technical advances. While the Company believes that its products have certain
distinct advantages over other, currently available desktop conferencing
systems, the Company expects future technology to be superior to the technology
currently used in its system. Although the Eris and Video Flyer Systems have
been designed to assimilate future technical advances, there can be no assurance
that any such future advances or the development of new or competitive products
by others will not render the Company's system less competitive or obsolete. The
greater finanical as well as other resources of many of the Company's present
and potential competitors may permit such competitors to respond more rapidly
than the Company to changes in technology.
DEPENDENCE ON SUPPLIERS
Currently, the Eris System is being manufactured under contract by
Lucent Technologies (formerly AT&T) Customer Manufacturing Services ("Lucent").
Lucent provides substantially all parts, purchasing and materials inventory,
manufactures and tests the product for the Company and also ships products to
the Company's customers directly from its production facility. Although raw
materials purchasing services are provided by Lucent, alternate suppliers have
been identified by the Company for most components. Major components for which
the Company depends on a single source include the AT&T AVP(TM) compression chip
set manufactured by AT&T Microelectronics and two programmable logic cell array
integrated circuits manufactured by Xilinx Corporation. If these components
become unavailable to the Company, the Company would experience serious delays
to redesign the Eris Systems to accommodate similar components from other
vendors. The Company does not have a contract with Xilinx Corporation. Lucent
purchases the circuits used in the Eris System directly from Xilinx Corporation.
Lucent has agreed to warrant to end-users and the Company that all
products are free from defects in material and workmanship for one year and also
warrants to the Company that all products conform to the Company's written
specifications.
Lucent has agreed to provide the Company with an additional 690 units
under the agreement, after which the Company's agreement with Lucent will
terminate. Through November 1996, 510 of these units have been delivered to the
Company. The Company believes that the remaining 180 units will be delivered to
RSI by the end of 1996.
On September 10, 1996 a new manufacturing agreement was finalized
between the Company and Altron, Inc. for the manufacture of the Eris video
conferencing unit. This manufacturer will provide substantially the same
services to the Company as Lucent has provided in the past. Pursuant to its
agreement with the Company, Altron warrants that all products will be free from
defects in material and workmanship for fifteen (15) months from packaging slip
date if Altron ships to the Company, or for twelve (12) months from the date the
Company ships to the customer, whichever comes first.
The Company regularly upgrades and enhances its software. To date, the
Company has supplied upgrades to its customers free of charge, but it intends to
charge customers for substantive upgrades in the future.
AVAILABILITY AND ACCEPTANCE OF ISDN
The Company believes the growth of the desktop conferencing market is
dependent on the availability and acceptance of Integrated Services Digital
Network ("ISDN") telephone service. To provide ISDN service to their customers,
telephone companies must replace analog switches with digital switches in their
local offices. Management believes that at least 75% of all telephone circuits
in the United States are capable of providing ISDN service. Internationally,
approximately 84%, 80% and 58% of telephone circuits in Europe, Australia and
Japan, respectively, are capable of providing ISDN service. The monthly charge
for ISDN service in the United States ranges between $20 and $80 per month plus,
in certain markets, per-minute charges for usage in excess of minimum levels.
Although the Company believes ISDN service will become more available and less
expensive in the United States, if ISDN service is not available to, or not
accepted by, businesses and individuals, the Company's sales of its Eris System
would be materially adversely affected.
DEPENDENCE ON CUSTOMERS
The Company has no current dependence on a single customer.
LIMITED PROPRIETARY PROTECTION
The Company currently relies on common law trade secrets and on patent,
trademark and copyright protection for the Eris System. The Company filed a
utility patent application and a design patent application for the Eris System
in September and October 1994, respectively. The Company also claims and uses
the trademark Eris and has taken steps to register the trademark under federal
trademark statutes. The Company filed an application for its "intent to use" the
mark "Eris" as a trademark in August 1994 under federal trademark statutes and
intends to file its "statement of use" of that trademark once it is eligible to
do so under such statutes. In October 1996 the Company also claimed and is now
using the names, "Computer Free," "Video Flyer" and "Video Airline." The Company
has also applied for design patents and trademark protection for the mark "Eris"
in six foreign countries. The Company intends to register its copyrights.
There can be no assurance that the Company's measures to protect its
intellectual property will be successful, that it will be granted any patents,
or that any patents that may be granted will be of value to the Company. In the
absence of meaningful intellectual property protection, the Company may be
vulnerable to competitors who could lawfully attempt to copy the Company's
products. Moreover, there can be no assurance that other competitors may not
independently develop the same or similar technology. Similarly, while the
Company believes that it has all rights necessary to market and sell its system
without infringement of intellectual property rights held by others, the Company
has not conducted a formal infringement search and there can be no assurance
that such conflicting rights do not exist. The Company could incur substantial
legal costs in seeking enforcement of its intellectual property rights against
infringement or the unauthorized use of its proprietary technology by others or
in defending itself against similar claims of others. There can be no assurance
that the Company will have sufficient funds to enforce or defend its
intellectual property rights.
ANTI-TAKEOVER PROVISIONS
The Board of Directors is authorized to issue up to 5,000,000
undesignated shares and to fix the rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the Company's shareholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any undesignated shares that may be issued in the future. Although
there is no current intention to do so, the issuance of undesignated shares
could have the effect of delaying, deferring or preventing a change in control
of the Company, which could deprive the Company's shareholders of opportunities
to sell their shares of the Common Stock at a premium. In addition, the
Company's Board of Directors is divided into three classes serving staggered
three-year terms. The staggered terms of directors may limit the shareholders'
ability to change control of the Company even if a change in control were in the
shareholders' interest. Additionally, the Company could adopt in the future one
or more additional anti-takeover measures, such as a shareholder rights plan,
without first seeking shareholder approval, which measures could also make a
change in control of the Company more difficult. The Company is also subject to
provisions of the Minnesota Business Combination Act and the Minnesota Control
Share Acquisition Act that make certain business combinations more difficult.
NO CASH DIVIDENDS
The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to pay dividends on its Common Stock in the
foreseeable future.
LIMITATION OF DIRECTOR LIABILITY
The Company's Restated Articles of Incorporation and Bylaws provide for
indemnification of directors to the full extent permitted by the Minnesota
Business Corporation Act and, to the extent permitted by such law, eliminate or
limit the personal liability of directors to the Company and its shareholders
for monetary damages for certain breaches of fiduciary duty. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
RSI SYSTEMS, INC.
GENERAL
RSI designs, develops and markets telecommunications products for video
conferencing, collaborative computing and high-speed data transfer. The
Company's first product, the ERIS(TM) Visual Communications System (the "Eris
System"), consisting of a peripheral device and application software, enables
personal computer users to engage in "desktop conferencing" -- the ability of
two PC users to conduct a video conference and simultaneously view and work on
documents such as spreadsheets, diagrams or reports ("document collaboration")
and transfer computer files from one user to the other.
In September 1996, the Company announced its new COMPUTER-FREE(TM)
ROLL-AROUND 1000 system (previously developed under the name WGS2000 Workgroup
Rollaround System). This roll-about system package comes complete with all the
devices necessary to provide immediate high-quality ISDN-based video
conferencing without the need for a personal computer. A computer can be
integrated with the system, however, to provide additional functionality if
desired. The Eris ROLL-AROUND 1000 includes a sturdy, locking rolling
cabinet/stand; the Eris computer-free peripheral; a 20-inch Sony color
TV/monitor; a Canon VCC-1 pan/tilt and zoom color camera; the US Robotic
conference room speaker microphone controller; cabling; and an instruction
manual. The computer-free Eris ROLL-AROUND 1000 system does not require the
addition of a Macintosh or personal computer for operation. This dramatically
simplifies the use of the system as well as lowering the initial equipment
costs. The portability allows organizations to bring video conferencing to the
point of need.
To address the private office opportunity, the Company has extended its
computer-free strategy to include the standalone credenza/desktop system called
the ERIS/PROFESSIONAL 1000, which was also released in September 1996. This
system is targeted at workers, managers, and executives who wish to have a
simple, high-quality, competitively priced video conferencing system available
for immediate access. The system connects directly to a color TV/monitor and is
controlled by a simple touch-tone telephone handset. The unique ERIS
computer-free software does not require the user to have any knowledge of
computers or computer skills for operation. One can achieve rapid video
conferencing merely by pushing a button and following the prompts on the screen.
This system includes the ERIS computer-free system peripheral; software; a
9-inch Sony TV/monitor; a stand; a Sony camera; touch-tone telephone handset;
cabling; and an instruction manual. A personal computer or Macintosh can be
added to the system to provide additional functionality.
Also announced in September 1996 was the third computer-free product:
the ERIS/PORTABLE 1000 (previously developed under the name WGS2000 Portable
Workgroup System). It extends the computer-free theme and is targeted at hotels,
conference centers and larger organizations that are looking to keep control of
the video conferencing components. The ERIS/PORTABLE 1000 includes the ERIS
computer-free system peripheral; software; a TV/monitor; a Sony camera;
microphone; handset controller; cabling; an instruction manual and a locking
case. The locking case allows for the system to be preset-up, cabled and ready
for use. This system can be carried or placed on a cart and rolled to a
conference room or site for use. The group or organization will have access to
computer-free video conferencing merely by removing the top and plugging the
system into an ISDN line. A personal computer or Macintosh can be added to the
system to provide additional functionality.
In October the Company announced that it had reached agreement with
Canon Sales Co., Japan, for the distribution of its Eris 1000 desktop video
conferencing system throughout Japan. Canon will market the Eris system through
its direct sales force and through its "0-1" stores. Canon has ordered 180 units
for demonstration, and initial sales are anticipated for the third quarter of
the fiscal year.
The Company was incorporated under the laws of Minnesota on December
21, 1993. Following the establishment of a business infrastructure, which
included the further development of the Eris System and implementation of
marketing strategies, the first beta unit of the Company's ERIS System was
produced in October 1994 and the first production unit was shipped in February
1995.
On July 25, 1995 the Company conducted a public offering of its common
stock, par value $.01 per share (the "Common Stock"). With the net proceeds from
the public offering, including proceeds from the exercise of the underwriter's
overallotment option (approximately $7,400,000), the Company has funded further
research and development related to the enhancement of the ERIS System, has
commenced development of new products and product enhancement and expanded the
Company's sales and marketing activities. In September 1996, the Company
completed a private placement of 1,500,000 shares of Common Stock, resulting in
net proceeds to the Company of approximately $4,005,000.00.
During fiscal 1996 and early fiscal 1997, the Company refocused its
product development, marketing and distribution strategies, and is in the
process of altering its manufacturing processes to allow it to leverage the
feedback it has received from its customers to enable the Company to develop and
distribute products more quickly and cost-effectively. The Company has also made
certain changes to its management team.
SELLING SHAREHOLDERS
The following table sets forth certain information as to the maximum
number of Shares that may be sold by each of the Selling Shareholders pursuant
to this Prospectus.
<TABLE>
<CAPTION>
Number of Number of
Shares Owned Number of Shares to be
Name Prior to the Shares Offered Owned After the
---- Offering Hereby Offering
------------ -------------- ---------------
<S> <C> <C> <C>
Larry Serbin 10,000 10,000 0
Lenore Owings & Paul Ownings 7,000 7,000 0
Paul Owings 7,000 7,000 0
Patricia A. Kay 3,500 3,500 0
Dr. Robert A. Kay Profit Sharing 7,000 7,000 0
TR
Judy Peterson 3,500 3,500 0
Donald C. Kettner Rv. Trust 3,500 3,500 0
Norman Purrington IRA 10,000 10,000 0
Norman Purrington & Joan 10,000 10,000 0
Purrington
John S. Rydberg 3,500 3,500 0
Neal T. Jansen 10,000 10,000 0
Special Situations Cayman Fund, 100,000 100,000 0
LP
Special Situations Fund III, LP 300,000 300,000 0
Dean Moser 3,500 3,500 0
Leonard W. Gehlhar 5,000 5,000 0
Joyce Guinther & Marie S. 3,500 3,500 0
Ackerman
Robert W. Clark Self-Declared 7,000 7,000 0
Trust
James T. Peterson IRA 5,000 5,000 0
Jeff Dobbs 10,000 10,000 0
OSL Orthopedic Surgery LTD 3,500 3,500 0
Pension Plan
Barbara Hansen 5,000 5,000 0
Ellsworth Peterson 10,000 10,000 0
John Hanson 30,000 30,000 0
Robert Terhaar & Harriet 3,500 3,500 0
Terhaar
Gary O. Ostrand & Karin A. 5,000 5,000 0
Ostrand
Aaron Boxer Revocable Trust 200,000 200,000 0
Michelle K. Cheng 100,000 100,000 0
Karin Knoll Roof 5,000 5,000 0
Edward H. Rudoy Rev. Trust 10,000 10,000 0
Robert W. Jonson 2,000 2,000 0
Balakrishna Mundodi 10,000 10,000 0
Vijaya Mundodi
Robert James 10,000 10,000 0
John R. Albers 100,000 100,000 0
David Leo Boehnen Charitable 5,000 5,000 0
Trust
Boehnen Associates I Ltd. 20,000 20,000 0
Partnership
Mark J. Lies Trust(1) 1,000 1,000 0
Byron G. Shaffer(2) 30,000 30,000 0
Patrick D. Wenning 5,000 5,000 0
Lee Wesley 14,000 14,000 0
John Holm IRA 8,000 8,000 0
John Holm 2,000 2,000 0
Jeffrey D. Rahm & Susan Rahm 2,500 2,500 0
Rollin C. Vickers 5,000 5,000 0
Jon Nelson 2,000 2,000 0
David E. Riviere 2,500 2,500 0
Richard C. Perkins 10,000 10,000 0
Robert G. Allison 10,000 10,000 0
First Protection Corp. 5,000 5,000 0
Elaine Millard 7,000 7,000 0
Kenneth R. Parker 20,000 20,000 0
Richard F. Craven(3) 17,500 17,500 0
Delores Merkley 3,000 3,000 0
Steven G. Loe SEP/IRA 30,000 30,000 0
Erika Arneson IRA 5,000 5,000 0
Lawrence Schrader 7,000 7,000 0
Everett Jensen Rev Trust 5,500 5,500 0
Industricorp & Co. Inc. 50,000 50,000 0
FBO T.C. Carpenters
Ellis Family Limited 20,000 20,000 0
Partnership
Kenneth B. Heithoff 15,000 15,000 0
Pyramid Partners, LP 100,000 100,000 0
Piper Jaffray as Custodian 15,000 15,000 0
FBO Harold Roitenberg IRA
Quest Venture Partners 30,000 30,000 0
John F. Rooney 10,000 10,000 0
Piper Jaffray as Custodian 10,000 10,000 0
FBO Kenneth A. Macke IRA
Daniel S. Perkins & 10,000 10,000 0
Patrice M. Perkins
David R. Weir 10,000 10,000 0
Dave M. Westrum 10,000 10,000 0
--------- ---------
1,500,000 1,500,000
</TABLE>
- ---------------------------
(1) Mr. Lies is the father of Donald C. Lies, President and CEO of the
Company.
(2) Mr. Shaffer is a director of the Company.
(3) Mr. Craven is a director of the Company.
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for
their own accounts. The Company will not receive any proceeds from the sale of
the Shares pursuant to this Prospectus. The Company has agreed to pay the
expenses of registration of the Shares, including a certain amount of legal and
accounting fees.
The Selling Shareholders may offer and sell the Shares from time to
time in transactions on the over-the-counter market, in brokerage transactions
at prevailing market prices or in transactions at negotiated prices. Sales may
be made to or through brokers or dealers who may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders or
the purchasers of Shares for whom such brokers or dealers may act as agent or to
whom they may sell as principal, or both. As of the date of this Prospectus, the
Company is not aware of any agreement, arrangement or understanding between any
broker or dealer and the Selling Shareholders.
The Selling Shareholders and any brokers or dealers acting in
connection with the sale of the Shares hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit realized by them on the resale
of Shares as principals may be deemed underwriting compensation under the
Securities Act.
EXPERTS
The consolidated financial statements contained in the Company's Annual
Report on Form 10-KSB incorporated by reference in this Prospectus have been
audited by KPMG Peat Marwick LLP, independent public accountants, as indicated
in their report with respect thereto, and incorporated herein by reference in
reliance upon the authority of such firm as experts in accounting and auditing
in giving said report.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Popham, Haik, Schnobrich & Kaufman, Ltd., 222 South Ninth Street,
Minneapolis, Minnesota 55402.
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company, any Selling
Shareholder or any other person. This Prospectus does not constitute an offer to
sell or a solicitation of any offer to buy to any person in any jurisdiction in
which such offer or solicitation would be unlawful or to any person to whom it
is unlawful. Neither the delivery of this Prospectus nor any offer of sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or that the information contained
herein is correct as of any time subsequent to the date hereof.
--------------------
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................................................ 2
RISK FACTORS.............................................................. 3
RSI SYSTEMS, INC.......................................................... 10
SELLING SHAREHOLDERS...................................................... 12
PLAN OF DISTRIBUTION...................................................... 13
EXPERTS ................................................................. 14
LEGAL MATTERS............................................................. 14
1,500,000 Shares
RSI SYSTEMS, INC.
Common Stock
--------------
PROSPECTUS
--------------
________, 1996
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 905
Accounting Fees and Expenses 2,500
Legal Fees and Expenses 5,000
Miscellaneous 2,000
-------
Total $10,405
All fees and expenses other than the SEC registration fee are
estimated. The expenses listed above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan; (2) acted in good faith; (3) received no
improper personal benefit and Section 302A.255 (with respect to director
conflicts of interest), if applicable, has been satisfied; (4) in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and (5) reasonably believed that the conduct was in the best interests
of the corporation in the case of acts or omissions in such person's official
capacity for the corporation or reasonably believed that the conduct was not
opposed to the best interests of the corporation in the case of acts or
omissions in such person's official capacity for other affiliated organizations.
The Restated Articles of Incorporation and Bylaws of RSI provides that RSI shall
indemnify officers and directors to the extent permitted by Section 302A.521 as
now enacted or hereafter amended.
RSI also maintains an insurance policy or policies to assist in funding
indemnification of directors and officers for certain liabilities.
ITEM 16. LIST OF EXHIBITS
5 Opinion of Popham, Haik, Schnobrich & Kaufman, Ltd. regarding
legality.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Popham, Haik, Schnobrich & Kaufman, Ltd. (included
in Exhibit 5 to this Registration Statement).
24 Power of Attorney.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(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 to such information 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 Commission pursuant to Rule 424(b)
under the Securities Act 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" table 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 in the
information set forth in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the 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.
Insofar as indemnification for liabilities arising Under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
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 liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant 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 has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on December 20, 1996.
RSI SYSTEMS, INC.
By /s/ Donald C. Lies
-----------------------------------------------
Donald C. Lies
Chief Executive Officer, President and Director
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 dates indicated.
By /s/ Donald C. Lies
---------------------------------------------- Dated: December 20, 1996
Donald C. Lies
Chief Executive Officer, President and Director
(principal executive officer) (principal financial officer)
(principal accounting officer)
By /s/ Richard J. Braun
---------------------------------------------
Richard J. Braun Dated: December 20, 1996
Chairman of the Board
By *
---------------------------------------------
Dennis A. Leese Dated: December 20, 1996
Director
By *
---------------------------------------------
William J. Brummond Dated: December 20, 1996
Director
By *
---------------------------------------------
Richard F. Craven Dated: December 20, 1996
Director
By *
---------------------------------------------
Byron G. Shaffer Dated: December 20, 1996
Director
By *
---------------------------------------------
David W. Stassen Dated: December 20, 1996
Director
By /s/ Donald C. Lies
---------------------------------------------
Donald C. Lies Dated: December 20, 1996
As Attorney-in-Fact
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
5 Opinion of Popham, Haik, Schnobrich & Kaufman, Ltd.
regarding legality..........................................
23.1 Consent of KPMG Peat Marwick LLP............................
24 Power of Attorney...........................................
Exhibit 5
(Popham, Haik, Schnobrich & Kaufman, Ltd. Letterhead]
December 20, 1996
RSI Systems, Inc.
7400 Metro Blvd.
Minneapolis, Minnesota 55439
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to RSI Systems, Inc., a Minnesota corporation
(the "Company") in connection with a Registration Statement on Form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the sale of
up to 1,500,000 shares of common stock of the Company, par value $.01 per share
("Common Stock"), of which all such shares will be sold from time to time by the
Selling Shareholders named in the Registration Statement, on the
over-the-counter market or otherwise, directly or through underwriters, brokers
or dealers.
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials.
Based on the foregoing, we are of the opinion that the shares of Common
Stock to be sold by the Selling Shareholders pursuant to the Registration
Statement have been duly authorized by all requisite corporate action and are
validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ Popham, Haik, Schnobrich & Kaufman, Ltd.
Popham, Haik, Schnobrich & Kaufman, Ltd.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
RSI Systems, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 20, 1996
Exhibit 24
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Donald C. Lies and Richard J. Braun, with
full power to each to act without the other, his or her true and lawful
attorney-in-fact and agent with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of RSI Systems, Inc. (the "Company") relating
to an aggregate of 1,500,000 shares of Company Common Stock that may be sold
from time to time by certain shareholders of the Company, and any or all
amendments or post-effective amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and to file the same with such state
commissions and other agencies as necessary, granting unto each such
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that each such attorney-in-fact fund
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on this 20th
day of December, 1996, by the following persons.
/s/ Byron G. Shaffer
----------------------------------
/s/ William J. Brummond
----------------------------------
/s/ Richard F. Craven
----------------------------------
/s/ Dennis A. Leese
----------------------------------
/s/ David W. Stassen
----------------------------------
