RSI SYSTEMS INC/MN
S-3/A, 1999-03-19
COMPUTER COMMUNICATIONS EQUIPMENT
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    As filed with the Securities and Exchange Commission on January 19, 1999
                                                      Registration No. 333-70773
    

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                                Amendment No. 1
                                       To
                                    FORM S-3
                             REGISTRATION STATEMENT
                                      Under
                           The Securities Act of 1933
    

                                RSI SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

            Minnesota                                     41-1767211
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                              5555 West 78th Street
                                     Suite F
                             Edina, 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                        Hinshaw & Culbertson
      RSI Systems, Inc.                         3300 Piper Jaffray Tower
   5555 West 78th Street                         222 South Ninth Street
          Suite F                             Minneapolis, Minnesota 55402
   Edina, Minnesota 55439                            (612) 334-8025
      (612) 896-3020

            (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)             1,389,000           $2.625             $3,646,125            $1,435
========================================================================================================
</TABLE>

*        Estimated solely for purposes of computing the registration fee and
         based upon the last sales prices for such Common Stock on March 16,
         1999, 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.

<PAGE>


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.


   
PROSPECTUS                                                SUBJECT TO COMPLETION
                                                             MARCH 18, 1999
    

                                RSI SYSTEMS, INC.

                                1,389,000 SHARES
                                       OF
                                  COMMON STOCK
                                ($.01 PAR VALUE)


   
         This prospectus relates to the sale from time to time of 1,389,000
shares of RSI Systems, Inc., a Minnesota corporation, by the shareholders named
in the section called "Selling Shareholders." RSI will not receive any
proceeds from the sale of the Shares.
    
         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 common stock is traded in the over-the-counter market and is quoted
on the Nasdaq SmallCap Market System under the symbol "RSIS." On March 16, 1999,
the last reported sale price of the common stock as reported on the Nasdaq
SmallCap Market System was $2.625 per share.


         For information concerning certain risks related to this offering, see
         "Risk Factors" beginning on page 3 of this prospectus.

         The Securities and Exchange Commission and State Regulatory Authorities
         have not approved or disapproved these securities, or determined if
         this prospectus is truthful or complete. Any representation to the
         contrary is a criminal offense.
    


         You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The selling security holders are offering to
sell, and seeking offers to buy, shares of RSI common stock only in
jurisdictions where offers and sales are permitted. 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 of any sale of the shares.

       

                The date of this Prospectus is __________, 1999.

       

<PAGE>


       

                                RSI SYSTEMS, INC.

   
         RSI designs, develops, manufactures and markets telecommunications
products for video conferencing. RSI was incorporated under the laws of
Minnesota on December 21, 1993. On July 25, 1995, RSI conducted a public
offering of its common stock.
    

         In July, 1996, RSI brought in a new management team which redesigned
the initial computer dependent video conferencing system into a small
television-based system. In addition, the management team accelerated
development of a second generation, high performance mobile workgroup video
conferencing system product -- the Video Flyer(TM).

   
         The Video Flyer system went into full production for worldwide
distribution in July, 1997. The Video Flyer is a self-contained, high
performance video conferencing component. The system is available in two models:
The Video Flyer 384 and the Video Flyer Rocket. The Video Flyer 384 can
communicate simultaneously over three high volume digital telephone lines to
provide a high quality signal of up to 30 frames per second. The Rocket connects
to only a single high volume digital telephone line and provides business
quality video conferencing of up to 15 frames per second. Both systems are
designed to connect to any size TV, projection system, PC, MAC or laptop
(properly configured) and can support most of the popular industry cameras and
recording, playback and communication devices.

         The Video Flyer is manufactured in Minnesota by Altron, Inc., a
facility that has been regionally recognized as a provider of high quality,
component-type assembly products. All product development for the Video Flyer is
performed in-house. A significant number of no-charge and for-fee new features
are in development. Our management believes these will keep the Video Flyer
current in the evolving technological marketplace and continue to enhance its
price performance and value.
    

                                  RISK FACTORS

   
         You should consider carefully the following risk factors, along with
the other information contained in or incorporated by reference in this
prospectus, in deciding whether to invest in our securities.
    

<PAGE>


   
         RSI HAS SUFFERED OPERATING LOSSES SINCE INCEPTION. RSI was formed in
December 1993 and has financed its operations to date through sales of its
Common Stock. As of June 30, 1998, RSI had an accumulated deficit of
$(15,042,000). There can be no assurance that RSI will generate sufficient sales
from the Video Flyer System or other products to achieve positive cash flow or
profitable operations.

         THERE IS NO ASSURANCE THAT RSI'S STOCK WILL CONTINUE TO BE QUOTED BY
NASDAQ. Nasdaq requires several minimum valuations for member companies to
remain listed. There can be no assurance that RSI will continue to be able to
meet such requirements. If we fail to meet such requirements RSI's common stock
could be delisted from the NASDAQ SmallCap Market. If RSI's common stock is
delisted for failure to meet the NASDAQ listing requirements, the common stock
would be subject to the rules relating to "penny stocks." These rules require
brokers who sell securities subject to such rules to persons other than
established customers and "institutional accredited investors" to complete
certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning the risks of trading in the
security. These rules may restrict the ability of brokers to sell RSI's common
stock and may affect the ability of purchasers in this offering to sell RSI
common stock in the secondary market.

         SUCCESS DEPENDENT ON MARKET ACCEPTANCE. There can be no assurance that
RSI will be able to obtain sufficient acceptance of its products by individuals
and organizations to achieve profitable operations. RSI's success will depend on
its ability to capitalize on the market opportunity for portable conference room
and workgroup conferencing systems and to successfully market its Video Flyer
System. RSI believes that the market leaders of portable conference room and
workgroup conferencing equipment will be determined during the next several
years. To establish its market presence during this period, RSI must convince a
significant number of business, education and government entities that the Video
Flyer System and other products which may be developed by RSI in the future
offer superior features at a reasonable price as compared to other group-type
conferencing systems which have been or will become available from RSI's
competitors.

         RSI IS SUBJECT TO INTENSE COMPETITION. The market for videoconferencing
equipment is intensely competitive. RSI's major competitors in the group
conferencing market in the United States include PictureTel, Vtel, Tandberg,
Vcon, Polycom and Sony. These and other companies provide group conferencing
systems that provide quality video and audio signal videoconferencing. In
addition, we expect 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 RSI's system. Many of RSI's
competitors are well established, better known, and significantly larger, with
substantially greater technical, manufacturing, marketing, and financial
resources than RSI. The greater resources of many of our competitors may permit
them to respond more rapidly than RSI to changes in technology. RSI's ability to
compete in the market will depend upon a number of factors including its success
in generating market acceptance of the Video Flyer System and the success of its
marketing efforts. RSI competes based upon the quality, reliability, flexibility
and the ease of use of its products. RSI also competes on value relative to the
features its product offers. However, if RSI is forced by competitive pressure
to significantly reduce prices RSI's revenues and profitability may be adversely
affected.

         LIMITED HISTORY OF MARKETING, DISTRIBUTION, AND SALES. There can be no
assurance that RSI's marketing and distribution strategy will be successful. As
of September 30, 1998, we have sold approximately $8.5 million of the Video
Flyer systems and related components. RSI's marketing strategy is to focus on
larger businesses, schools and governmental entities which RSI believes will
provide the most significant opportunities for sales of its system. RSI markets
its system worldwide direct and through distributors and dealers. RSI also sells
worldwide through equipment manufacturing relationships with Philips North
America and VTEL Corporation. Although RSI's marketing personnel have
significant experience in marketing new products and services in the industry,
such
    

<PAGE>


   
personnel only have limited experience in marketing RSI's product. 

         TECHNICAL ADVANCES COULD RENDER RSI's PRODUCTS OBSOLETE. Although the
Video Flyer System has 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 our system less
competitive or obsolete. The telecommunications industry is undergoing rapid and
significant technical advances. While we believe that the Video Flyer System has
certain advantages over other, currently available group conferencing systems,
we expect future technology to be superior to the technology currently used in
our system.

         RSI's PRODUCTS DEPEND UPON ACCEPTANCE OF HIGH SPEED DIGITAL PHONE
SERVICE. We believe the growth of the group conferencing market is dependent on
the availability and acceptance of Integrated Services Digital Network telephone
service. To provide that service to their customers, telephone companies must
replace analog switches with digital switches in their local offices. In 1994,
approximately 75 percent of all telephone circuits in the United States were
capable of providing high speed digital service. Internationally, approximately
84 percent, 80 percent and 58 percent of telephone circuits in Europe, Australia
and Japan, respectively, are capable of providing high speed digital service.
The monthly charge for high speed digital service in the United States ranges
between $20 and $80 per month plus, in certain markets, per-minute charges for
usage above minimum levels. Although RSI believes high speed digital service
will become more available and less expensive in the United States, RSI sales of
its products would be materially adversely affected if high speed digital
service is not available to, or not accepted by, businesses and individuals. The
Video Flyer also operates on existing telephone lines.

         RSI COULD REQUIRE ADDITIONAL CAPITAL. RSI believes that it has
sufficient working capital to meet its needs for the foreseeable future.
Nonetheless, RSI's working capital requirements may vary substantially from
those planned depending on numerous factors, including a failure to generate
significant revenues in 1999, unexpected increases in expenses, and other
unplanned events. If RSI is unable to generate significant revenues from sales,
or if despite sufficient sales, RSI is unable to achieve its targeted margins,
it will require additional financing. In addition, RSI may need additional
working capital if it experiences higher than anticipated expenses. RSI could
also require additional capital to finance future growth or for strategic
acquisitions, although no such acquisitions are currently planned. RSI will be
materially adversely affected and its ability to continue in business could be
jeopardized if it is not able to achieve positive cash flow or profitability or
if it is not able to obtain any necessary financing on satisfactory terms.

         FUTURE SALES OF STOCK COULD DILUTE EXISTING SHAREHOLDERS. Required
additional capital would be sought from a number of sources and could include
sales of additional shares of capital stock or other securities. Any additional
sales of capital stock could be dilutive to investors in this offering.

         RSI IS DEPENDENT ON A FEW KEY PERSONNEL. RSI is highly dependent on its
key management, technical and marketing personnel, particularly Donald C. Lies,
President and Chief Executive Officer of RSI. RSI's future success will also
depend in part upon its ability to attract and retain highly qualified personnel
and consultants. RSI competes for personnel with other companies, and there can
be no assurance that RSI will be successful in hiring or retaining qualified
personnel or consultants. The loss of key personnel or consultants or the
inability to hire or retain qualified personnel or consultants could have a
material adverse effect on RSI. RSI has entered into confidentiality,
non-compete and employment agreements with Mr. Lies.
    

<PAGE>


   
         THE PROPRIETARY PROTECTION FOR RSI's PRODUCTS IS LIMITED. There can be
no assurance that RSI's measures to protect its intellectual property will be
successful, that it will be granted any patents in the future, or that any
patents that may be granted will be of value to RSI. RSI currently relies on
patent and trademark protection for the Video Flyer System. RSI filed a utility
patent application for its peripheral videoconferencing system in the fall of
1994 and received a Notice of Allowance in August 1997. RSI also claims the
trademark Eris Video Flyer and has registered the trademark under federal
trademark statutes. RSI filed an application for its "intent to use" the mark
"Eris Video Flyer" as a trademark 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. RSI has also applied for patents for its peripheral
videoconferencing systems in foreign countries. RSI intends to register its
copyrights.

         In the absence of meaningful intellectual property protection, RSI may
be vulnerable to competitors who could lawfully attempt to copy RSI's products.
Moreover, there can be no assurance that other competitors may not independently
develop the same or similar technology. While RSI believes that it has all
rights necessary to market and sell its system without infringement of
intellectual property rights held by others, RSI has not conducted a formal
infringement search and there can be no assurance that such conflicting rights
do not exist. RSI 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 RSI will have sufficient funds
to enforce or defend its intellectual property rights.

         HOLDERS OF A MAJORITY OF RSI's STOCK HAVE THE POWER TO CONTROL
ELECTIONS OF DIRECTORS. There is no cumulative voting for the election of
directors of RSI. Accordingly, the owners of a majority of RSI's outstanding
voting stock may elect all the directors, if they choose to do so, and the
owners of the remaining shares will not be able to elect any directors. Officers
and directors of RSI currently own approximately 21 percent of the outstanding
shares of Common Stock.
    

<PAGE>


   
         RSI's ANTI-TAKEOVER PROVISIONS RENDER AN ACQUISITION OF RSI LESS
LIKELY. 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 RSI'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 such shares by RSI could deprive
RSI's shareholders of opportunities to sell their shares of the common stock at
a premium. Additionally, RSI could adopt in the future one or more additional
anti-takeover measures, such as a shareholder rights plan, without first seeking
shareholder approval. Those measures could also make a change in control of RSI
more difficult. RSI 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. RSI 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. Therefore RSI's common stock is not a suitable investment
for someone seeking current dividend income.

         LIMITATION OF DIRECTOR LIABILITY. RSI'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
RSI and its shareholders of monetary damages for certain breaches of fiduciary
duty. These provisions could require payment to directors by RSI or preclude
payments of damages by directors to RSI or shareholders.
    
                           FORWARD-LOOKING INFORMATION

   
         Statements made in this prospectus or in the documents incorporated by
reference herein that are not statements of historical fact are forward-looking
statements within the meaning of Federal Securities laws. A number of risks and
uncertainties, including those discussed under the caption "Risk Factors" above
could affect forward-looking statements and could cause actual results to differ
materially from the statements made.
    


<PAGE>


                              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. The table assumes all shares being registered in this
offering will be sold. However, to RSI's knowledge, the holders of such
securities have no commitment to anyone to sell all or part of the securities
being registered.
    

<TABLE>
<CAPTION>
   
                                                                                            PERCENT OF         SHARES
                                                                            NUMBER OF      COMMON STOCK       ISSUABLE
                                                                          SHARES TO BE      OWNED AFTER    UPON EXERCISE
                             NUMBER OF SHARES        NUMBER OF SHARES    OWNED AFTER THE    COMPLETION     OF OPTIONS OR
NAME                     OWNED PRIOR TO OFFERING      OFFERED HEREBY        OFFERING        OF OFFERING       WARRANTS
- ----                     -----------------------     ----------------      -----------      -----------    -------------
<S>                           <C>                        <C>                   <C>              <C>           <C>
Byron G. Shaffer                 364,000                 155,000               209,000          3.1%           32,500

Richard F. Craven
  RSI Director                   953,000                 813,000               140,000          2.1%          141,500

Gregory D. Craven                 55,000                  36,000                19,000            *            31,000

Gretchen M. Craven                25,500                   5,000                20,500            *                --

Todd R. Craven                    15,000                   5,000                10,000            *                --

Donald C. Lies
  President, Chairman
  and CEO of RSI                 663,325                 335,000               328,325          4.7%          310,000

Marti Miller
  Vice President -
  Engineering of RSI             120,000                  20,000               100,000          1.5%           20,000

James Hanzlik
  Chief Financial
  Officer of RSI                 100,000                  20,000                80,000          1.2%           20,000
                               ---------               ---------               -------
                               2,295,825               1,389,000               906,825
    
</TABLE>

- -----------------------
*        Less than 1 percent.

       

<PAGE>


                              PLAN OF DISTRIBUTION

         The Shares will be offered and sold by the Selling Shareholders for
their own accounts. RSI will not receive any proceeds from the sale of
the Shares pursuant to this Prospectus. RSI will pay the expenses of
registration of the Shares, including 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. As of the date of this Prospectus, RSI 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 RSI's Annual
Report on Form 10-KSB incorporated by reference in this Prospectus have been
audited by KPMG Peat Marwick LLP, independent certified 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 RSI
by Hinshaw & Culbertson, 222 South Ninth Street, Minneapolis, Minnesota 55402.
    

                       WHERE YOU CAN FIND MORE INFORMATION

   
         We file annual, quarterly, and current reports, proxy statements, and
other documents with the Securities and Exchange Commission. You may read and
copy any document we file at the public reference room at Judiciary Plaza
Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You should
call 1-800-SEC-0330 for more information on the public reference room. The
Securities and Exchange Commission maintains an internet site at
http://wwe.sec.gov where certain information regarding issuers (including RSI)
may be found.

         This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (Registration No. 333-70773). The
registration statement contains more information than this prospectus regarding
RSI and its common stock, including certain exhibits and schedules. You can get
a copy of the registration statement at the address listed above or from the
internet site.

         The Securities and Exchange Commission allows us to "incorporate" into
this prospectus information we file with the Securities and Exchange Commission
in other documents. This means that we can disclose important information to you
by referring to other documents that contain that information. The information
may include documents filed after the date of this prospectus which update and
supersede the information you read in this prospectus. We incorporate by
reference the documents listed below, except to the extent information in those
documents is different from the information contained in this prospectus, and
all future documents filed under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until we terminate the offering of these shares.

*    Annual Report on Form 10-KSB for the Year ended June 30, 1998

*    Quarterly Reports on Form 10-QSB for the Quarters ended December 31, 1998
     and September 30, 1998

*    Registration Statement on Form 8-A describing the common stock.

You may request a copy of these documents, at no cost, by writing to:
    
                              RSI Systems, Inc.
                              5555 W. 78th Street
                              Suite F
                              Edina, MN 55439
                              Phone - (612) 896-3020
                              Fax - (612) 896-3030

<PAGE>


   
         You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. RSI has not authorized
anyone else to provide you with different information. RSI is not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
    


                              --------------------

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

WHERE YOU CAN FIND MORE INFORMATION.......................................  2
INCORPORATION OF CERTAIN DOCUMENTS........................................  2
RSI SYSTEMS, INC..........................................................  3
RISK FACTORS..............................................................  3
SELLING SHAREHOLDERS...................................................... 12
PLAN OF DISTRIBUTION...................................................... 13
EXPERTS  ................................................................. 14
LEGAL MATTERS............................................................. 14




                                1,389,000 Shares




                                RSI SYSTEMS, INC.




                                  Common Stock






                                 --------------

                                   PROSPECTUS

                                 --------------




                                ___________, 1999

<PAGE>


                                    PART II.

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         SEC Registration Fee                  $ 1,434
         Accounting Fees and Expenses            2,000
         Legal Fees and Expenses                 5,000
         Miscellaneous                           1,000
                                               -------
           Total                               $ 9,434

         All fees and expenses other than the SEC registration fee are
estimated. The expenses listed above will be paid by RSI.

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 Hinshaw & Culbertson regarding legality.

         23.1   Consent of independent auditors.

         23.2   Consent of Hinshaw & Culbertson (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.

<PAGE>


                                   SIGNATURES

   
         Pursuant to the requirements of the Securities Act of 1933, the
Registrant has caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis, State of Minnesota, on March 18, 1999.
    


                              RSI SYSTEMS, INC.


                              By /s/ Donald C. Lies 
                                 -----------------------------------------------
                                 Donald C. Lies
                                 Chief Executive Officer, President and Chairman


         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: March 18, 1999
   Donald C. Lies
   Chief Executive Officer, President and Director
   (principal executive officer) (principal financial officer)
   (principal accounting officer)


By  *
   ---------------------------------------------
   Richard F. Craven                                   Dated: March 18, 1999
   Director


By  *
   ---------------------------------------------
   David W. Stassen                                    Dated: March 18, 1999
   Director


By  *
   ---------------------------------------------
   Manfred D. Haiderer                                 Dated: March 18, 1999
   Director


* By /s/ Donald C. Lies
     -------------------------------------------
     Donald C. Lies                                    Dated: March 18, 1999
     As Attorney-in-Fact
    

<PAGE>


                                  EXHIBIT INDEX


Exhibit No.    Description                                                 Page
- -----------    -----------                                                 ----

   
    5*         Opinion of Hinshaw & Culbertson regarding legality .........
    

    23.1       Consent of Independent Auditors ............................

   
    24*        Power of Attorney ..........................................

- --------------------
* Previously Filed
    



                                                                    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.

                                         /s/ KPMG Peat Marwick LLP


   
Minneapolis, Minnesota
March 18, 1999
    



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