EXHIBIT 10.31


                                 PROMISSORY NOTE


$225,000                                                  Minneapolis, Minnesota
                                                                 August 31, 2000

         For value received, the undersigned, RSI Systems, Inc. hereby promises
to pay to the order of Richard F. Craven ("Creditor"), at any place designated
at any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of One Hundred
Fifty Thousand Dollars ($225,000), together with interest on the principal
amount hereunder remaining unpaid from time to time computed on the basis of the
number of days elapsed in a 360-day year consisting of twelve (12) months of
thirty (30) days each, from the date hereof until this Note is fully paid, at an
annual rate of ten percent (10%). Interest on the outstanding principal amount
of this Note shall accrue and shall be payable upon maturity, as provided
herein.

         The principal amount of this Note, and all accrued and unpaid interest
thereon, shall be due and payable upon demand of Creditor at any time after
February 28, 2001. This Note may be prepaid, in whole or in part, at any time
without penalty. At the sole option of the Creditor, upon maturity, the
outstanding principal and accrued and unpaid interest under this Note may be
converted into common stock of RSI Systems, Inc. at a per share price equal to
the average closing price of such stock on the date of this Note, which is $.34
per share. Creditor may convert to RSI common stock any amount, up to a maximum
of the outstanding principal and accrued interest.

         This Note shall be immediately due and payable (including unpaid
interest accrued hereon) without demand or notice thereof upon filing of a
petition by or against the undersigned under the United States Bankruptcy Code.

         It is the intention of the parties hereto to comply with any applicable
usury laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note in no event shall this Note require the payment or permit
the collection of interest or any amount in the nature of interest or fees in
excess of the maximum amount permitted by applicable law. Any such excess
interest or fee shall first be applied to reduce the principal balance, and,
when the principal has been paid in full, refunded to the undersigned. In
determining whether or not the interest paid or payable exceeds the highest
lawful rate, the total amount of interest shall be spread throughout the entire
term of any indebtedness so that the interest rate is uniform through the term
of such indebtedness.

         The undersigned consents hereby to any and all extensions of time,
renewals, waivers or modifications of, and all substitutions or releases of,
security or of any party primarily or secondarily liable on this Note or any
term and provision of either, which may be made, granted or consented to by
Creditor, and agrees that suit may be brought and maintained against any one or
more of them, at the election of Creditor without joinder of any other party
hereto, and that

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undersigned shall not be required first to foreclose, proceed against, or
exhaust any security hereof in order to enforce payment of this Note. The
undersigned hereby waives presentment, demand for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, and all other notices in
connection herewith, as well as filing of suit (if permitted by law) and
diligence in collecting this Note or enforcing any of the security therefore,
and agree to pay (if permitted by law) all expenses incurred in collection,
including Creditor's actual attorneys' fees. The undersigned hereby waives all
benefits of valuation, appraisement and exemption laws. This Note is payable in
the State of Minnesota and shall be construed in accordance with the laws of
such state.

                                    RSI SYSTEMS, INC.



                                    By____________________________________
                                             Its Chief Financial Officer


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