Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549



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FORM 10-Q

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|           |                                                                                                                                                 
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark One)
|          
|x          | QUARTERLY REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2008; OR  
|           |                                                                                                                                                 
|o          | TRANSITION REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________TO__________.

Commission File Number: 000-20728

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|                   |                                                         | 
|------------------ | ------------------------------------------------------- | 
|RIMAGE CORPORATION
|                   | (Exact
 name of registrant as specified in its charter) | 

|                                                                                    |                                                                  |  |  |                                       | 
|----------------------------------------------------------------------------------- | ---------------------------------------------------------------- |  |  | ------------------------------------- | 
|                                                                                    | Minnesota                                                        |  |  | 41-1577970                            | 
|                                                                                    | (State
 or other jurisdiction of
 incorporation or organization) |  |  | (I.R.S.
 Employer Identification No.) | 
|                                                                                    |                                                                  |  |  |                                       | 
|7725
 Washington Avenue South, Edina, MN 55439                                     
|(Address
 of principal executive offices)                                          
|                                                                                   
|952-944-8144                                                                       
|(Registrants
 telephone number, including area code)                              
|                                                                                   
|NA                                                                                 
|(Former
 name, former address and former fiscal year, if changed since last report)

Common Stock outstanding at October 31, 2008  9,352,956 shares 
of $.01 par value Common Stock.

---

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YesxNo
o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2
of the Exchange Act):

Large Accelerated FileroAccelerated
FilerxNon-Accelerated Filer
oSmaller Reporting Companyo

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act): YesoNo
x

1





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RIMAGE
CORPORATION
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2008

|           |                                                              |                                                                                                               |       |       |     
|---------- | ------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------- | ----- | ----- | ----
|           |                                                              | Description                                                                                                   |       |       | Page
|           |                                                              |                                                                                                               |       |       |     
|           |                                                              |                                                                                                               |       |       |     
|PART I     | FINANCIAL
 INFORMATION                                       |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 1.    | Financial
 Statements (unaudited)                            |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|           |                                                              | Condensed Consolidated Balance Sheets as of 
 September 30, 2008 and December 31, 2007                        |       | 3    
|           |                                                              |                                                                                                               |       |      
|           |                                                              | Condensed Consolidated Statements of Income 
 for the three and nine months ended September 30, 2008 and 2007 |       | 4    
|           |                                                              |                                                                                                               |       |      
|           |                                                              | Condensed Consolidated Statements of Cash Flows 
 for the nine months ended September 30, 2008 and 2007       |       | 5    
|           |                                                              |                                                                                                               |       |      
|           |                                                              | Notes to Condensed Consolidated Financial
Statements                                                          |       | 6-13 
|           |                                                              |                                                                                                               |       |      
|Item 2.    |                                                              | Managements Discussion and Analysis of 
 Financial Condition and Results of Operations                       |       | 14-23
|           |                                                              |                                                                                                               |       |      
|Item 3.    |                                                              | Quantitative and Qualitative Disclosures about 
 Market Risk                                                  |       | 23   
|           |                                                              |                                                                                                               |       |      
|Item 4.    |                                                              | Controls
 and Procedures                                                                                      |       | 23   
|           |                                                              |                                                                                                               |       |      
|PART II    | OTHER
 INFORMATION                                           |                                                                                                               | 24-25
|           |                                                              |                                                                                                               |       |      
|Item 1.    | Legal
 Proceedings                                           |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 1A.   | Risk
 Factors                                                |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 2.    | Unregistered
 Sales of Equity Securities and Use of Proceeds |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 3.    | Defaults
 Upon Senior Securities                             |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 4.    | Submission
 of Matters to a Vote of Security Holders         |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 5.    | Other
 Information                                           |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|Item 6.    | Exhibits                                                     |                                                                                                               |      
|           |                                                              |                                                                                                               |       |      
|SIGNATURES |                                                              | 26                                                                                                           

2

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Table of Contents

|         |                                 
|-------- | --------------------------------
|PART 1  | FINANCIAL INFORMATION           
|Item 1.  | Financial Statements (unaudited)

Condensed Consolidated
Balance Sheets(unaudited
- in thousands, except share data)

|                                                                                                                          |  |                     |         |                    |   |         | 
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------ | - | ------- | 
|Assets                                                                                                                    |  | September 30,
 2008 |         | December 31,
 2007 |  
|                                                                                                                          |  |                     |         |                    |  
|                                                                                                                         
|Current assets:                                                                                                           |  |                     |         |                    |   |         | 
|Cash and cash equivalents                                                                                                 |  | $                   | 23,561  |                    | $ | 7,416   | 
|Marketable securities                                                                                                     |  |                     | 33,060  |                    |   | 51,605  | 
|Receivables, net of allowance for doubtful accounts
and 
 sales returns of $650 and $583, respectively                    |  |                     | 15,228  |                    |   | 14,447  | 
|Inventories                                                                                                               |  |                     | 5,914   |                    |   | 8,075   | 
|Prepaid expenses and other current assets                                                                                 |  |                     | 1,252   |                    |   | 1,591   | 
|Deferred income taxes - current                                                                                           |  |                     | 1,446   |                    |   | 1,637   | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total current assets                                                                                                      |  |                     | 80,461  |                    |   | 84,771  | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|                                                                                                                         
|Marketable securities -
 non-current                                                                                      |  |                     | 33,992  |                    |   | 35,201  | 
|Property and equipment, net                                                                                               |  |                     | 6,465   |                    |   | 3,206   | 
|Deferred income taxes -
 non-current                                                                                      |  |                     | 2,183   |                    |   | 1,918   | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total assets                                                                                                              |  | $                   | 123,101 |                    | $ | 125,096 | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Liabilities
 and Stockholders Equity                                                                                     |  |                     |         |                    |   |         | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|                                                                                                                         
|Current liabilities:                                                                                                      |  |                     |         |                    |   |         | 
|Checks written in excess of bank balance                                                                                  |  | $                   | 1,124   |                    | $ |        | 
|Trade accounts payable                                                                                                    |  |                     | 4,194   |                    |   | 7,564   | 
|Accrued compensation                                                                                                      |  |                     | 2,052   |                    |   | 3,138   | 
|Other accrued expenses                                                                                                    |  |                     | 1,131   |                    |   | 1,157   | 
|Income taxes payable                                                                                                      |  |                     | 684     |                    |   | 685     | 
|Deferred income and customer deposits                                                                                     |  |                     | 4,904   |                    |   | 5,281   | 
|Other current liabilities                                                                                                 |  |                     | 24      |                    |   | 57      | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total current liabilities                                                                                                 |  |                     | 14,113  |                    |   | 17,882  | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Long-term liabilities:                                                                                                    |  |                     |         |                    |   |         | 
|Deferred income and customer deposits -
non-current                                                                       |  |                     | 1,908   |                    |   | 1,930   | 
|Income taxes payable - non-current                                                                                        |  |                     | 431     |                    |   | 164     | 
|Other non-current liabilities                                                                                             |  |                     | 41      |                    |   | 59      | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total long-term liabilities                                                                                               |  |                     | 2,380   |                    |   | 2,153   | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total liabilities                                                                                                         |  |                     | 16,493  |                    |   | 20,035  | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Stockholders equity:                                                                                                     |  |                     |         |                    |   |         | 
|Preferred stock, $.01 par value, authorized 250,000
shares,
 no shares issued and outstanding                             |  |                     |        |                    |   |        | 
|Common stock, $.01 par value, authorized 29,750,000
shares,
 issued and outstanding 9,352,956 and 9,705,947, respectively |  |                     | 94      |                    |   | 97      | 
|Additional paid-in capital                                                                                                |  |                     | 36,988  |                    |   | 33,827  | 
|Retained earnings                                                                                                         |  |                     | 68,903  |                    |   | 70,462  | 
|Accumulated other comprehensive income                                                                                    |  |                     | 623     |                    |   | 675     | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total stockholders equity                                                                                                |  |                     | 106,608 |                    |   | 105,061 | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|                                                                                                                          |  |                     |         |                    |   |         | 
|Total
 liabilities and stockholders equity                                                                               |  | $                   | 123,101 |                    | $ | 125,096 | 
|                                                                                                                          |  |                     |         |                    |   |         | 

See accompanying notes to
condensed consolidated financial statements.

3

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Income(unaudited
- in thousands, except per share data)

|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|-------------------------------------------- |  | --------------------------------- | ------ | -------------------------------- | - | ------ | - | ---- | ------ | - | - | ------ | -
|                                             |  | Three Months Ended
 September 30, |        | Nine Months Ended
 September 30, |  
|                                             |  | 2008                              |        | 2007                             |   | 2008   |   | 2007 |       
|                                             |  |                                   |        |                                  |   |        |   |      |       
|                                            
|Revenues                                     |  | $                                 | 25,210 |                                  | $ | 33,650 |   | $    | 70,645 |   | $ | 80,662 |  
|Cost
 of revenues                            |  |                                   | 13,233 |                                  |   | 17,238 |   |      | 39,077 |   |   | 43,105 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Gross profit                                 |  |                                   | 11,977 |                                  |   | 16,412 |   |      | 31,568 |   |   | 37,557 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                            
|Operating expenses:                          |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Research and development                     |  |                                   | 1,227  |                                  |   | 1,592  |   |      | 4,091  |   |   | 4,622  |  
|Selling, general and administrative          |  |                                   | 5,225  |                                  |   | 6,180  |   |      | 17,535 |   |   | 18,292 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Total operating expenses                     |  |                                   | 6,452  |                                  |   | 7,772  |   |      | 21,626 |   |   | 22,914 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                            
|Operating income                             |  |                                   | 5,525  |                                  |   | 8,640  |   |      | 9,942  |   |   | 14,643 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                            
|Other income (expense):                      |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Interest, net                                |  |                                   | 691    |                                  |   | 889    |   |      | 2,203  |   |   | 2,553  |  
|Gain (loss) on currency exchange             |  |                                   | 40     |                                  |   | 163    |   |      | (123   | ) |   | 74     |  
|Other, net                                   |  |                                   | (20    | )                                |   | (31    | ) |      |       |   |   | (18    | )
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Total other income, net                      |  |                                   | 711    |                                  |   | 1,021  |   |      | 2,080  |   |   | 2,609  |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                            
|Income before income taxes                   |  |                                   | 6,236  |                                  |   | 9,661  |   |      | 12,022 |   |   | 17,252 |  
|Income tax expense                           |  |                                   | 2,230  |                                  |   | 3,458  |   |      | 4,303  |   |   | 6,006  |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                            
|Net income                                   |  | $                                 | 4,006  |                                  | $ | 6,203  |   | $    | 7,719  |   | $ | 11,246 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Net income per basic share                   |  | $                                 | 0.42   |                                  | $ | 0.63   |   | $    | 0.80   |   | $ | 1.13   |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Net income per diluted
 share                |  | $                                 | 0.42   |                                  | $ | 0.59   |   | $    | 0.79   |   | $ | 1.07   |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Basic weighted average
 shares outstanding   |  |                                   | 9,465  |                                  |   | 9,890  |   |      | 9,629  |   |   | 9,992  |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  
|Diluted weighted average
 shares outstanding |  |                                   | 9,595  |                                  |   | 10,302 |   |      | 9,820  |   |   | 10,466 |  
|                                             |  |                                   |        |                                  |   |        |   |      |        |   |   |        |  

See accompanying notes to
condensed consolidated financial statements.

4

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows(unaudited - in thousands)

|                                                                                   |  |                                  |         |      |   |         |  
|---------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ---- | - | ------- | -
|                                                                                   |  | Nine months ended
 September 30, |        
|                                                                                   |  | 2008                             |         | 2007 |  
|                                                                                   |  |                                  |         |      |   |         |  
|Cash flows from operating activities:                                              |  |                                  |         |      |   |         |  
|Net income                                                                         |  | $                                | 7,719   |      | $ | 11,246  |  
|Adjustments to reconcile net income to net cash
provided by operating
 activities: |  |                                  |         |      |   |         |  
|Depreciation and amortization                                                      |  |                                  | 1,044   |      |   | 1,165   |  
|Deferred income tax benefit                                                        |  |                                  | (50     | )    |   | (1,032  | )
|Loss on disposal of property and equipment                                         |  |                                  | 3       |      |   | 112     |  
|Stock-based compensation                                                           |  |                                  | 748     |      |   | 1,174   |  
|Excess tax benefits from stock-based
compensation                                  |  |                                  | (673    | )    |   | (1,011  | )
|Changes in operating assets and
liabilities:                                       |  |                                  |         |      |   |         |  
|Receivables                                                                        |  |                                  | (781    | )    |   | 1,896   |  
|Inventories                                                                        |  |                                  | 2,160   |      |   | (1,512  | )
|Prepaid income taxes/income taxes payable                                          |  |                                  | 1,196   |      |   | 2,785   |  
|Prepaid expenses and other current assets                                          |  |                                  | 339     |      |   | (545    | )
|Trade accounts payable                                                             |  |                                  | (3,357  | )    |   | 430     |  
|Accrued compensation                                                               |  |                                  | (1,085  | )    |   | 69      |  
|Other accrued expenses and other current
liabilities                               |  |                                  | (59     | )    |   | 49      |  
|Deferred income and customer deposits                                              |  |                                  | (399    | )    |   | 3,197   |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Net
 cash provided by operating activities                                         |  |                                  | 6,805   |      |   | 18,023  |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Cash flows from investing activities:                                              |  |                                  |         |      |   |         |  
|Purchases of marketable securities                                                 |  |                                  | (52,059 | )    |   | (42,953 | )
|Maturities of marketable securities                                                |  |                                  | 71,756  |      |   | 33,495  |  
|Purchases of property and equipment                                                |  |                                  | (4,318  | )    |   | (1,163  | )
|Other non-current items                                                            |  |                                  | (6      | )    |   | 140     |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Net
 cash provided by (used in) investing activities                               |  |                                  | 15,373  |      |   | (10,481 | )
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Cash flows from financing activities:                                              |  |                                  |         |      |   |         |  
|Checks written in excess of bank balance                                           |  |                                  | 1,124   |      |   |        |  
|Principal payments on capital lease
obligations                                    |  |                                  | (18     | )    |   | (5      | )
|Repurchase of common stock                                                         |  |                                  | (9,284  | )    |   | (12,628 | )
|Excess tax benefits from stock-based
compensation                                  |  |                                  | 673     |      |   | 1,011   |  
|Proceeds from employee stock plans                                                 |  |                                  | 1,485   |      |   | 1,982   |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Net
 cash used in financing activities                                             |  |                                  | (6,020  | )    |   | (9,640  | )
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Effect of exchange rate changes on cash                                            |  |                                  | (13     | )    |   | 98      |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Net increase (decrease) in cash and cash equivalents                               |  |                                  | 16,145  |      |   | (2,000  | )
|                                                                                  
|Cash and cash equivalents, beginning of period                                     |  |                                  | 7,416   |      |   | 8,500   |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Cash and cash equivalents, end of period                                           |  | $                                | 23,561  |      | $ | 6,500   |  
|                                                                                   |  |                                  |         |      |   |         |  
|                                                                                  
|Supplemental disclosures of net cash paid during the period
for:                   |  |                                  |         |      |   |         |  
|Income taxes                                                                       |  | $                                | 3,160   |      | $ | 4,311   |  

See accompanying notes to
condensed consolidated financial statements.

5

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Table of Contents

RIMAGE
CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
(unaudited)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Basis of
 Presentation and Nature of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Rimage Corporation (the
 Company or Rimage) develops, manufactures and markets digital publishing
 systems that are used by businesses to produce recordable CD (CD-R), DVD
 (DVD-R) and blue laser discs with customized digital content on an
 on-demand basis. Rimage distributes its publishing systems from its
 operations in the United States, Germany and Japan. The Company also
 distributes related consumables for use with its systems, consisting of media
 kits, ribbons, ink cartridges and Rimage-branded blank CD-R and DVD-R media.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The accompanying condensed
 consolidated financial statements of Rimage are unaudited and have been
 prepared by the Company in accordance with accounting principles generally
 accepted in the United States of America for interim financial information,
 pursuant to the rules and regulations of the Securities and Exchange
 Commission. Pursuant to such rules and regulations, certain financial
 information and footnote disclosures normally included in the financial
 statements have been condensed or omitted. However, in the opinion of
 management, the financial statements include all adjustments, consisting of
 normal recurring accruals, necessary for a fair presentation of the financial
 position and results of operations and cash flows of the interim periods
 presented. Operating results for these interim periods are not necessarily
 indicative of results to be expected for the entire year, due to seasonal,
 operating and other factors. These condensed consolidated financial
 statements should be read in conjunction with the consolidated financial
 statements and notes thereto included in the Companys Annual Report on Form
 10-K as of and for the year ended December 31, 2007.                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The preparation of
 financial statements in conformity with accounting principles generally
 accepted in the United States of America requires management to make
 estimates and assumptions that affect the reported amounts of assets and
 liabilities at the date of the financial statements and the reported amounts
 of revenues and expenses during the reporting period. Actual results could
 differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | Stock-Based
 Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In May 2007, the Companys
 shareholders approved the 2007 Stock Incentive Plan (the 2007 Plan). The
 2007 Plan provides for the grant of stock incentive awards in the form of
 incentive and non-qualified stock options, stock appreciation rights,
 restricted stock, restricted stock units, performance stock, performance
 units and other awards in stock and/or cash to certain key employees,
 non-employee directors and service providers. The 2007 Plan permits the
 issuance of up to 730,320 shares of the Companys common stock. At September
 30, 2008, a total of 322,320 shares were available for future grant under the
 2007 Plan. Effective with the approval of the 2007 Plan in May 2007, the
 Company may not issue any new awards or options under its Amended and
 Restated 1992 Stock Option Plan (the 1992 Plan). The exercise price of
 stock options granted under the 2007 Plan is equal to the market value on the
 date of grant. Options issued to employees through March 31, 2006 under the
 1992 Plan generally become exercisable over a two-year period and terminate
 ten years from the date of grant. Options issued to employees after March 31,
 2006 under both the 1992 Plan and the 2007 Plan generally become exercisable
 over a four-year period.

6

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Options issued to employees
 through May 13, 2008 under the 1992 Plan and the 2007 Plan terminate ten
 years from the date of grant, while options issued effective May 14, 2008
 under the 2007 Plan terminate seven years from the date of grant. Stock
 options granted to non-employee directors vest six months from the date of
 grant and terminate ten years from the date of grant. Restricted stock issued
 to non-employee directors under the 2007 Plan are subject to the risk of
 forfeiture and transfer restrictions that lapse one year from the date of
 grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In accordance with
 Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based
 Payment, stock-based compensation expense is determined based on the
 grant-date fair value and is recognized on a straight-line basis over the
 vesting period for each stock-based award granted on or after January 1,
 2006, and for previously granted awards not yet vested as of January 1, 2006.
 Compensation cost is recognized for all awards over the vesting period to the
 extent the employees or directors meet the requisite service requirements,
 whether or not the award is ultimately exercised. Conversely, when an
 employee or director does not meet the requisite service requirements and
 forfeits the award prior to vesting, any compensation expense previously
 recognized for the award is reversed. The Company recognized stock-based
 compensation costs of $451,000 and $748,000 for the three and nine months
 ended September 30, 2008, respectively, compared to $625,000 and $1,174,000
 for the comparable periods in 2007. Costs recognized in the current
 year-to-date period include the impact of the reversal in the second quarter
 of approximately $0.2 million in expenses stemming from the forfeiture of
 unvested stock options held by terminated employees.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The fair value of each
 option award is estimated at the date of grant using the Black-Scholes option
 pricing model. The following key assumptions were utilized in valuing option
 awards issued during the nine months ended September 30, 2008 and 2007:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                   |  |                                 |              |      |  |              |  
|---------------------------------- |  | ------------------------------- | ------------ | ---- |  | ------------ | -
|                                   |  | Nine Months Ended September 30, |             
|                                   |  | 2008                            |              | 2007 | 
|                                   |  |                                 |              |      | 
|                                  
|Expected life of options in
 years |  |                                 | 4.75
 - 6.00 |      |  | 6.00         |  
|                                   |  |                                 |              |      |  |              |  
|Risk-free interest rate            |  |                                 | 3.1          | %    |  | 4.5
 - 4.8   | %
|                                   |  |                                 |              |      |  |              |  
|Expected volatility                |  |                                 | 39.1
 - 40.0 | %    |  | 39.0
 - 40.0 | %
|                                   |  |                                 |              |      |  |              |  
|Expected dividend yield            |  |                                 | 0.0          | %    |  | 0.0          | %
|                                   |  |                                 |              |      |  |              |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In accordance with SFAS
 No. 123R, the Company reviews these assumptions at the time of each new
 option award and adjusts them as necessary to ensure proper option valuation.
 The expected life represents the period that the stock option awards are
 expected to be outstanding and is determined based on an analysis of
 historical exercise behavior and anticipated future exercise patterns, giving
 consideration to the contractual terms of unexercised stock option awards.
 The risk-free interest rate is based on the yield of constant maturity U.S.
 treasury bonds with a remaining term equal to the expected life of the
 awards. The Company estimated the stock price volatility using historical
 weekly price observations over the expected life of the awards. The expected
 dividend yield is zero as the Company has not paid or declared any cash
 dividends on its common stock and does not currently have plans to pay
 dividends.

7

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

| |                                                              
| | -------------------------------------------------------------
| | Other information
 pertaining to stock options is as follows:

|                                                          |  |                                       |       |                                 |   |       |  |      |       |  |   |       | 
|--------------------------------------------------------- |  | ------------------------------------- | ----- | ------------------------------- | - | ----- |  | ---- | ----- |  | - | ----- | 
|                                                          |  | Three Months Ended September 30,      |       | Nine Months Ended September 30, |  
|                                                          |  | 2008                                  |       | 2007                            |   | 2008  |  | 2007 |      
|                                                          |  |                                       |       |                                 |   |       |  |      |      
|                                                          |  | (in thousands, except per share data) |      
|                                                          |  |                                       |       |                                 |   |       |  |      |       |  |   |       | 
|Number of options granted                                 |  |                                       |      |                                 |   |      |  |      | 184   |  |   | 245   | 
|Fair value of options granted                             |  | $                                     |      |                                 | $ |      |  | $    | 1,282 |  | $ | 3,002 | 
|Per share weighted average fair value of options
 granted |  | $                                     |      |                                 | $ |      |  | $    | 6.98  |  | $ | 12.25 | 
|Total fair value of stock options vested                  |  | $                                     |      |                                 | $ | 75    |  | $    | 879   |  | $ | 858   | 
|Total intrinsic value of stock options exercised          |  | $                                     |      |                                 | $ | 348   |  | $    | 2,592 |  | $ | 3,824 | 
|Total intrinsic value of stock options outstanding        |  | $                                     | 1,347 |                                 | $ | 8,984 |  | $    | 1,347 |  | $ | 8,984 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Cash received from the
 exercise of stock options was $1,485,000 and $1,982,000 for the nine months
 ended September 30, 2008 and 2007, respectively. The income tax benefit
 realized from the exercise of stock options and recorded as an increase to
 additional paid-in capital was $930,000 and $1,274,000 for the nine months
 ended September 30, 2008 and 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | Accounting
 for Uncertainty in Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company implemented
 the provisions of Financial Accounting Standards Board (FASB)
 Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxesan
 interpretation of FASB Statement No. 109, effective January 1, 2007. This
 interpretation clarifies the accounting for uncertainty in income taxes
 recognized in an enterprises financial statements in accordance with FASB
 Statement No. 109, Accounting for Income Taxes. This interpretation
 prescribes a recognition threshold and measurement criteria for the financial
 statement recognition and measurement of a tax position taken or expected to
 be taken in a tax return. It also provides guidance on derecognition,
 classification, interest and penalties, accounting in interim periods,
 disclosure and transition.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Gross unrecognized tax
 benefits as of September 30, 2008 and December 31, 2007 totaled $368,000 and
 $187,000, respectively. Changes in gross unrecognized tax benefits consisted
 of an increase of $36,000 for tax positions taken in the current year and a
 decrease of $72,000 resulting from settlements with state taxing authorities.
 An additional increase of $217,000 resulted from a balance sheet
 reclassification of a deferred tax asset that had previously been offset in
 unrecognized tax benefits as of December 31, 2007. Included in the balance of
 unrecognized tax benefits at September 30, 2008 are potential benefits of
 $131,000 that if recognized, would affect the effective tax rate. The
 difference between this amount and the corresponding amount of gross                   

8

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | unrecognized
 tax benefits relates primarily to the deferred federal benefit for state and
 foreign income tax related amounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The
 Company recognizes accrued interest and penalties related to unrecognized tax
 benefits as a component of income tax expense. Total accrued interest and
 penalties amounted to $63,000 and $49,000 on a gross basis at September 30,
 2008 and December 31, 2007, respectively, and are excluded from the gross
 amounts of unrecognized tax benefits reflected above. Interest and penalties
 recognized in the accompanying Condensed Consolidated Statements of Income
 related to uncertain tax positions amounted to $17,000 for the nine months
 ended September 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The
 Company files income tax returns in the U.S. federal jurisdiction and various
 state and foreign jurisdictions. As of September 30, 2008, the Company was no
 longer subject to income tax examinations for taxable years before 2006 and
 2005 in the case of U.S. federal and German taxing authorities, respectively,
 and taxable years generally before 2003 in the case of state taxing
 authorities, consisting primarily of Minnesota, California and Maryland.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(4) | Marketable Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Marketable
 securities consist primarily of municipal securities, U.S. government agency
 and money market securities and corporate securities with long-term credit
 ratings of AAA and short-term credit ratings of A-1. Marketable securities
 are classified as short-term or long-term in the balance sheet based on their
 effective maturity date. All marketable securities, except for variable rate
 demand notes, have maturities ranging from three to 36 months. Variable rate
 demand notes may be liquidated in less than three months from the date of
 purchase, but have legal maturities of greater than three months and are
 required to be classified as marketable securities. Marketable securities are
 classified as available-for-sale. Available-for-sale securities are recorded
 at fair value and any unrealized holding gains and losses, net of the related
 tax effect, are excluded from earnings and are reported as a separate
 component of accumulated other comprehensive income until realized. See Note
 8, Fair Value Measurements, for a discussion of inputs used to measure the
 fair value of the Companys available-for-sale securities. The Companys
 investment portfolio at September 30, 2008 did not include any auction-rate
 securities, high-yield sub-prime backed paper or other affected securities
 which are subject to significant market value declines or liquidity issues.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(5) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Inventories
 consisted of the following (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                                            |  |                     |       |                    |   |       | 
|------------------------------------------- |  | ------------------- | ----- | ------------------ | - | ----- | 
|                                            |  | September 30,
 2008 |       | December 31,
 2007 |  
|                                            |  |                     |       |                    |  
|                                            |  |                     |       |                    |  
|Finished goods and
 demonstration equipment |  | $                   | 1,703 |                    | $ | 1,879 | 
|Purchased parts and
 subassemblies          |  |                     | 4,211 |                    |   | 6,196 | 
|                                            |  |                     |       |                    |   |       | 
|                                            |  | $                   | 5,914 |                    | $ | 8,075 | 
|                                            |  |                     |       |                    |   |       | 

9

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Comprehensive Income                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                               
|    | Comprehensive
 income consists of the Companys net income, foreign currency translation
 adjustments and unrealized holding gains and losses from available-for-sale
 securities. The components of and changes in other comprehensive income are
 as follows (in thousands):

|                                                                  |  |                                   |       |                                  |   |       |  |      |       |   |   |        | 
|----------------------------------------------------------------- |  | --------------------------------- | ----- | -------------------------------- | - | ----- |  | ---- | ----- | - | - | ------ | 
|                                                                  |  | Three Months Ended
 September 30, |       | Nine Months Ended
 September 30, |  
|                                                                  |  |                                   |       |                                  |  
|                                                                  |  | 2008                              |       | 2007                             |   | 2008  |  | 2007 |      
|                                                                  |  |                                   |       |                                  |   |       |  |      |      
|                                                                  |  |                                   |       |                                  |   |       |  |      |      
|Net income                                                        |  | $                                 | 4,006 |                                  | $ | 6,203 |  | $    | 7,719 |   | $ | 11,246 | 
|Other comprehensive income:                                       |  |                                   |       |                                  |   |       |  |      |       |   |   |        | 
|Net changes in:                                                   |  |                                   |       |                                  |   |       |  |      |       |   |   |        | 
|Foreign currency translation adjustments                          |  |                                   | (475  | )                                |   | 144   |  |      | (19   | ) |   | 238    | 
|Net unrealized gain (loss) on marketable securities,
net of taxes |  |                                   | (135  | )                                |   | 178   |  |      | (32   | ) |   | 63     | 
|                                                                  |  |                                   |       |                                  |   |       |  |      |       |   |   |        | 
|Total comprehensive income                                        |  | $                                 | 3,396 |                                  | $ | 6,525 |  | $    | 7,668 |   | $ | 11,547 | 
|                                                                  |  |                                   |       |                                  |   |       |  |      |       |   |   |        | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Foreign Currency Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The
 Company enters into forward foreign exchange contracts to hedge intercompany
 receivables denominated in Euros arising from sales to its subsidiary in
 Germany. Gains or losses on forward foreign exchange contracts are calculated
 at each period end and are recognized in net income in the period in which
 they arose. The fair value of forward foreign exchange contracts is recorded
 in other current assets or other current liabilities depending on whether the
 net amount is a gain or a loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | As
 of September 30, 2008, the Company had nine outstanding foreign currency
 contracts totaling approximately $1,743,000. These contracts mature during
 2008 and bear exchange rates ranging from 1.3967 to 1.5762 U.S. Dollars per
 Euro. As of September 30, 2008, the fair value of foreign currency contracts
 resulted in a net gain position of $93,000, which is recorded in other
 current assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | As
 of December 31, 2007, the Company had 20 outstanding foreign currency
 contracts totaling $3,981,000, all maturing during the first half of 2008 at
 exchange rates ranging from 1.4041 to 1.4810 U.S. Dollars per Euro. As of
 December 31, 2007, the fair value of foreign currency contracts resulted in a
 net loss position of approximately $34,000, which is recorded in other
 current liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(8) | Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The
 Company adopted SFAS No. 157, Fair Value Measurements, for financial assets
 and liabilities on January 1, 2008. SFAS No. 157 defines fair value and
 establishes a framework for measuring fair value. This statement applies only
 to fair value measurements that are already required or permitted by other
 accounting standards, except for measurements of share-based payments and
 measurements that are similar to, but not intended to be, fair value. In
 February 2008, FASB Staff Position No. 157-2 was issued which delayed the
 effective date of FASB Statement No. 157 to fiscal years ending after
 November 15, 2008 for nonfinancial assets and liabilities, except for items
 that are recognized or disclosed at fair value in the financial statements on
 a recurring basis (at least annually). Although the adoption of SFAS No. 157
 for financial assets and liabilities did not impact the Companys financial
 statements, additional disclosures about fair value measurements are
 required.

10

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SFAS
 No. 157 establishes a framework for measuring fair value by creating a
 hierarchy of fair value measurements that distinguishes market data between
 observable independent market inputs and unobservable market assumptions by
 the reporting entity, as highlighted in the table below. The Companys assets
 and liabilities measured at fair value on a recurring basis subject to the
 disclosure requirements of SFAS No. 157 were as follows at September 30,
 2008:

|                                            |  |                                              |        |                                             |                               |                                                  |  |                                              |        |  |   |   | 
|------------------------------------------- |  | -------------------------------------------- | ------ | ------------------------------------------- | ----------------------------- | ------------------------------------------------ |  | -------------------------------------------- | ------ |  | - | - | 
|                                            |  |                                              |        |                                             | Fair Value Measurements Using |                                                 
|                                            |  |                                              |        |                                             |                               |                                                 
|(in thousands)                              |  | Total Carrying
 Value at
 September 30, 2008 |        | Quoted Prices in
 Active Markets
 (Level 1) |                               | Significant Other
 Observable
 Inputs
 (Level 2) |  | Significant
 Unobservable
 Inputs
 (Level 3) |       
|                                            |  |                                              |        |                                             |                               |                                                  |  |                                              |       
|Assets                                      |  |                                              |        |                                             |                               |                                                  |  |                                              |        |  |   |   | 
|Available-for-sale securities               |  | $                                            | 82,923 |                                             | $                             |                                                 |  | $                                            | 82,923 |  | $ |  | 
|Foreign currency forward exchange
contracts |  | $                                            | 93     |                                             | $                             |                                                 |  | $                                            | 93     |  | $ |  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Available-for-sale
 securities are carried at fair value based on significant observable inputs
 other than quoted market prices. Such inputs may include benchmark yields,
 reported trades, broker/dealer quotes, issuer spreads, two-sided markets,
 benchmark securities, bids, offers and other reference data. Foreign currency
 forward exchange contracts are also carried at fair value based on
 significant other observable market inputs, in this case, quoted foreign
 currency exchange rates. Such valuation represents the amount the Company
 would receive or pay to terminate the forward exchange contracts at the
 reporting date.                                                                                                                                                                                                                                                                         
|   
|    | The
 Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and
 Financial Liabilities-Including an Amendment of FASB Statement No. 115, on
 January 1, 2008. This standard permits entities to choose to measure many
 financial instruments and certain other items at fair value. This statement
 also establishes presentation and disclosure requirements designed to
 facilitate comparisons between entities that choose different measurement
 attributes for similar types of assets and liabilities. Unrealized gains and
 losses on items for which the fair value option is elected would be reported
 in earnings. The Company has not elected the fair value measurement option
 for any of its financial assets or liabilities as of September 30, 2008, and
 the Company has not determined whether or not it will elect this option for
 financial instruments it may acquire in the future.
|   
|(9) | Common Stock Repurchase Authorizations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | On
 October 17, 2007, the Companys Board of Directors authorized the repurchase
 of up to 500,000 shares of its common stock. In February 2008, the Companys
 Board of Directors increased the share repurchase authorization by an
 additional 500,000 shares, bringing total shares authorized for repurchase to
 1,000,000. Shares will be purchased at prevailing market prices in the open
 market or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | in
 private transactions, subject to market conditions, share price, trading
 volume and other factors. The repurchase program may be discontinued at any
 time. The Company will finance the purchase of the shares using cash on hand.
 During the three and nine months ended September 30, 2008, the Company
 repurchased 275,452 and 550,762 shares, respectively, of its common stock at
 an average purchase price of $15.56 and $16.86 per share for each respective
 period under the authorizations. As of September 30, 2008, there were 449,238
 shares available for repurchase under the authorizations.                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(10) | Recently Issued Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | In
 December 2007, the FASB issued SFAS No. 141R (revised 2007), Business
 Combinations. SFAS No. 141R establishes principles and requirements for how
 an acquirer recognizes and measures in its financial statements the
 identifiable assets acquired, the liabilities assumed, any noncontrolling
 interest in the acquiree and the goodwill acquired in the business
 combination. SFAS No. 141R also establishes disclosure requirements to enable
 the evaluation of the nature and financial effects of the business
 combination. SFAS No. 141R becomes effective for business combinations
 occurring on or after January 1, 2009, and early adoption is prohibited.                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | In
 December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
 Consolidated Financial Statementsan amendment of Accounting Research
 Bulletin No. 51. SFAS No. 160 establishes accounting and reporting standards
 for ownership interests in subsidiaries held by parties other than the
 parent, the amount of consolidated net income attributable to the parent and
 to the noncontrolling interest, changes in a parents ownership interest and
 the valuation of retained noncontrolling equity investments when a subsidiary
 is deconsolidated. SFAS No. 160 also establishes disclosure requirements that
 clearly identify and distinguish between the interests of the parent and the
 interests of the noncontrolling owners. The provisions of SFAS No. 160 are
 effective for the Company beginning January 1, 2009. The Company is currently
 evaluating the impact of adopting this pronouncement on its consolidated
 financial statements and related disclosures.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(11) | Computation of Net Income Per Share of Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | Basic
 net income per common share is determined by dividing net income by the
 weighted average number of shares of common stock outstanding. Diluted net
 income per common share includes the potentially dilutive effect of common
 shares issued in connection with outstanding stock options using the treasury
 stock method. Stock options to acquire 788,000 and 717,000 weighted average
 common shares for the three and nine months ended September 30, 2008,
 respectively, and 397,000 and 303,000 weighted average common shares for the
 three and nine months ended September 30, 2007, respectively, have been
 excluded from the computation of diluted weighted average shares outstanding
 for each respective period as their effect is anti-dilutive. The following is
 a summary of the weighted average common shares outstanding and diluted
 potential common shares (in thousands, except for per share data):                                                             

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Table of Contents

RIMAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|-------------------------------------------------------------- |  | --------------------------------- | ----- | -------------------------------- | - | ------ |  | ---- | ----- | - | - | ------ | 
|                                                               |  | Three Months Ended
 September 30, |       | Nine Months Ended
 September 30, |  
|                                                               |  |                                   |       |                                  |  
|                                                               |  | 2008                              |       | 2007                             |   | 2008   |  | 2007 |      
|                                                               |  |                                   |       |                                  |   |        |  |      |      
|                                                               |  |                                   |       |                                  |   |        |  |      |      
|Shares outstanding at end of period                            |  |                                   | 9,353 |                                  |   | 9,646  |  |      | 9,353 |   |   | 9,646  | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Weighted average shares outstanding                            |  |                                   | 9,470 |                                  |   | 9,890  |  |      | 9,632 |   |   | 9,992  | 
|Restricted stock effect on weighted average shares
outstanding |  |                                   | (5    | )                                |   |       |  |      | (3    | ) |   |       | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Total basic weighted average shares
outstanding                |  |                                   | 9,465 |                                  |   | 9,890  |  |      | 9,629 |   |   | 9,992  | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Weighted average shares outstanding                            |  |                                   | 9,470 |                                  |   | 9,890  |  |      | 9,632 |   |   | 9,992  | 
|Weighted average potential common shares                       |  |                                   | 125   |                                  |   | 412    |  |      | 188   |   |   | 474    | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Total diluted weighted average shares
outstanding              |  |                                   | 9,595 |                                  |   | 10,302 |  |      | 9,820 |   |   | 10,466 | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Net income                                                     |  | $                                 | 4,006 |                                  | $ | 6,203  |  | $    | 7,719 |   | $ | 11,246 | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Basic net income per common share                              |  | $                                 | 0.42  |                                  | $ | 0.63   |  | $    | 0.80  |   | $ | 1.13   | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 
|Diluted net income per common share                            |  | $                                 | 0.42  |                                  | $ | 0.59   |  | $    | 0.79  |   | $ | 1.07   | 
|                                                               |  |                                   |       |                                  |   |        |  |      |       |   |   |        | 

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | The
 Company is exposed to a number of asserted and unasserted claims encountered
 in the normal course of business. In the opinion of management, the
 resolution of these matters will not have a material adverse effect on the
 Companys financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(13) | Purchase of Real Property and Building                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | On
 August 11, 2008, a Purchase and Sale Agreement dated July 31, 2008 between
 the Company and 7725 Washington Avenue Corp. (the Seller) became effective.
 Under the Purchase and Sale Agreement, the Company agreed to purchase from
 the Seller the real property and building the Company previously leased as
 its corporate headquarters in Edina, Minnesota. The closing of the purchase
 transaction was effective September 30, 2008. The aggregate cost of the
 property totaled $3.9 million, consisting of the base purchase price of $3.8
 million and other direct costs of $0.1 million. The Company financed the
 purchase using cash on hand.

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| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Item 2. Managements Discussion and
 Analysis of Financial Condition and Results of Operations                                             
| |                                                                                                                                            
| | The
 following table sets forth, for the periods indicated, selected items from
 the Companys condensed consolidated statements of income.

|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|----------------------------------- |  | -------------------------------------------------------------- | --- | --------------------------------------------- |  | ------------------------------------------------------------- | - | --------------------------------------------- | --- | ---- |  | ------------- | - |  | --- | - |  | --- | -
|                                    |  | Percentage (%)
 of Revenues
 Three Months Ended
 September 30, |     | Percentage (%)
 Incr/(Decr)
 Between
 Periods |  | Percentage (%)
 of Revenues
 Nine Months Ended
 September 30, |   | Percentage (%)
 Incr/(Decr)
 Between
 Periods |    
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |    
|                                    |  | 2008                                                           |     | 2007                                          |  | 2008 vs. 2007                                                 |   | 2008                                          |     | 2007 |  | 2008 vs. 2007 |  
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |  
|Revenues                            |  |                                                                | 100 |                                               |  | 100                                                           |   |                                               | (25 | )    |  | 100           |   |  | 100 |   |  | (12 | )
|Cost of revenues                    |  |                                                                | (52 | )                                             |  | (51                                                           | ) |                                               | (23 | )    |  | (55           | ) |  | (53 | ) |  | (9  | )
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|Gross profit                        |  |                                                                | 48  |                                               |  | 49                                                            |   |                                               | (27 | )    |  | 45            |   |  | 47  |   |  | (16 | )
|Operating expenses:                 |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|Research and development            |  |                                                                | (5  | )                                             |  | (5                                                            | ) |                                               | (23 | )    |  | (6            | ) |  | (6  | ) |  | (11 | )
|Selling, general and administrative |  |                                                                | (21 | )                                             |  | (18                                                           | ) |                                               | (15 | )    |  | (25           | ) |  | (23 | ) |  | (4  | )
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|Operating income                    |  |                                                                | 22  |                                               |  | 26                                                            |   |                                               | (36 | )    |  | 14            |   |  | 18  |   |  | (32 | )
|Other income, net                   |  |                                                                | 3   |                                               |  | 3                                                             |   |                                               | (30 | )    |  | 3             |   |  | 3   |   |  | (20 | )
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|Income before income taxes          |  |                                                                | 25  |                                               |  | 29                                                            |   |                                               | (35 | )    |  | 17            |   |  | 21  |   |  | (30 | )
|Income tax expense                  |  |                                                                | (9  | )                                             |  | (11                                                           | ) |                                               | (36 | )    |  | (6            | ) |  | (7  | ) |  | (28 | )
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  
|Net income                          |  |                                                                | 16  |                                               |  | 18                                                            |   |                                               | (35 | )    |  | 11            |   |  | 14  |   |  | (31 | )
|                                    |  |                                                                |     |                                               |  |                                                               |   |                                               |     |      |  |               |   |  |     |   |  |     |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Overview                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Rimage develops,
 manufactures and markets digital publishing systems that are used by
 businesses to produce recordable CD, DVD and blue laser discs with customized
 digital content on an on-demand basis. Rimage distributes its publishing
 systems from its operations in the United States, Germany and Japan. These
 systems allow customers to benefit from cost savings by reducing or
 eliminating their manual labor efforts in industries such as digital
 photography, medical imaging and business services. Rimage anticipates
 increased sales and marketing expenditures in 2008 as a result of increased
 resources focused on developing these markets. As Rimages sales within North
 America and Europe have averaged 94% of total sales over the past three
 years, the strength of the economies in these regions plays an important role
 in determining the success of Rimage.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Rimage earns revenues
 through the sale of equipment, consumables (ribbons, ink cartridges and
 Rimage-branded blank CD-R and DVD-R media), maintenance contracts, parts and
 repair services. Rimages recurring revenues (consumables, maintenance
 contracts, parts and service) comprised approximately 59% and 46% of its
 consolidated revenues during the nine months ended September 30, 2008 and
 2007, respectively. Exclusive of a small amount of capital lease obligations,
 Rimage has no long-term debt and does not require significant capital
 investment for its ongoing operations as all fabrication of its products is
 outsourced to vendors.                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Results
 of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Revenues. Consolidated revenues decreased 25% and
 12% to $25.2 million and $70.6 million for the three and nine months ended
 September 30, 2008, respectively, from $33.7 million and $80.7 million for
 the respective prior-year periods. The reduction in revenues resulted from
 decreased sales of Producer and Desktop product line equipment of $8.8 million
 and $14.5 million for the three and nine months ended September 30, 2008,
 respectively, compared to the same periods in the prior year. The overall
 decline in the volume of equipment sales was primarily due to deliveries
 against significant orders from the retail market segment during the prior
 years second and third quarters, compared to minimal equipment sales in this
 market segment in the current-year periods. Sales in the retail market                                                                 

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| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | segment can fluctuate
 significantly between periods due to uneven rollout schedules of the
 Companys retail customers. The lower volume and concentration of sales in
 the retail market segment during the current-year periods helped drive an
 increase in average selling prices on Producer equipment configurations, partially
 offsetting the impact on revenue of a decreased volume of equipment sales.
 Sales of Producer product line equipment comprised 37% and 34% of total
 revenues for the three and nine months ended September 30, 2008,
 respectively, compared to 49% and 44% for the same periods in the prior year.
 Sales of Desktop product line equipment represented 5% and 7% of revenues for
 the three and nine months ended September 30, 2008, respectively, compared to
 8% and 9% in the respective prior-year periods. Partially offsetting the
 overall decrease in equipment sales was an increase in the volume of
 recurring revenues of $0.4 million and $4.5 million for the three and nine
 months ended September 30, 2008, respectively, compared to the same periods
 in the prior year. The growth in recurring revenues was primarily due to the
 continued expansion of the Companys worldwide installed base of CD-R and
 DVD-R publishing systems and the Companys increased emphasis on promoting
 this portion of its business. Recurring revenues comprised 58% and 59% of
 total revenues for the three and nine months ended September 30, 2008,
 respectively, compared to 43% and 46% in the same prior-year periods.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | International sales
 decreased 3% for the third quarter and increased 11% for the year-to-date
 period compared to the same prior-year periods, and comprised 35% and 42% of
 total respective sales, compared to 27% and 33% for the same periods in the
 prior year. Currency fluctuations affecting the Companys European and
 Japanese operations reduced the decline in the third quarter and generated
 the increase in the year-to-date period of total international revenues,
 resulting in an increase in reported consolidated revenues for the three and
 nine months ended September 30, 2008 of 2.8% and 4.4%, respectively, relative
 to the same prior-year periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | As of and for the nine
 months ended September 30, 2008, the Companys German and Japanese operations
 generated foreign revenues from unaffiliated customers of $26.0 million and
 operating income of $0.1 million. Net identifiable assets for these
 operations amounted to $9.1 million. These amounts pertain primarily to the
 Companys German operations. Comparable amounts for the Companys German and
 Japanese operations as of and for the nine months ended September 30, 2007
 were revenues of $22.8 million, operating income of $0.2 million and net
 identifiable assets of $9.5 million. The growth in total revenues for these
 operations occurred primarily as a result of foreign currency fluctuations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The Company is estimating
 that fourth quarter 2008 consolidated revenues will range between $20 million
 and $22 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Gross profit. Gross profit as a percentage of revenues
 was 48% and 45% for the three and nine months ended September 30, 2008,
 respectively, compared to 49% and 47% for the respective prior year periods.
 The decline in gross profit as a percentage of revenues for both current-year
 periods resulted primarily from a shift in the distribution of sales to lower
 margin products. This shift is driven largely by a reduced volume and
 concentration of Producer product line equipment sales, which generally carry
 higher gross margins than Desktop product line equipment or recurring
 revenues. Sales in the current-year periods also included an increased volume
 and concentration of sales of media and media kits, which generally carry
 lower margins than other product offerings, comprising 21% and 20% of
 revenues for the three and nine months ended September 30, 2008,
 respectively, compared to 13% and 12% in the same prior-year periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Partially offsetting the
 unfavorable impact of changes in product mix was an improvement in equipment
 margins primarily as a result of higher average selling prices on Producer
 equipment configurations, influenced by the lower concentration of sales in
 the retail market segment. Additionally, gross margin for the current-year
 periods benefited from reductions in compensation related costs stemming from
 a workforce reduction in the second quarter 2008 in the Companys U.S.
 operations. Gross margin for the current year-to-date period was also
 favorably impacted by reduced inventory related charges to cost of sales of
 approximately $0.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Future gross profit
 margins will continue to be affected by many factors, including product mix,
 the timing of new product introductions, changes in material costs,
 manufacturing volume, the growth rate of service related revenues relative to
 associated service support costs and foreign currency exchange rate
 fluctuations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Operating
 expenses. Research
 and development expenses totaled $1.2 million and $4.1 million for the three
 and nine months ended September 30, 2008, respectively, representing 5% and
 6% of revenues for each period, respectively. Expenses for the same
 prior-year periods totaled $1.6 million and $4.6 million, representing 5% and
 6% of revenues, respectively. The reduction in expenses between periods was
 primarily due to the timing of activities associated with new product
 development projects and enhancements to existing products. Rimage
 anticipates expenditures in research and development in the fourth quarter of
 2008 to increase approximately 5% to 10% from this years third quarter to
 support new product development initiatives and to improve existing products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Selling, general and
 administrative expenses for the three and nine months ended September 30,
 2008 amounted to $5.2 million and $17.5 million, respectively, or 21% and 25%
 of revenues, compared to expenses in the same prior-year periods of $6.2
 million and $18.3 million, respectively, or 18% and 23% of revenues. Currency
 fluctuations affecting the Companys European and Japanese operations
 increased selling, general and administrative expenses in the current years
 third quarter and year-to-date period by $0.2 million and $0.7 million,
 respectively, from the same periods in the prior year. The increased expenses
 from currency fluctuations were more than offset in the current-year periods
 by lower bonus expenses, stemming from below plan revenue and operating
 income, and a $0.2 million and $0.5 million respective decrease in
 stock-based compensation costs. Further offsetting the impact of currency
 fluctuations for the current-year periods were reduced expenditures for
 marketing and promotional programs, and for the nine months ended September
 30, 2008, reduced consulting and related expenses of $0.2 million primarily
 stemming from the Companys implementation in the prior years first quarter
 of a new enterprise resource planning (ERP) system in the Companys
 European operation.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Other
 income, net.The
 Company recognized net interest income on cash and marketable securities of
 $0.7 million and $2.2 million for the three and nine months ended September
 30, 2008, respectively, compared to $0.9 million and $2.6 million for the
 same prior-year periods. The reduction in interest income in each of the
 current-year periods was the result of a decline in average interest rates
 approximating one percentage point relative to the same prior-year periods.
 Partially offsetting the impact of the reduction in interest rates was a $6
 million and $9 million increase in average cash equivalent and marketable
 securities balances for the three and nine months ended September 30, 2008,
 respectively, compared to the same periods in the prior year. Other income
 for the three and nine months ended September, 2008 included a net gain and a
 net loss on foreign currency transactions of $40,000 and $123,000,
 respectively, compared to net gains on foreign                                                                                                                                                                                                                                                                                                                                                     

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | currency transactions of
 $163,000 and $74,000 in the respective prior year periods. The net loss in
 the current year-to-date period was impacted by larger fluctuations in the
 rate of exchange between the U.S. dollar and the Japanese Yen and European
 Euro applied to intercompany receivable balances denominated in these foreign
 currencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Income
 taxes. The
 provision for income taxes represents federal, state and foreign income taxes
 on income. Income tax expense for the three and nine months ended September
 30, 2008 amounted to $2.2 million and $4.3 million, or 35.8% of income before
 taxes in each period. Income tax expense for the three and nine months ended
 September 30, 2007 was $3.5 million and $6.0 million, or 35.8% and 34.8% of
 income before taxes, respectively. The rise in the effective tax rate for the
 year-to-date period primarily reflects the increased impact of recording no
 tax benefit on foreign operating losses for the Companys Japanese
 subsidiary. Additionally, the increase in the year-to-date period was further
 impacted by higher state income taxes and the recognition of a benefit in the
 same period in 2007 for the federal research credit, which was not yet
 reinstated for 2008 as of September 30, 2008. Tax-exempt interest income
 comprised a larger percentage of pre-tax income in the current year-to-date
 period, generating a partially offsetting favorable impact on the effective
 tax rate. The Company anticipates its effective tax rate will range between
 35% and 37% for the full year 2008.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Net
 income / net income per share. Resulting net income for the three and nine
 months ended September 30, 2008 was $4.0 million and $7.7 million,
 respectively, or 16% and 11% of revenues for the respective periods.
 Comparable amounts for the three and nine months ended September 30, 2007
 were $6.2 million and $11.2 million, respectively, or 18% and 14% of
 revenues, respectively. Related net income per diluted share amounts for the
 three and nine months ended September 30, 2008 were $0.42 and $0.79,
 respectively, compared to $0.59 and $1.07 per diluted share for the
 respective prior-year periods. The Company expects fourth quarter 2008 net
 income to range from $0.15 to $0.21 per diluted share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Liquidity
 and Capital Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The Company expects it
 will be able to maintain current operations, including anticipated capital
 expenditure requirements, through its internally generated funds and, if
 required, from Rimages existing credit agreement. This credit agreement
 allows for advances under an unsecured revolving loan up to a maximum advance
 of $10 million. At September 30, 2008, no amounts were outstanding under the
 credit agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | At September 30, 2008, the
 Company had working capital of $66.3 million, a decrease of $0.6 million from
 working capital reported at December 31, 2007. The decrease was primarily the
 result of the Companys use of $9.3 million during the nine months ended
 September 30, 2008 to repurchase shares of its common stock and $3.9 million
 in September 2008 to purchase its U.S. corporate headquarters and
 manufacturing facility, previously leased by the Company. Year-to-date net
 income adjusted for non-cash items of $9.5 million, proceeds from employee stock
 plans of $1.5 million and the impact of a $1.2 million net change in
 classification of marketable securities partially offset the uses of cash
 described above. The net change in marketable securities resulted from a
 non-cash change in the classification of $18.5 million of marketable
 securities from non-current as of December 31, 2007 to current as of
 September 30, 2008, partially offset by a $17.3 million net use of cash to
 purchase non-current marketable securities.                                                                                                                                                                   

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | On October 17, 2007, the
 Companys Board of Directors authorized the repurchase of up to 500,000
 shares of its common stock. In February 2008, the Companys Board of
 Directors increased the share repurchase authorization by an additional
 500,000 shares, bringing total shares authorized for repurchase to 1,000,000.
 Shares will be purchased at prevailing market prices in the open market or in
 private transactions, subject to market conditions, share price, trading
 volume and other factors. The repurchase program may be discontinued at any
 time. The Company will finance the purchase of the shares using cash on hand.
 During the nine months ended September 30, 2008, the Company repurchased
 550,762 shares of its common stock at an average purchase price of $16.86 per
 share under the authorizations. The Company also intends on utilizing its
 assets primarily for its continued organic growth. Additionally, the Company
 may use its available cash for potential future strategic initiatives or
 alliances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Net cash provided by
 operating activities totaled $6.8 million for the nine months ended September
 30, 2008, compared to $18.0 million in the same prior-year period. The $11.2
 million reduction in cash generated from operations resulted from changes in
 operating assets and liabilities producing a net use of cash of $2.0 million
 in 2008 compared to a net increase in cash of $6.3 million in 2007, coupled
 with a $3.2 million decrease in net income adjusted for non-cash items for
 the nine months ended September 30, 2008 compared to the same prior-year
 period. Contributing to the change in operating assets and liabilities
 compared to the prior years period was a $1.6 million smaller increase in income
 taxes payable and unfavorable variations of $2.7 million in receivables, $3.6
 million in deferred income and $5.0 million in the aggregate amount of trade
 accounts payable, accrued compensation and accrued expenses. These changes
 were partially offset by favorable variations of $3.7 million in inventories
 and $0.9 in prepaid expenses. The unfavorable change in receivables resulted
 from an $0.8 million increase in receivables in the current period, compared
 to a $1.9 million decrease in the comparable prior-year period, primarily
 impacted by a $2.2 million increase in revenue in September 2008 relative to
 December 2007 (last month of each quarter), compared to a $3.7 million
 decrease in revenue between the comparable prior-year periods. The unfavorable
 change in deferred income resulted from a larger volume of new maintenance
 contracts initiated during the first nine months of 2007 compared to 2008.
 The changes in trade accounts payable, accrued compensation and accrued
 expenses were primarily due to the timing of related payments, and in the
 case of accounts payable, reduced inventory purchases. The favorable change
 in inventories resulted from a $2.2 million reduction in inventories during
 the current-year period, compared to a $1.5 million increase in the same
 prior-year period. The decrease in inventories in the current period resulted
 primarily from the Companys maintenance of lower levels of buffer inventory
 stock and a reduced level of sales.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Investing activities
 provided a net increase in cash of $15.4 million for the nine months ended
 September 30, 2008, compared to a net use of cash of $10.5 million for the
 same prior-year period. The fluctuations in investing activities were
 primarily the result of $19.7 million in maturities of marketable securities,
 net of related purchases, during the nine months ended September 30, 2008,
 compared to $9.5 million in purchases of marketable securities, net of
 related maturities, in the same prior-year period. Capital expenditures for
 the nine months ended September 30, 2008 and 2007 totaled $4.3 million and
 $1.2 million, respectively. Capital expenditures in the current period
 consisted of the purchase of the Companys U.S. corporate headquarters and
 manufacturing facility ($3.9 million), previously leased by the Company, and
 purchases of manufacturing tooling and office equipment. Expenditures in the
 prior-year period consisted primarily of costs capitalized as part of the
 implementation of an enterprise resource planning system and purchases of
 manufacturing tooling.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Financing activities used
 net cash of $6.0 million and $9.6 million for the nine months ended September
 30, 2008 and 2007, respectively. The significant net use of cash in each
 period was primarily attributable to the Companys repurchase of shares of
 its common stock, requiring $9.3 million of cash to repurchase 550,762 shares
 in the current period and $12.6 million to repurchase 500,000 shares in the
 prior-year period. Partially offsetting the Companys use of cash to
 repurchase common stock in each period were proceeds from employee stock
 plans of $1.5 million and $2.0 million, respectively. Checks written in
 excess of the account bank balance also generated a partially offsetting
 increase in cash from financing activities in the current-year period of $1.1
 million.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Additionally, each period
 includes excess tax benefits recognized as an addition to the additional
 paid-in capital (APIC) pool of $0.7 million and $1.0 million, respectively.
 Such amounts are required to be reported as an addition to financing
 activities and a reduction in operating activities in the Statements of Cash
 Flows under the provisions of Statement of Financial Accounting Standards
 (SFAS) No. 123R, Share-Based Payment.                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Critical
 Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Management utilizes its
 technical knowledge, cumulative business experience, judgment and other
 factors in the selection and application of the Companys accounting
 policies. The accounting policies described below are considered by
 management to be the most critical to the presentation of the consolidated
 financial statements because they require the most difficult, subjective and
 complex judgments. Management made no changes to the Companys critical
 accounting policies during the nine months ended September 30, 2008.                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | In applying the critical
 accounting policies described below, management reassesses its estimates each
 reporting period based on available information. Changes in such estimates
 did not have a significant impact on earnings for the three or nine months
 ended September 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Revenue Recognition. Revenue for product sales (including
 hardware and consumables), which do not include any requirement for
 installation or training, is recognized on shipment, at which point the
 following criteria of SEC Staff Accounting Bulletin (SAB) No. 104, Revenue
 Recognition, Topic 13(A)(1) have been satisfied:                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Persuasive evidence of an
 arrangement exists. Orders are received for all sales and sales invoices are
 mailed on shipment.                                                                                                                           
| |  | Delivery has occurred.
 Product has been transferred to the customer or the customers designated
 delivery agent, at which time title and risk of loss transfers.                                                                                     
| |  | The vendors price is
 fixed or determinable. All sales prices are fixed at the time of the sale
 (shipment).                                                                                                                                          
| |  | Collectibility is
 probable. All sales are made on the basis that collection is expected in line
 with the Companys standard payment terms, which are consistent with industry
 practice in the geographies in which the Company markets its products.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A standard product sale by
 the Company does not require a commitment on the Companys part to provide
 installation, set-up or training. When such services are requested,
 value-added resellers generally arrange and perform the service directly with
 the customer, with no financial interest or obligation on the part of the
 Company. In the limited situations in which the Company does provide
 installation or training services for customers, the Company charges
 separately for the service based

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| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | Managements
 Discussion and Analysis of Financial Condition and Results of Operations
 (Continued)                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | upon its published list
 prices and recognizes the associated service revenue upon the successful
 completion of the service.                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Company records an
 allowance for sales returns from its customers. The amount of the allowance
 is based upon historical trends, timing of new product introductions and
 other factors. A return policy is in place with the Companys distributors to
 restrict the volume of returned products, and the Company reviews the
 distributors inventory to ensure compliance with the return policy.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Revenue for maintenance agreements is recognized primarily on a
 straight-line basis over the life of the contracts, in accordance with FASB
 Technical Bulletin No. 90-1, Accounting for Separately Priced Extended
 Warranty and Product Maintenance Contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue
 Arrangements with Multiple Deliverables provides revenue recognition
 guidance for arrangements with multiple deliverables and the criteria to
 determine if items in a multiple deliverable agreement should be accounted
 for separately. The elements of the Companys sales transactions are clearly
 and separately stated and sufficient evidence of their fair value exists to
 separately account for the elements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Allowance for
 Doubtful Accounts and Sales Returns. The Company
 records an allowance for doubtful accounts for potentially uncollectible
 receivables. The allowance is established based on a specific assessment of
 accounts with known collection exposure, based upon a review of the age of
 the receivable, the customers payment history, the customers financial
 condition and industry and general economic conditions, as well as a general
 assessment of collection exposure in the remaining receivable population
 based upon bad debt history. Actual bad debt exposure could differ
 significantly from managements estimates if economic conditions worsened for
 the Companys customers. As described above under Revenue Recognition, the
 Company also records an allowance for sales returns from its customers. The
 amount of the allowance is based upon historical trends, timing of new
 product introductions and other factors.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Inventory
 Provisions. The Company records provisions for
 inventory shrinkage and for potential excess, obsolete and slow moving
 inventory. The amounts of these provisions are based upon usage, historical
 loss trends, inventory levels, expected product lives and forecasted sales
 demand. Results could be materially different if demand for the Companys
 products decreased because of economic or competitive conditions, or if
 products became obsolete because of technical advancements in the industry or
 by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Income Taxes.
 The Company recognizes deferred tax assets for the expected future tax impact
 of temporary differences between book and taxable income. A valuation
 allowance and income tax charge are recorded when, in managements judgment,
 realization of a specific deferred tax asset is uncertain. Income tax expense
 could be materially different from actual results because of changes in
 managements expectations regarding future taxable income, the relationship
 between book and taxable income and tax planning strategies employed by the
 Company.                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | On January 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty
 in Income Taxes, an Interpretation of FASB Statement No. 109. Prior to
 adoption, the Companys policy was to establish an accrual that reflected the
 probable outcome of known tax contingencies. The effects of final resolution,
 if any, were recognized as changes to the effective income tax rate in the
 period of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements Discussion and Analysis of
 Financial Condition and Results of Operations (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | resolution. FIN 48 requires application of a more-likely-than-not
 threshold to the recognition and derecognition of uncertain tax positions.
 Under FIN 48, once the-more-likely-than-not threshold is met, the amount of
 benefit to be recognized is the largest amount of tax benefit that is greater
 than 50 percent likely of being ultimately realized upon settlement. It
 further requires that a change in judgment related to the expected ultimate
 resolution of uncertain tax positions be recognized in earnings in the period
 of such a change.Management recognizes a tax accrual for estimated exposures associated
 with uncertain tax positions and adjusts this accrual in light of changing
 facts and circumstances. However, due to the complexity of some of these
 uncertainties, the ultimate settlement may result in payments that are
 significantly different from managements current estimate of tax
 liabilities, resulting in the recognition of additional charges or benefits
 to income tax expense.                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | For the nine months ended September 30, 2008, the Company recognized
 tax liabilities of $36,000 and $217,000, before reduction for the federal
 benefit for state and foreign income tax related amounts, for new
 uncertainties related to current period income tax positions and prior period
 income tax positions, respectively. During the nine months ended September
 30, 2008, the Company reversed gross tax liabilities, exclusive of interest
 and penalties, amounting to $72,000 associated with income tax settlements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Warranty Accruals.
 The Companys non-consumable products are warranted to the end-user to ensure
 end-user confidence in design, workmanship and overall quality. Warranty
 lengths vary by product type, ranging from periods of six to twelve months.
 Warranty covers parts, labor and other associated expenses. The Company
 performs the majority of warranty work, while authorized distributors and
 dealers also perform some warranty work. The Company records a liability for
 estimated future warranty claims during the warranty period. The amount of
 the liability is based on an analysis of historical claims experience, which
 includes labor, parts and freight costs and consideration of the proportion
 of parts that can be re-used. Also considered are the anticipated impact of
 product improvements, releases of new products and other factors. Claims
 experience could be materially different from actual results because of the
 introduction of new, more complex products; a change in the Companys
 warranty policy in response to industry trends, competition or other external
 forces; or manufacturing changes that could impact product quality.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Stock-Based
 Compensation. The Company implemented the fair
 value recognition provisions of SFAS No. 123R effective January 1, 2006 using
 the modified prospective method. Under this method, the Company recognizes
 compensation expense on a straight-line basis over the vesting period for all
 stock-based awards granted on or after January 1, 2006, and for previously
 granted awards not yet vested as of January 1, 2006. The Company recognized
 stock-based compensation costs of approximately $0.7 million and $1.2 million
 for the nine months ended September 30, 2008 and 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company utilizes a Black-Scholes option pricing model to estimate
 the fair value of each stock option award on the date of grant. The Black-Scholes
 model requires the input of certain assumptions that involve management
 judgment. Key assumptions that affect the calculation of fair value include
 the expected life of stock-based awards and the Companys stock price
 volatility. Additionally, the Company is required to estimate the expected
 forfeiture rate of unvested awards and recognize expense for only those
 shares expected to vest. The assumptions used in calculating the fair value
 of stock-based awards and the forfeiture rate of such awards reflect
 managements best estimates. However, circumstances may change and additional
 data may become available over time, which could result in changes to these
 assumptions that materially impact the fair value determination of                                                                                                                                                                                                                                                                   

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements Discussion and Analysis of
 Financial Condition and Results of Operations (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | future awards or their estimated rate of forfeiture. If assumptions
 change for future stock-based awards, the compensation expense recorded under
 SFAS 123R may differ significantly from the expense recorded in the current
 period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | See Note 2 under the Notes to Condensed Consolidated Financial
 Statements in this Form 10-Q for additional information on stock-based
 compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Impairment of
 Long-lived Assets. Long-lived assets at
 September 30, 2008 consisted of property and equipment. In accordance with
 SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets,
 the Company reviews the carrying amount of its long-lived assets when events
 or changes in circumstances such as market value, asset utilization, physical
 change, legal factors or other matters indicate that the carrying amount of
 the assets may not be recoverable. When this review indicates the carrying
 amount of an asset or asset group exceeds the sum of the future undiscounted
 cash flows expected to be generated by the assets, the Company recognizes an
 asset impairment charge against operations for the amount by which the
 carrying amount of the impaired asset exceeds its fair value. Considerable
 judgment is required in the evaluation of whether certain events or
 circumstances lead to an indication of impairment and in the assumptions used
 in determining the amount and period over which future revenues are expected
 to be earned, related costs, terminal values and discount rates. No
 impairment charges were recognized by the Company during the nine months
 ended September 30, 2008. The Company recorded charges to cost of revenues of
 $60,000 during the nine months ended September 30, 2007 for impairment in the
 carrying value of manufacturing tooling associated with the assembly of the
 Rimage 360i product line.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Recently Issued Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In December 2007, the FASB issued SFAS No. 141R (revised 2007),
 Business Combinations. SFAS No. 141R establishes principles and
 requirements for how an acquirer recognizes and measures in its financial
 statements the identifiable assets acquired, the liabilities assumed, any
 noncontrolling interest in the acquiree and the goodwill acquired in the
 business combination. SFAS No. 141R also establishes disclosure requirements
 to enable the evaluation of the nature and financial effects of the business
 combination. SFAS No. 141R becomes effective for business combinations
 occurring after January 1, 2009, and early adoption is prohibited.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In December 2007, the FASB issued SFAS No. 160, Noncontrolling
 Interests in Consolidated Financial Statementsan amendment of Accounting
 Research Bulletin No. 51. SFAS No. 160 establishes accounting and reporting
 standards for ownership interests in subsidiaries held by parties other than
 the parent, the amount of consolidated net income attributable to the parent
 and to the noncontrolling interest, changes in a parents ownership interest
 and the valuation of retained noncontrolling equity investments when a
 subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
 requirements that clearly identify and distinguish between the interests of
 the parent and the interests of the noncontrolling owners. The provisions of
 SFAS No. 160 are effective for the Company beginning January 1, 2009. The
 Company is currently evaluating the impact of adopting this pronouncement on
 its consolidated financial statements and related disclosures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Cautionary Note Regarding Forward-Looking
 Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | This report contains forward-looking statements that involve risks
 and uncertainties. For this purpose, any statements contained in this report
 that are not statements of historical fact may be deemed to be forward-looking
 statements. Without limiting the foregoing, words such as may, will,
 expect,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managements Discussion and Analysis of
 Financial Condition and Results of Operations (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | believe, anticipate, estimate or continue or comparable
 terminology are intended to identify forward-looking statements. These
 statements by their nature involve substantial risks and uncertainties. The
 Companys actual results could differ significantly from those discussed in
 the forward-looking statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Factors that could cause or contribute to such differences include,
 but are not limited to, the following, as well as other factors not now
 identified: the economic health of the markets from which Rimage derives its
 sales and, in particular, the strength of the economies within North America
 and Europe where the Company has averaged 94% of total sales over the past
 three years; the Companys ability to keep pace with changes in technology in
 the computer and storage media industries as well as technology changes in
 the retail, medical and business services markets; increasing competition and
 the ability of the Companys products to successfully compete with products
 of competitors and newly developed media storage products; the ability of the
 Companys newly developed products to gain acceptance and compete against
 products in their markets; the significance of the Companys international
 operations and the risks associated with international operations including
 currency fluctuations, local economic health and management of these
 operations over long distances; the Companys ability to protect its
 intellectual property and to defend claims of others relating to its
 intellectual property; the Companys dependence upon the selling efforts of
 the Companys key channel partners; the Companys ability to maintain
 adequate inventory of products; the Companys reliance on single source
 suppliers; the ability of the Companys products to operate effectively with
 the computer products developed and to be developed by other manufacturers;
 the negative effect upon the Companys business from manufacturing or design
 defects; the effect of U.S. and international regulation; fluctuations in the
 Companys operating results; the Companys dependence upon its key personnel;
 the volatility of the price of the Companys common stock; provisions
 governing the Company relating to a change of control, compliance with
 corporate governance and securities disclosures rules and other risks,
 including those set forth in the Companys reports filed with the Securities
 and Exchange Commission, including Item 1A of Part I of the Companys Annual
 Report on Form 10-K for the year ended December 31, 2007. These
 forward-looking statements are made as of the date of this report and the
 Company assumes no obligation to update such forward-looking statements, or
 to update the reasons why actual results could differ materially from those
 anticipated in such forward-looking statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Item
 3. Quantitative and Qualitative Disclosures about Market
 Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The Company is exposed to market risk from foreign exchange rate
 fluctuations of the European Euro and Japanese Yen to the U.S. dollar as the
 financial position and operating results of the Companys German and Japanese
 subsidiaries, Rimage Europe GmbH and Rimage Japan Co., Ltd., respectively,
 are translated into U.S. dollars for consolidation. Resulting translation
 adjustments are recorded as a separate component of stockholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The Company enters into forward exchange contracts principally to
 hedge intercompany receivables denominated in Euros arising from sales to its
 subsidiary in Germany. Gains or losses on forward exchange contracts are
 calculated at each period end and are recognized in net income in the period
 in which they arose. The Company records the fair value of its open forward
 foreign exchange contracts in other current assets or other current
 liabilities depending on whether the net amount is a gain or a loss. The
 Company does not utilize financial instruments for trading or other
 speculative purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Item
 4. Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (a) Evaluation of Disclosure Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The Companys Chief Executive Officer, Bernard P. Aldrich, and the
 Companys Chief Financial Officer, Robert M. Wolf, have evaluated the
 Companys disclosure controls and procedures as of the end of the period
 covered by this report. Based upon such evaluation, they have concluded that
 these disclosure controls and procedures are effective.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) Changes in Internal Control Over Financial Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | There have been no changes in internal controls over financial
 reporting that occurred during the fiscal quarter covered by this report that
 have materially affected, or are reasonably likely to materially affect, the
 Companys internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

23

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Table of Contents

PART II
 OTHER INFORMATION

| |                                                                                                                                                         |                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------
| | Item 1.                                                                                                                                                 | Legal Proceedings                                           
| |                                                                                                                                                         |                                                             
| | Not
 Applicable.                                                                                                                                       
| |                                                                                                                                                         |                                                             
| | Item 1A.                                                                                                                                                | Risk Factors                                                
| |                                                                                                                                                         |                                                             
| | Not
 Applicable.                                                                                                                                       
| |                                                                                                                                                         |                                                             
| | Item 2.                                                                                                                                                 | Unregistered
 Sales of Equity Securities and Use of Proceeds
| |                                                                                                                                                         |                                                             
| | The following table provides certain information regarding purchases
 made by the Company of its common stock in the quarter ended September 30,
 2008:

|                            |        |  |         |                                    |   |                               |  |                                                                                    |         |                                                                                        |  |         |  |  | 
|--------------------------- | ------ |  | ------- | ---------------------------------- | - | ----------------------------- |  | ---------------------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------------------- |  | ------- |  |  | 
|                            | Period |  |         | Total Number
 of Shares
 Purchased |   | Average Price
 Paid Per Share |  | Total Number of
 Shares Purchased
 as Part of Publicly
 Announced Plan or
 Program |         | Maximum
 Numberof Shares that
 May Yet Be
 Purchased Under
 the Plans or
 Programs (1) | 
|                            |        |  |         |                                    |   |                               |  |                                                                                    |         |                                                                                        | 
|                            |        |  |         |                                    |   |                               |  |                                                                                    |         |                                                                                        |  |         | 
|July 1 
 July 31, 2008     |        |  | 110,000 |                                    | $ | 15.10                         |  |                                                                                    | 110,000 |                                                                                        |  | 614,690 | 
|August 1 
 August 31, 2008 |        |  | 165,452 |                                    | $ | 15.86                         |  |                                                                                    | 165,452 |                                                                                        |  | 449,238 | 
|Sept. 1 
 Sept. 30, 2008   |        |  |        |                                    |   |                              |  |                                                                                    |        |                                                                                        |  | 449,238 | 
|                            |        |  |         |                                    |   |                               |  |                                                                                    |         |                                                                                        |  |         | 
|Total                       |        |  | 275,452 |                                    | $ | 15.56                         |  |                                                                                    | 275,452 |                                                                                        |  | 449,238 | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------
| | (1) On October 17, 2007, the Companys Board of Directors authorized
 the repurchase of up to 500,000 shares of its common stock. In February 2008,
 the Companys Board of Directors increased the share repurchase authorization
 by an additional 500,000 shares, bringing total shares authorized for
 repurchase to 1,000,000. Shares will be purchased at prevailing market prices
 in the open market or in private transactions, subject to market conditions,
 share price, trading volume and other factors. The repurchase program may be
 discontinued at any time. The Company will finance the purchase of the shares
 using cash on hand.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Item 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Defaults Upon Senior Securities                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Not
 Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Item 4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Submission
 of Matters to a Vote of Security Holders
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Not Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Item 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Other Information                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     
| | Not
 Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

24

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Table of Contents

| |         |                                             
| | ------- | --------------------------------------------
| | Item 6. | Exhibits                                    
| |         |                                             
| | (a)     | The
 following exhibits are included herein:
| |         |                                             

| |      |                                                                                                                            
| | ---- | ---------------------------------------------------------------------------------------------------------------------------
| | 10.1 | Purchase and
 Sale Agreement dated as of July 31, 2008, between Rimage Corporation and 7725
 Washington Avenue Corporation.
| | 31.1 | Certificate
 of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the
 Exchange Act.                          
| | 31.2 | Certificate
 of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the
 Exchange Act.                          
| | 32   | Certifications
 pursuant to 18 U.S.C. §1350.                                                                               

25

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Table of Contents

SIGNATURES

In accordance
with the Exchange Act, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereto duly authorized.

|      |                   |  |     |                                    |  | 
|----- | ----------------- |  | --- | ---------------------------------- |  | 
|      |                   |  |     | RIMAGE CORPORATION                
|      |                   |  |     |                                    |  | 
|      |                   |  |     | Registrant                        
|      |                   |  |     |                                   
|      |                   |  |     |                                   
|Date: | November 7,
 2008 |  | By: | /s/ Bernard P. Aldrich            
|      |                   |  |     |                                    |  | 
|      |                   |  |     | Bernard P. Aldrich                
|      |                   |  |     | Director, Chief Executive Officer,
|      |                   |  |     | and President                     
|      |                   |  |     | (Principal Executive Officer)     
|      |                   |  |     |                                   
|Date: | November 7,
 2008 |  | By: | /s/ Robert M. Wolf                
|      |                   |  |     |                                    |  | 
|      |                   |  |     | Robert M. Wolf                    
|      |                   |  |     | Chief Financial Officer           
|      |                   |  |     | (Principal Financial Officer)     
|      |                   |  |     | (Principal Accounting Officer)    

26

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