8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): February 26, 2010

Rimage Corporation

(Exact name of Registrant as Specified in its Charter)

Minnesota

(State Or Other Jurisdiction Of Incorporation)

000-00619	41-1577970
(Commission File Number)	(I.R.S. Employer Identification No.)
7725 Washington Avenue South Minneapolis, MN	55439
(Address Of Principal Executive Offices)	(Zip Code)

(952) 944-8144

Registrant’s Telephone Number, Including Area Code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Items under Sections 1, 3 and 4, and 6 though 8 are not applicable and therefore omitted.

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Rimage Corporation (the “Company”) hereby furnishes a press release, issued on March 3, 2010, disclosing material non-public information regarding its results of operations for the quarter and year ended December 31, 2009 and hereby furnishes statements of Sherman L. Black, its President, Chief Executive Officer and Chief Operating Officer, and Robert M. Wolf, its Chief Financial Officer, made on March 3, 2010 at a telephone conference relating to the quarter and year ended December 31, 2009 results.

ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.

On February 25, 2010, the Compensation Committee of the Company recommended, and on February 26, 2010, the Board of Directors of the Company approved, an increase in the annual base salaries of Samir Mittal, the Company’s Chief Technology Officer, and Robert M. Wolf, the Company’s Chief Financial Officer.  Mr. Mittal’s annual base salary will be $221,450 and Mr. Wolf’s annual base salary will be $216,300, with the increases effective June 28, 2010.  The base salary of Sherman L. Black, the Company’s President, Chief Executive Officer and Chief Operating Officer, was not changed.

Additionally, the Compensation Committee recommended on February 25, 2010, and the Board of Directors approved on February 26, 2010, cash bonuses to the Company’s executive officers under the Company’s 2009 cash incentive compensation plan for executive officers (the “2009 Incentive Plan”) based upon achievement of the quarterly and annual goals related to sales and operating income as a percentage of sales that were established by the Compensation Committee.  The following table summarizes the estimated bonuses under the 2009 Incentive Plan to the Company’s current executive officers.

Name of Executive Officer	2009 Incentive Plan Estimated Bonus Amount
Sherman L. Black President, Chief Executive Officer and Chief Operating Officer	$178,425
Robert M. Wolf Chief Financial Officer	$155,400
Samir Mittal Chief Technology Officer	$  44,308

In the case of Messrs. Black and Mittal, amounts reflect service for part of 2009.  In addition, the Company’s former Chief Executive Officer, Bernard P. Aldrich, will be paid an estimated bonus under the 2009 Incentive Plan of $314,353.  Mr. Aldrich is entitled to the bonus under the terms of the 2009 Incentive Plan and the terms of his separation and release agreement from the Company dated November 4, 2009.

The estimated cash bonus amounts will be finalized upon completion of the audit of the Company’s financial statements for the year ended December 31, 2009, but the final amounts are not expected to change materially from the estimated amounts stated above.  These cash bonuses will be paid following completion of the audit, which is expected to be on or about March 11, 2010.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit No.	Description
99.1	Press Release issued on March 3, 2010.
99.2	Statements of Sherman L. Black, President, Chief Executive Officer and Chief Operating Officer, and Robert M. Wolf, Chief Financial Officer, at a telephone conference held on March 3, 2010.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RIMAGE CORPORATION
By:	/s/ Robert M. Wolf
	Robert M. Wolf Chief Financial Officer

Date:  March 4, 2010

EX-99.1

Exhibit 99.1

Rimage Reports Improved Fourth Quarter Sales and Earnings

New Business Strategy Outlined

Minneapolis, MN—March 3, 2010—Rimage Corporation (Nasdaq: RIMG) today reported operating results for the fourth quarter of 2009 ended December 31.

·     Sales totaled $22,686,000, an increase of 9% from $20,749,000 in the fourth quarter of 2008.

·     Operating income totaled $2,885,000, up 60% from $1,806,000 in the year-earlier period, reflecting the significantly higher gross margin recorded in the fourth quarter of 2009.

·     Net income came to $2,228,000 or $0.23 per diluted share, up 30% from $1,712,000 or $0.18 per diluted share in the fourth quarter of 2008.

·     Reflecting the cash-generating ability of Rimage’s business, cash and investments rose to  $110,125,000 at December 31, 2009, from $107,323,000 at September 30, 2009, and $95,402,000 at the beginning of the year.

Sherman L. Black, president and chief executive officer, commented: “We are generally pleased with Rimage’s improved fourth quarter operating results, which were attained despite the continued impact of the weak global economy on the capital spending decisions of our customers. Our fourth quarter revenue was paced by a nearly 26% increase in sales of our high-end Producer disc publishing hardware, which included an $800,000 order shipped to the Department of Justice for our new video surveillance data archiving system. As a result of continued product improvements that have reduced service-related costs, in addition to the shift in our sales mix toward Producer hardware, Rimage’s gross margin rose to 51% in the fourth quarter from 39% in the year-earlier period.”

He continued: “We have developed a comprehensive strategy for transforming Rimage into a higher-performing business by bolstering our management team; strengthening our core disc publishing business; generating new revenue streams by developing total solutions that leverage our core capabilities; and identifying and investing in future opportunities in adjacent markets. Going forward, we will incur higher expenses related to the implementation of our growth strategy, including increases in our head count and other costs. We also anticipate a short-term sales disruption as we institute changes in our distribution channel and other aspects of our operations. While these factors will affect our first quarter performance, we believe our operating results will start benefiting from our transformation initiatives as they gain greater traction as the year progresses. In addition, the recently introd uced Professional 5400N and 3400 disc publishing systems will be a key contributor to our 2010 plan. The compact and fully integrated footprints, functionality and attractive pricing of these systems position them for retail and a range of other applications. In all, it is our goal to reverse the decline in sales and earnings that Rimage has posted over the past two years.”

Black added: “We view 2010 as only a first step in a multi-year program toward transforming Rimage into a higher-performing company. Today, we are investing not only in 2010 but, more importantly, in 2011 and beyond, which makes us optimistic about Rimage’s future. We also want to emphasize that throughout our investment process, we will be prudent stewards of our shareholders’ money and remain committed to safeguarding Rimage’s strong financial condition.”

The process of transforming Rimage into a growing and increasingly profitable business consists of several elements:

Strengthening Rimage’s Management Team

We have significantly strengthened our management team with the addition of leading technologists and marketing executives. Samir Mittal, a Ph.D. in mechanical engineering, became senior vice president and chief technology officer in September, responsible for evaluating potential new technologies and products, in addition to managing Rimage’s R&D organization. In December, Christopher A. Wells joined us as vice president of marketing and strategy to build an advanced strategic marketing function. Then, in February 2010, we hired P.D. Mathur, a Ph.D in electrical engineering, as vice president, technology, responsible for developing new technology solutions.

Strengthening Rimage’s Core Business

ŸDistribution: In January 2010, we announced that we will cease using distributors in our largest markets, including the U.S., Germany and the U.K. In their place, we are expanding our sales force, while continuing to serve customers through value-added resellers (VARs). Eliminating this layer of distribution, which will take effect in the second quarter, will remove cost from our sales system. Equally important, we will move closer to our customers and VARs, allowing us to gain insights into satisfying unmet needs with our current and potential new products.

ŸProduct Offerings: We will reduce our hardware offerings from 27 to a more manageable 13 during the coming year. The eliminated products, which were not sufficiently differentiated to justify their manufacturing and selling costs, added to the complexity of the selling efforts of our sales force and VARs. Streamlining our product offerings also will strengthen our supply chain efficiencies.

ŸConsumable Supplies: Based on our conviction that consumable supplies represent a significant opportunity for Rimage, we are developing a web commerce system for our consumables business to promote greater customer convenience, strengthen selling efficiencies and generate enhanced profitability. In addition to providing us with better visibility into consumption models and customer needs, our WebShop will give us the opportunity to increase sales of optical media by leveraging our large customer base for printer ribbons/cartridges. At the same time, our VAR partners will b e able to purchase a complete range of products, including systems and consumable supplies, through a separate Web portal.

ŸGlobal Service: To capture the full revenue potential of our worldwide service capability, we have simplified our service offerings, with the goal of increasing the attach rates of service contracts on system sales. In addition we have modified our internal sales and VAR incentive programs to drive focus on this opportunity.

Generating New Revenue Streams in 2010

The disc publishing market is gradually maturing due to inevitable technology substitution. For this reason, we are focused on generating new revenue streams by transitioning from our historic function as a hardware supplier into a provider of total solutions that leverages Rimage’s unique disc publishing platform with growing levels of software functionality.

ŸVideo Surveillance Solution

Our first solutions-based initiative is the video surveillance data archiving system that was ordered by the Department of Justice in the fourth quarter of 2009. Developed in partnership with a major provider of surveillance software, this solution enables users to collect, archive and publish video surveillance data. We expect to engage other federal, state and corporate customers in 2010 as important new features are added to this solution.

ŸDigital Forensics Solution

We also are developing a solution in the field of digital forensics by leveraging our disc publishing platform to collect and process information stored on optical media found at crime scenes. By significantly automating disc handling, imaging and information processing, this solution will result in rapid turnaround times, as well as increased accuracy in tracing and authenticating evidence. We expect this solution to be available in the first half of 2010.

ŸMedical Opportunities in China

We see substantial opportunity for our solutions approach in China and other developing economies, particularly in the field of medical imaging. Hospitals and clinics in China have not converted the output of CT, MRI and other imaging modalities to discs, but instead continue to rely upon analog film. The benefits of digital output, including lower cost and convenience, have been proven over the past few years by our success at penetrating North American and European hospitals and clinics. We expect to finalize plans for deploying a complete digital publishing solution for medical imaging in China in the first half of 2010 and recognize initial revenues from this undertaking during the second half of the year.

Beyond 2010

Rimage has benefited from an established sales channel, over 20,000 installations, a global footprint, a strong digital publishing brand and strategic relationships. However, Rimage must expand its solution level offerings to take advantage of adjacent market opportunities. In addition, we believe future growth opportunities will require investments beyond the realm of physical distribution of data, which has been Rimage’s traditional business. We intend to leverage our existing market position, strong financial position and R&D efforts to develop new solution-based growth opportunities.

About Rimage

Rimage Corporation is the world’s leading provider of digital publishing systems that businesses and organizations use to quickly and easily produce CDs, DVDs and Blu-ray discs with customized content and durable color or monochrome disc labeling. Our systems integrate software, robotics and surface label printers into a complete disc publishing solution. Major markets for Rimage’s disc publishing systems currently include retail, medical and government.

Statements regarding Rimage’s anticipated performance are forward-looking and therefore involve risks and uncertainties, including but not limited to: market conditions, competitive products, changes in technology, conditions in overseas markets that could affect international sales, and other factors set forth in Rimage’s filings with the Securities and Exchange Commission.

#    #    #

For additional information, contact
Robert M. Wolf, CFO Rimage Corporation 952/944-8144	Richard G. Cinquina Equity Market Partners 904/415-1415

Conference Call and Replay

Rimage Corporation will review its fourth quarter operating results in a conference call at 10:00 AM Eastern today. Investors can listen to the conference call at www.rimage.com. Listeners should go to this web site at least 15 minutes before the scheduled start time to download and install any necessary audio software. A replay of the conference will be available at 303-590-3030 with 4243173 conference ID through March 10. In addition, the webcast of the conference call will be archived in the investor relations section of Rimage’s web site.

RIMAGE CORPORATION

Selected Consolidated Financial Information

(In thousands except per share data)

(Unaudited)

Consolidated Statements of Income Information:

	Three months ended December 31,				Year ended December  31,
	2009		2008		2009		2008
Revenues	$	22,686	$	20,749	$	83,227	$	91,394
Cost of revenues		11,203		12,654		42,894		51,731
Gross profit		11,483		8,095		40,333		39,663
Operating expenses:
Research and development		2,153		1,160		7,143		5,251
Selling, general and administrative		6,445		5,129		21,944		22,664
Total operating expenses		8,598		6,289		29,087		27,915
Operating income		2,885		1,806		11,246		11,748
Other income, net		223		631		1,866		2,711
Income before income taxes		3,108		2,437		13,112		14,459
Income tax expense		880		725		4,617		5,028
Net income		2,228		1,712		8,495		9,431
Net income per basic share	$	0.24	$	0.19	$	.91	$	.99
Net income per diluted share	$	0.23	$	0.18	$	.89	$	.97
Basic weighted average shares outstanding		9,403		9,342		9,374		9,559
Diluted weighted average shares outstanding		9,586		9,447		9,507		9,729

Consolidated Balance Sheet Information:

	Balance as of
	December 31, 2009		December 31, 2008
Cash and marketable securities	$	101,088	$	54,755
Receivables		13,732		11,099
Inventories		4,123		5,625
Total current assets		120,760		74,151
Property and equipment, net		7,855		6,183
Marketable securities – non-current		9,037		40,647
Total assets		140,282		123,456
Current liabilities		17,589		12,010
Long-term liabilities		2,744		2,398
Stockholders’ equity		119,949		109,048

EX-99.2

Exhibit 99.2

Remarks of Sherman L. Black

Rimage Corporation 4th Quarter and FY 2009 Conference Call

March 3, 2010

• Good morning and thank you for taking the time to participate in our fourth quarter earnings conference call.
• I will lead off this call by briefly reviewing our fourth quarter performance and then detailing the strategy we are putting in place to transform Rimage into a higher-performing company.
• Then, Rob Wolf, our chief financial officer, will cover some of the highlights of our recent operating results.
• We will be pleased to take your questions at the conclusion of our remarks.
• Regulation FD prohibits us from providing any forward-looking statements unless they are released simultaneously to the public.
• It is important to understand that any forward-looking statements are subject to a number of risks that could affect our anticipated performance.
• These risks are set forth in our filings with the Securities and Exchange Commission, which we urge you to review.
• Turning now to a brief discussion of our current performance, Rimage has remained a solidly profitable, cash-generator throughout the course of the global economic downturn.
• Fourth quarter sales totaled $22.7 million, an increase of 9% from $20.7 million in the fourth quarter of 2008.
• Net income came to $2.2 million or $0.23 per diluted share, up 30% from $1.7 million or $0.18 per diluted share in the fourth quarter of 2008.
• And reflecting the cash-generating ability of Rimage’s business, cash and investments rose to $110.1 million at year-end, from $95.4 million at the beginning of 2009.
• The improvement in our fourth quarter revenue was paced by a 26% increase in sales of our high-end Producer disc publishing hardware.
• This increase was driven in part by an $800,000 order shipped to the Department of Justice for a new video surveillance data archiving solution that I will discuss later in my remarks.
• Our fourth quarter earnings also benefited from continued product improvements that have reduced service-related costs.
• This factor, coupled with the shift in our sales mix toward Producer hardware, drove Rimage’s gross margin to 51% in the fourth quarter from 39% in the year-earlier period.
• Now, for the next few minutes, I will outline the plan that we have developed for transforming Rimage into a higher-performing business.
• Our plan consists of a three-part strategy.

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• First, strengthening our core disc publishing operation.
• Second, generating new revenue streams by developing total solutions that leverage our core technological capabilities with greater levels of software functionality.
• And three, identifying and investing in future opportunities in adjacent markets that extend beyond our traditional business of physically distributing content via discs.
• We are now implementing this growth strategy, and I will start off by discussing our initiatives aimed at strengthening Rimage’s core disc publishing business.
• This past January, it was announced that we will cease using distributors in our largest markets, including the U.S., Germany and the U.K., in this year’s second quarter.
• In place of distributors, we are expanding our sales force, while continuing to serve customers through value-added resellers or VARs.
• Removing this layer of distribution will eliminate cost from our sales system.
• Equally important, we will be positioned to move closer to our customers and VARs, allowing us to gain insights into satisfying unmet needs with our current and potential new products.
• Next, we will reduce our hardware offerings from 27 to a more manageable 13 during the coming year.
• The products slated for elimination, which were not sufficiently differentiated to justify their manufacturing and selling costs, have added to the complexity of the selling efforts of our sales force and VARs.
• Moreover, streamlining our product offerings will strengthen our supply chain and manufacturing efficiencies.
• At the same time, we recently introduced two strategically important products…our Professional 5400N and 3400 disc publishing systems, which will be key contributors to our 2010 plan.
• The compact and fully integrated footprints, functionality and attractive pricing of these systems position them for retail and a wide range of other applications.
• Now, a few words about how we plan to maximize our aftermarket revenues.
• Based on our conviction that consumables represent a significant, ongoing opportunity for Rimage, we are developing a web commerce system for our consumables business to promote greater customer convenience, strengthen selling efficiencies and generate enhanced profitability.
• In addition to providing us with better visibility into consumption models and customer needs, our WebShop will give us the opportunity to increase sales of optical media by leveraging our large customer base for printer ribbons/cartridges.
• At the same time, our VAR partners will be able to purchase a complete range of products, including systems and consumables, through a separate Web portal.

- 2 -

• The final aspect of our drive to strengthen Rimage’s core business involves maximizing our opportunity in the area of service and support.
• To capture the full revenue potential of our worldwide service capability, we have simplified our service offerings, with the goal of increasing the attach rates of service contracts on system sales.
• In addition we have modified our internal sales and VAR incentive programs to drive our focus on this opportunity.
• When taken as a whole, we believe these various initiatives represent a coherent plan that, if properly executed, should strengthen the sales and profitability of our disc publishing business over the course of 2010 and establish a solid growth foundation.
• While we are excited about the changes around our core business, we also understand that the disc publishing market is gradually maturing due to inevitable technology substitution.
• For this reason, the second element of our strategy, which involves generating new revenue streams, is critically important for our future.
• To generate new revenue streams, we are transitioning from our historic function as a hardware supplier into a provider of total solutions by leveraging Rimage’s disc publishing platform with growing levels of software functionality.
• Our first solutions-based initiative is the video surveillance data archiving system that was purchased by the Department of Justice in the fourth quarter of 2009.
• Developed in partnership with a major provider of surveillance software, this solution enables users to collect, archive and publish video surveillance data.
• We expect to engage other federal, state and corporate customers in 2010 as important new features are added to this solution.
• We also are developing a solution in the field of digital forensics by leveraging our disc publishing platform to collect and process information stored on optical media found at crime scenes.
• By significantly automating disc handling, imaging and information processing, this solution will result in rapid turnaround times, as well as increased accuracy in tracing and authenticating evidence.
• We expect this solution to be available in the first half of 2010.
• We also see substantial opportunity for our solutions approach in China and other developing economies, particularly in the field of medical imaging.
• For example, hospitals and clinics in China have not converted the output of CT, MRI and other imaging modalities to discs, but instead continue to rely upon analog film.

- 3 -

• The benefits of digital output, including lower cost and convenience, have been proven over the past few years by our success at penetrating North American and European hospitals and clinics.
• We expect to finalize plans for deploying a complete digital publishing solution for medical imaging in China during the first half of 2010 and recognize initial revenues from this effort during the second half of the year.
• The third element of our transformation plan is aimed at strengthening Rimage’s long-term future…beyond 2010.
• Rimage must expand its solution-level offerings due to gradual technology obsolescence.
• Toward this end, we are targeting growth opportunities in adjacent markets beyond the realm of physical distribution of data, which has been Rimage’s traditional business.
• We will pursue solution-based opportunities by leveraging our sales channel, over 20,000 installations, our global footprint, a strong digital publishing brand and strategic relationships.
• And throughout this investment cycle, we will be prudent stewards of our shareholders’ money and remain committed to safeguarding Rimage’s strong financial condition.
• Turning now to our near-term outlook, our first quarter performance will be affected by two factors.
• First, we will incur higher expenses related to the implementation of our growth strategy, including increases in our head count and other costs.
• And second, we anticipate a short-term sales disruption as we institute changes in our distribution channel and other aspects of our operations.
• While these factors will affect our first quarter performance, we believe our operating results will start benefiting from our transformation initiatives as they gain greater traction as the year progresses.
• At this point, it is too early to speak in more precise terms about the full year, but it is our goal to reverse the declines in sales and earnings that Rimage has posted over the past two years.
• However, we view 2010 only as a first step in a multi-year program toward transforming Rimage into a higher-performing company.
• Today, we are investing not only in the current year, but, more importantly, in 2011 and beyond, which makes us optimistic about Rimage’s future.
• Thank-you. Now Rob Wolf will review some highlights from our fourth quarter operating results.

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Remarks of Robert M. Wolf

Rimage Corporation 4th Quarter and FY 2009 Conference Call

March 3, 2010

§Thanks, Sherm.

§First, I will review some fourth quarter sales highlights.

§Sales of digital publishing systems increased 3% from the level posted in this year’s third quarter and by 27% from the fourth quarter of 2008.

§Systems accounted for 42% of total sales in the fourth quarter, compared to 43% in the third quarter and 36% in the fourth quarter of 2008.

§Sales of recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD/blue laser media and maintenance contracts, were up 5% from the third quarter and were virtually unchanged from last year’s fourth quarter.

§Recurring revenues accounted for 58% of our fourth quarter sales, up slightly from 57% in the third quarter but down from 64% in the fourth quarter of 2008.

§The significant year-over-year decline reflects the shift in our sales mix toward systems during this period.

§International sales increased 27% in this year’s fourth quarter in comparison to the third quarter and by 11% from the year-earlier period.

§A significant amount of our increased international sales was driven by the Asia/Pacific market, reflecting the positive impact of our business development investments in this region.

§International sales accounted for 44% of total fourth quarter sales, compared to 35% in the third quarter and 44% in the year-earlier period.

§Currency effects increased worldwide sales by 4% in the fourth quarter of 2009.

§Rimage’s gross margin was 51% in the fourth quarter, up from 50% in the third quarter and 39% in last year’s fourth quarter.

§In recent periods, our gross margin has benefited from reduced service-related costs associated with improvements to our products that have further strengthened their performance and reliability.

§And on a year-over-year basis, our gross margin benefited from the shift in our sales mix toward systems, particularly our higher-margin Producer systems.

§We anticipate a gross margin in the first quarter of 2010 in the mid-40% range, based on our outlook for lower volumes of Producer sales.

§Moving down the P&L, R&D expense of $2.2 million was up from $1.5 million in this year’s third quarter and from $1.2 million in last year’s fourth quarter.

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§Development of strategic new products, including the new disc publishing systems and video surveillance solution that Sherm discussed previously, accounted for most of the higher R&D expense in the fourth quarter.

§R&D expense will remain at relatively high levels in 2010 as we continue to transition into a solutions-based company.

§Reflecting our strong emphasis on product development, we anticipate R&D expense in the range of $1.6 to $1.8 million in this year’s first quarter.

§Selling, general and administrative expense totaled $6.4 million in the fourth quarter, up from $5.0 million in this year’s third quarter and $5.1 million in the year-earlier period.

§Separation expense related to our former CEO and year-end bonuses accounted for substantially all of the increased SG&A.

§We are forecasting SG&A in the range of $6.4 to 6.8 million in this year’s first quarter as we strengthen our sales and marketing organization and other operations in support of the growth initiatives that we are implementing.

§Our effective tax rate was 28% in the fourth quarter, compared to 36% in    the third quarter and 30% in the year-earlier period.

§The effective tax rate in the fourth quarter of 2009 benefitted from the implementation of recommendations of a transfer price study related to our Japanese subsidiary.

§Reflecting the cash-generating ability of Rimage’s business, cash and investments rose to $110.1 million at December 31, 2009, from $107.3 million at the end of the third quarter and $95.4 million at the beginning of 2009.

§Working capital totaled $103.2 million at the end of the fourth quarter, up from $95.0 million at the end of the third quarter and $62.1 million at the end of 2008.

§Finally, Rimage’s balance sheet remains debt-free, while stockholders’ equity increased to $119.9 million at year-end 2009, from $116.6 million at September 30 and $109.0 million at December 31, 2008.

§That wraps up our formal remarks, and now the conference call operator will poll you for any questions.

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Certain Remarks of Robert M. Wolf

Rimage Corporation 4th Quarter and FY 2009
Conference Call – Question and Answer Portion

March 3, 2010

Q:My last question was: What percentage of your business these days would you say is government related?

R. Wolf:            & nbsp;           Good question.  Chuck, if I look at for example fourth quarter where we did have the slight anomaly with the $800,000 order…I’d say right there that fourth quarter would run around just shy of 10% total revenues.  So on an average quarter, probably anywhere from 5% to 10%.

Q:Is that consumables and hardware?  Or just hardware?

R. Wolf:That would be consumables and hardware.

________________________

Q:You had talked about a mid-40’s gross margin in 2010 and I think you had said due to a maybe a little lower mix of disk publishing sales.  Is that simply because you think your web based effort and just a commitment to maybe exploring consumable sales more effectively will cause a revenue mix shift? Is that your thought there?

R. Wolf:       & nbsp;                Greg, just to be clear the forward-looking guidance we gave there would be Q1, it was for the gross margin mid 40% range for Q1.

Q:Okay.

R. Wolf:If you look at the main reason for the shift [in Q4] is we did have that $800,000 producer order in the fourth quarter from the Department of Justice which helped our mid-shift tremendously in that quarter.  Those were 8100’s, our highest margin product.  The first quarter of 2010, not having an order of that magnitude in the first quarter is going to have some impact on gross margin.

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