UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
20549
 
 Form 10-K
 
 (Mark
      One)R
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the Fiscal Year Ended March 31, 2009or£
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
 
 Commission
File Number: 001-33345
 _______________
 
 RAND
LOGISTICS, INC.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
              No.
      20-1195343(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)461
      Fifth Avenue, 25th
      FloorNew
      York, NY
              10017(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
telephone number, including area code:
 (212) 644-3450
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 Title of Each
      Class
              Name of Each Exchange
      on Which RegisteredCommon
      Stock, $.0001 par value per share
              The
      NASDAQ Capital Market
 
 Securities
registered pursuant to Section 12(g) of the Act: None
 
 Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.  Yes £     No R
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes £     No R
 
 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, and (2) has been subject to the filing
requirements for at least the past 90 days.  Yes R     No
£
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months.   Yes £      No
£
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  £
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
 
 Large
accelerated filer £                                                    Accelerated
filer £
 
 Non-accelerated
filer £                                                      Smaller
reporting company R
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes £     No R
 
 The
aggregate market value of voting stock held by non-affiliates of the registrant
as of September 30, 2008 was $21,924,888.
 
 12,890,927
shares of Common Stock were outstanding at June 25, 2009.
  
  DOCUMENTS
INCORPORATED BY REFERENCE
 
 Portions
of the registrant’s definitive Proxy Statement, to be filed with the Securities
and Exchange Commission within 120 days after the end of the registrant’s
fiscal year covered by this Annual Report on Form 10-K, with respect to the
Annual Meeting of Stockholders to be held on September 23, 2009, are
incorporated by reference into Part III of this Annual Report on
Form 10-K.
 
 
 RAND
LOGISTICS, INC.
 
 TABLE
OF CONTENTS
  PART
      I
                
                1Item
      1.
                Business
                1Item
      1A.
                Risk
      Factors
                3Item
      1B.
                Unresolved
      Staff Comments
                11Item
      2.
                Properties
                12Item
      3.
                Legal
      Proceedings
                12Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                12PART
      II
                
                12Item
      5.
                Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                12Item
      6.
                Selected
      Financial Data
                13Item
      7.
                Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      Introduction
                13Item
      7A.
                Quantitative
      and Qualitative Disclosure about Market Risk
                27Item
      8.
                Financial
      Statements and Supplementary Data
                27Item
      9.
                Changes
      in and Disagreements with Accountant on Accounting and Financial
      Disclosure
                27Item
      9A(T).
                Controls
      and Procedures
                27Item
      9B.
                Other
      Information
                28PART
      III
                
                28Item
      10.
                Directors,
      Executive Officers and Corporate Governance of the
    Registrant
                28Item
      11.
                Executive
      Compensation
                28Item
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                28Item
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence
                29Item
      14.
                Principal
      Accountant Fees and Services
                29PART
      IV
                
                29Item
      15.
                Exhibits
      and Financial Statement Schedules
                29
  i
  PART I
 
 Item 1.  Business
 
 Overview
 
 Rand
Logistics, Inc. (formerly Rand Acquisition Corporation) was incorporated in the
State of Delaware on June 2, 2004 as a blank check company to effect a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating business. On November 2, 2004, we closed our initial public
offering of 4,000,000 units with each unit consisting of one share of our common
stock and two warrants, each to purchase one share of our common stock at an
exercise price of $5.00 per share. The units were sold at an offering price of
$6.00 per unit, generating gross proceeds of $24.0 million. On November 3, 2004,
we sold an additional 600,000 units pursuant to the underwriters' over-allotment
option raising additional gross proceeds of $3.6 million. After deducting the
underwriting discounts and commissions and the offering expenses, the total net
proceeds to us from the offering were approximately
$24.6 million.
 
 On March
3, 2006, we acquired all of the outstanding shares of capital stock of Lower
Lakes Towing Ltd., a Canadian corporation which, with its subsidiary Lower Lakes
Transportation Company (“Lower Lakes Transportation”), provides bulk freight
shipping services throughout the Great Lakes region and operated eight vessels
(the “Core Vessels”). As part of the acquisition of Lower Lakes, we also
acquired Lower Lakes' affiliate, Grand River Navigation Company, Inc. (“Grand
River”). Prior to the acquisition, we did not conduct, or have any
investment in, any operating business. In this discussion of Rand's business,
unless the context otherwise requires, references to Rand include Rand and its
direct and indirect subsidiaries, and references to Lower Lakes' business or the
business of Lower Lakes mean the combined businesses of Lower Lakes Towing,
Lower Lakes Transportation and Grand River.
 
 On
August 27, 2007, Lower Lakes purchased the VOYAGEUR INDEPENDENT and the VOYAGEUR
PIONEER (collectively, the "Vessels") from Voyageur Marine Transport Limited
("Voyageur"), and Voyageur Pioneer Marine Inc. for an aggregate purchase price
of CDN $25.0 million.  In connection with the acquisition of the
Vessels, Lower Lakes entered into a Contract of Affreightment with Voyageur and
Voyageur Maritime Trading Inc. ("VMT"), pursuant to which Voyageur and VMT made
a Canadian flagged vessel owned by VMT, the MARITIME TRADER (the "Trader"),
available exclusively to Lower Lakes for its use in providing transportation and
storage services for its customers.  Lower Lakes has the option to
acquire the Trader for CDN $5.0 million, subject to certain adjustments, between
January 1, 2012 and December 31, 2017, subject to certain early exercise
provisions.
 
 On
February 13, 2008, Grand River and Rand LL Holdings Corp. acquired three United
States flagged vessels, the DAVID Z. NORTON, the EARL W. OGLEBAY and the
WOLVERINE, from Wisconsin & Michigan Steamship Company ("WMS"), for an
aggregate purchase price of $20.0 million, plus transaction
expenses.  Prior to commencement of the 2008 sailing season, we
transferred one of the vessels acquired from United States to Canadian registry
for deployment as part of Lower Lakes Canadian fleet. Lower Lakes Transportation
had time chartered these three vessels since August 1, 2006 pursuant to the
terms of a Time Charter Agreement between Lower Lakes Transportation and WMS,
which also provided for an option to purchase the
vessels.   Prior to the vessels’ acquisition and in connection
with such time charter, the Company determined WMS was a variable interest
entity (“VIE”) and, as such, consolidated WMS’s financial statements into the
Company’s consolidated financial statements in accordance with
FIN-46R.  Following the acquisition of the WMS vessels, the Company
determined it was no longer a primary beneficiary of WMS and therefore not
required to consolidate WMS’s financial statements into the Company’s
consolidated financial statements.
 
 Rand's
shipping business is operated in Canada by Lower Lakes Towing and in the United
States by Lower Lakes Transportation. Lower Lakes Towing was organized in March
1994 under the laws of Canada to provide marine transportation services to dry
bulk goods suppliers and purchasers operating in ports in the Great Lakes that
were restricted in their ability to receive larger vessels. Lower Lakes has
grown from its origin as a small tug and barge operator to a full service
shipping company with a fleet of thirteen cargo-carrying vessels, one of which
is operated under a contract of affreightment. From its exclusively Canadian
beginnings, Lower Lakes has also grown to offer domestic services to both
Canadian and U.S. customers as well as cross-border routes. Lower Lakes services
the construction, electric utility and integrated steel industries through the
transportation of limestone, coal, iron ore, salt, grain and other dry bulk
commodities.
 
 We
believe that Lower Lakes is the only company providing significant domestic
port-to-port services to both Canada and the United States in the Great Lakes
region. Lower Lakes maintains this operating flexibility by operating both U.S.
and Canadian flagged vessels in compliance with the Shipping Act, 1916, and the
Merchant Marine Act, 1920, commonly referred to as the Jones Act, in the U.S. and
the Coasting Trade Act (Canada) in Canada.
  
  Lower
Lakes' fleet consists of five self-unloading bulk carriers and three
conventional bulk carriers in Canada and five self-unloading bulk carriers in
the U.S., including an integrated tug and barge unit. Lower Lakes Towing owns
seven of the Canadian vessels and charters the eighth pursuant to the terms of a
Contract of Affreightment.  Lower Lakes Transportation time charters
five of the U.S. vessels, including the tug and barge unit, from Grand River.
With the exception of the barge (which Grand River bareboat charters from an
affiliate of WMS, Grand River owns the vessels that it time charters to Lower
Lakes Transportation.
 
 Lower
Lakes is a leader in the provision of River Class bulk freight shipping services
throughout the Great Lakes, operating  one-half of all River Class
vessels servicing the Great Lakes and the majority of boom-forward equipped
vessels in this category. Boom forward self-unloading vessels - those with their
booms located in front of the cargo holds – offer greater accessibility for
delivery of cargo to locations where only forward access is possible. Six of the
vessels used in Lower Lakes' operations are boom forward self-unloaders and four
vessels are boom aft self-unloaders. River Class vessels - which represent the
smaller end of Great Lakes vessels with maximum dimensions of approximately 650
feet in length and 72 feet in beam and carrying capacities of 15,000 to 20,000
tons - are ideal for customers seeking to move significant quantities of dry
bulk product to ports which restrict non-River Class vessels due to size and
capacity constraints.
 
 Lower
Lakes services approximately 50 customers in a diverse array of end markets by
shipping dry bulk commodities such as construction aggregates, coal, grain, iron
ore and salt.  Lower Lakes’ top ten customers accounted for
approximately 70% of its revenue during the twelve months ended March 31,
2009.  Lower Lakes is the sole-source shipping provider to several of
its customers.  Many of Lower Lakes’ customers are under long-term
contracts with Lower Lakes, which typically average three to five years in
duration and provide for minimum and maximum tonnage, annual price escalation
features, and fuel surcharges.
 
 Lower
Lakes faces competition from other marine and land-based transporters of dry
bulk commodities in and around the Great Lakes area.  In the River
Class market segment, Lower Lakes generally faces two primary competitors:
Seaway Marine Transport and American Steamship Company.  Seaway Marine
Transport is a Canadian traffic and marketing partnership, which owns 22
self-unloading vessels, four of which are River Class boom-forward
vessels.  American Steamship Company operates in the U.S. and
maintains a fleet of 18 vessels, four of which are River Class
vessels.  We believe that industry participants compete on the basis
of customer relationships, price and service, and that the ability to meet a
customer’s schedule and offer shipping flexibility is a key competitive
factor.  Moreover, we believe that customers are generally willing to
continue to use the same carrier assuming such carrier provides satisfactory
service with competitive pricing.
 
 We
believe that until November 2008, demand  exceeded available shipping
capacity on the Great Lakes, which has caused prices and margins to increase
steadily over time. While freight carried is steadily increasing, the available
capacity is declining over the long term as the aging Great Lakes fleet is
retired. We do not believe that such retirements will be replaced with new or
refurbished capacity until freight rates are substantially increased to justify
such capital investments.
 
 As of
March 31, 2009, Lower Lakes had approximately 398 full-time employees, 29 of
whom were shoreside and management and 369 that were
operational.  Approximately 44% of Lower Lakes’ employees (all U.S.
based Grand River crews) are unionized with the International Organization of
Masters, Mates and Pilots, AFL-CIO.  Lower Lakes has never experienced
a work stoppage on its crewed vessels as a result of labor issues, and we
believe that our employee relations are good.
 
 Our
executive officers are Laurence S. Levy, who serves as our chairman of the board
and chief executive officer; Edward Levy, who serves as our president; and
Joseph W. McHugh, Jr., who serves as our chief financial
officer.  Carol Zelinski is the secretary of Rand.
 
 Warrant
Tender Offer and Expiration
 
 On
September 23, 2008, we announced an offer to holders of our 5,194,489
outstanding publicly-traded warrants that would permit the cashless exercise of
the warrants for a limited time. The shares underlying such warrants, if issued
upon exercise, would have represented approximately 41.2% of our outstanding
shares at commencement of the offer. The offer modified the terms of the
warrants to allow holders to receive one share of common stock for every 25
warrants surrendered, without paying a cash exercise price.
 
 The offer
commenced on September 26, 2008, and ended on October 26, 2008. 5,045,275
warrants, or approximately 97.1% of the 5,194,489 publicly traded warrants then
outstanding, were tendered for cashless exercise in exchange for 201,811 shares
of our common stock, or 1.6% of common shares outstanding at the commencement of
the offer. An additional 74,659 warrants were exercised during the offer period
generating $373,000 of proceeds. The Company’s expenses in connection with the
warrant tender offer were approximately $292,000. Pursuant to their terms, the
Company’s remaining 74,555 warrants expired on October 26, 2008.
  2
 
 Item 1A.  Risk Factors
 
 An
investment in our common stock involves a high degree of risk. You should
carefully consider the following material risks before you decide to buy our
common stock. If any of the following risks actually occur, our business,
results of operations and financial condition would likely suffer. In these
circumstances, the market price of our common stock could decline and you may
lose all or part of your investment.
  Global
Economic Conditions Risk Factor
  The
recent worldwide financial and credit crisis could lead to an extended worldwide
economic recession and have a material adverse effect on our financial results
and financial condition.
  During
recent months, there has been substantial volatility and losses in worldwide
equity markets that could lead to an extended worldwide economic recession. In
addition, due to the substantial uncertainty in the global economies, there has
been deterioration in the credit and capital markets and access to financing is
uncertain. These conditions could have an adverse effect on our industry and our
business and future operating results. Our customers may curtail their capital
and operating expenditure programs, which could result in a decrease in demand
for our vessels and a reduction in rates and/or utilization. In addition,
certain of our customers could experience an inability to pay suppliers,
including us, in the event they are unable to access the capital markets to fund
their business operations. Likewise, our suppliers may be unable to sustain
their current level of operations, fulfill their commitments and/or fund future
operations and obligations, each of which could adversely affect our
operations.
  Risks
Associated with our Business
  Our
business is dependent upon key personnel whose loss may adversely impact our
business.
  We depend
on the expertise, experience and continued services of Lower Lakes’ senior
management employees, especially Scott Bravener, its President. Bravener has
acquired specialized knowledge and skills with respect to Lower Lakes and its
operations and most decisions concerning the business of Lower Lakes will be
made or significantly influenced by him. Although Lower Lakes maintains life
insurance with respect to Bravener, the proceeds of such insurance may not be
adequate to compensate Lower Lakes in the event of Bravener’s death. The loss of
Bravener or other senior management employees, or an inability to attract or
retain other key individuals, could materially adversely affect our business. We
seek to compensate and incentivize executives, as well as other employees,
through competitive salaries and bonus plans, but there can be no assurance that
these programs will allow us to retain key employees or hire new key employees.
As a result, if Bravener were to leave Lower Lakes, we could face substantial
difficulty in hiring a qualified successor and could experience a loss in
productivity while any such successor obtains the necessary training and
experience.
  Our
officers and directors may allocate their time to other businesses thereby
causing conflicts of interest in their determination as to how much time to
devote to our affairs.
  Our
officers and directors are not required to commit their full time to our
affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. Laurence S. Levy and Edward Levy
are each engaged in several other business endeavors and are not obligated to
contribute any specific number of hours per week to our affairs.
  Some
of our officers and directors may have conflicts of interest in business
opportunities.
  Some of
our officers and directors may become aware of business opportunities which may
be appropriate for presentation to us as well as the other entities with which
they are or may be affiliated. Due to our officers’ and directors’ existing
affiliations with other entities, they may have fiduciary obligations to present
potential business opportunities to those entities in addition to presenting
them to us which could cause additional conflicts of interest. Accordingly, they
may have conflicts of interest in determining to which entity a particular
business opportunity should be presented.
  3
  Capital
expenditures and other costs necessary to operate and maintain Lower Lakes’
vessels tend to increase with the age of the vessel and may also increase due to
changes in governmental regulations, safety or other equipment
standards.
  Capital
expenditures and other costs necessary to operate and maintain Lower Lakes’
vessels tend to increase with the age of each vessel. Accordingly, it is likely
that the operating costs of Lower Lakes’ older vessels will increase. In
addition, changes in governmental regulations, safety or other equipment
standards, as well as compliance with standards imposed by maritime
self-regulatory organizations and customer requirements or competition, may
require Lower Lakes to make additional expenditures. For example, if the U.S.
Coast Guard, Transport Canada or the American Bureau of Shipping (an independent
classification society that inspects the hull and machinery of commercial ships
to assess compliance with minimum criteria as set by U.S., Canadian and
international regulations) enact new standards, Lower Lakes may be required to
incur significant costs for alterations to its fleet or the addition of new
equipment. In order to satisfy any such requirement, Lower Lakes may be required
to take its vessels out of service for extended periods of time, with
corresponding losses of revenues. In the future, market conditions may not
justify these expenditures or enable Lower Lakes to operate its older vessels
profitably during the remainder of their anticipated economic
lives.
  If
Lower Lakes is unable to fund its capital expenditures, drydock costs and winter
work expenses, Lower Lakes may not be able to continue to operate some of its
vessels, which would have a material adverse effect on our
business.
  In order
to fund Lower Lakes’ capital expenditures, drydock costs and winter work
expenses, we may be required to incur borrowings or raise capital through the
sale of debt or equity securities. Our ability to access the capital markets for
future offerings may be limited by our financial condition at the time of any
such offering as well as by adverse market conditions resulting from, among
other things, general economic conditions and contingencies and uncertainties
that are beyond its control. Our failure to obtain the funds for necessary
future capital expenditures and winter work expenses would limit its ability to
continue to operate some of its vessels and could have a material adverse effect
on our business, results of operations and financial condition.
  The
climate in the Great Lakes region limits Lower Lakes’ vessel operations to
approximately nine months per year.
  Lower
Lakes’ operating business is seasonal, meaning that it experiences higher levels
of activity in some periods of the year than in others.  Ordinarily,
Lower Lakes is able to operate its vessels on the Great Lakes for approximately
nine months per year beginning in late March or April and continuing through
December or mid-January. However, weather conditions and customer demand cause
increases and decreases in the number of days Lower Lakes actually
operates.
  The
shipping industry has inherent operational risks that may not be adequately
covered by Lower Lakes’ insurance.
  Lower
Lakes maintains insurance on its fleet for risks commonly insured against by
vessel owners and operators, including hull and machinery insurance, war risks
insurance and protection and indemnity insurance (which includes environmental
damage and pollution insurance). We can give no assurance that Lower Lakes will
be adequately insured against all risks or that its insurers will pay a
particular claim. Even if its insurance coverage is adequate to cover its
losses, Lower Lakes may not be able to timely obtain a replacement vessel in the
event of a loss. Furthermore, in the future, Lower Lakes may not be able to
obtain adequate insurance coverage at reasonable rates for Lower Lakes’ fleet.
Lower Lakes may also be subject to calls, or premiums, in amounts based not only
on its own claim record but also the claims record of all other members of the
protection and indemnity associations through which Lower Lakes may receive
indemnity insurance coverage. Lower Lakes’ insurance policies will also contain
deductibles, limitations and exclusions which, although we believe are standard
in the shipping industry, may nevertheless increase its costs.
  Lower
Lakes is subject to certain credit risks with respect to its counterparties on
contracts and failure of such counterparties to meet their obligations could
cause us to suffer losses on such contracts decreasing revenues and
earnings.
  Lower
Lakes enters into Contracts of Affreightment (COAs) pursuant to which Lower
Lakes agrees to carry cargoes, typically for industrial customers, who export or
import dry bulk cargoes. Lower Lakes also enters into spot market voyage
contracts, where Lower Lakes is paid a rate per ton to carry a specified cargo
from point A to point B. All of these contracts subject Lower Lakes to
counterparty credit risk. As a result, we are subject to credit risks at various
levels, including with charterers, cargo interests, or terminal customers. If
the counterparties fail to meet their obligations, Lower Lakes could suffer
losses on such contracts which would decrease our revenues and
earnings.
  4
  Lower
Lakes may not be able to generate sufficient cash flows to meet its debt service
obligations.
  Lower
Lakes’ ability to make payments on its indebtedness will depend on its ability
to generate cash from its future operations. Lower Lakes’ business may not
generate sufficient cash flow from operations or from other sources sufficient
to enable it to repay its indebtedness and to fund its other liquidity needs,
including capital expenditures and winter work expenses. The indebtedness of
Lower Lakes under its new senior credit facility bears interest at floating
rates, and therefore, if interest rates increase, Lower Lakes’ debt service
requirements will increase. Lower Lakes may need to refinance or restructure all
or a portion of its indebtedness on or before maturity. Lower Lakes may not be
able to refinance any of its indebtedness, including the new senior credit
facility, on commercially reasonable terms, or at all. If Lower Lakes cannot
service or refinance its indebtedness, it may have to take actions such as
selling assets, seeking additional equity or reducing or delaying capital
expenditures, any of which could have a material adverse effect on our
operations. Additionally, Lower Lakes may not be able to effect such actions, if
necessary, on commercially reasonable terms, or at all.
  A
default under Lower Lakes’ indebtedness may have a material adverse effect on
our financial condition.
  In the
event of a default under Lower Lakes’ indebtedness, including the indebtedness
under its existing senior credit facility, the holders of the indebtedness
generally would be able to declare all of such indebtedness, together with
accrued interest, to be due and payable. In addition, borrowings under the
existing senior credit facility are secured by a first priority lien on all of
the assets of Lower Lakes, Lower Lakes Transportation and Grand River and, in
the event of a default under that facility, the lenders generally would be
entitled to seize the collateral. In addition, default under one debt instrument
could in turn permit lenders under other debt instruments to declare borrowings
outstanding under those other instruments to be due and payable pursuant to
cross default clauses. Moreover, upon the occurrence of an event of default
under the existing senior credit facility, the commitment of the lenders to make
any further loans to us would be terminated. Accordingly, the occurrence of a
default under any debt instrument, unless cured or waived, would likely have a
material adverse effect on our results of operations.
  Servicing
debt could limit funds available for other purposes, such as the payment of
dividends.
  Lower
Lakes will use cash to pay the principal and interest on its debt, and to fund
capital expenditures, drydock costs and winter work expenses. These payments
limit funds that would otherwise be available for other purposes, including
distributions of cash to our stockholders.
  Lower
Lakes’ loan agreements contain restrictive covenants that will limit its
liquidity and corporate activities.
  Lower
Lakes’ loan agreements impose operating and financial restrictions that limit
Lower Lakes’ ability to:
  ·
                incur
      additional indebtedness;
  ·
                create
      additional liens on its assets;
  ·
                make
      investments;
  ·
                engage
      in mergers or acquisitions;
  ·
                pay
      dividends; and
  ·
                sell
      any of Lower Lakes’ vessels or any other assets outside the ordinary
      course of business.
  Therefore,
Lower Lakes will need to seek permission from its lender in order for Lower
Lakes to engage in some corporate actions. Lower Lakes’ lender’s interests may
be different from those of Lower Lakes, and no assurance can be given that Lower
Lakes will be able to obtain its lender’s permission when needed. This may
prevent Lower Lakes from taking actions that are in its best
interest.
  Because
Lower Lakes generates approximately 60% of its revenues and incurs approximately
60% of its expenses in Canadian dollars, exchange rate fluctuations could cause
us to suffer exchange rate losses thereby increasing expenses and reducing
income.
  Lower
Lakes generates a portion of its revenues in Canadian dollars. Similarly, Lower
Lakes incurs a portion of its expenses in Canadian dollars. This could lead to
fluctuations in our net income due to changes in the value of the U.S. Dollar
relative to the Canadian Dollar.
  5
  Lower
Lakes depends upon unionized labor for its U.S. operations. Any work stoppages
or labor disturbances could disrupt its business.
  Substantially
all of Grand River’s employees are unionized with the International Organization
of Masters, Mates and Pilots, AFL-CIO. Any work stoppages or other labor
disturbances could have a material adverse effect on our business, results of
operations and financial condition.
  A
labor union has attempted to unionize Lower Lakes’ Canadian
employees.
  The
Seafarers International Union of Canada, or SIU, has attempted without success
to organize Lower Lakes’ unlicensed employees periodically over the past several
years. Although we believe that support for this union is low, if SIU is
successful in organizing a union among Lower Lakes’ Canadian employees, it could
result in increased labor costs or reduced productivity for Lower Lakes, which
could have a material adverse effect on our results of operations.
  Lower
Lakes’ employees are covered by U.S. Federal laws that may subject it to
job-related claims in addition to those provided by state laws.
  All of
Lower Lakes’ U.S. seagoing employees are covered by provisions of the Shipping
Act, 1916, and the Merchant Marine Act, 1920, commonly referred to as the Jones
Act, and general maritime law. These laws typically operate to make liability
limits established by state workers’ compensation laws inapplicable to these
employees and to permit these employees and their representatives to pursue
actions against employers for job-related injuries in Federal courts. Because
Lower Lakes is not generally protected by the limits imposed by state workers’
compensation statutes, Lower Lakes has greater exposure for claims made by these
employees as compared to employers whose employees are not covered by these
provisions.
  Restriction
on foreign ownership and possible required divestiture of stock.
  Under
U.S. maritime laws, in order for us to maintain our eligibility to own and
operate vessels in the U.S. domestic trade, 75% of our outstanding capital stock
and voting power is required to be held by U.S. citizens. Although our amended
and restated certificate of incorporation contains provisions limiting
non-citizenship ownership of our capital stock, we could lose its ability to
conduct operations in the U.S. domestic trade if such provisions prove
unsuccessful in maintaining the required level of citizen ownership. Such loss
would have a material adverse effect on our results of operations. If our board
of directors determines that persons who are not citizens of the U.S. own more
than 23% of our outstanding capital stock or more than 23% of our voting power,
we may redeem such stock or, if redemption is not permitted by applicable law or
if our board of directors, in its discretion, elects not to make such
redemption, we may require the non-citizens who most recently acquired shares to
divest such excess shares to persons who are U.S. citizens in such manner as our
board of directors directs. The required redemption would be at a price equal to
the average closing price during the preceding 30 trading days, which price
could be materially different from the current price of the common stock or the
price at which the non-citizen acquired the common stock. If a non-citizen
purchases the common stock, there can be no assurance that he will not be
required to divest the shares and such divestiture could result in a material
loss. Such restrictions and redemption rights may make Rand’s equity securities
less attractive to potential investors, which may result in Rand’s publicly
traded common stock having a lower market price than it might have in the
absence of such restrictions and redemption rights.
  Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to obtain future public financing.
  We
currently have outstanding an option to purchase 300,000 shares of common stock
and warrants to purchase an additional 600,000 shares of common stock which
expires if unexercised on October 12, 2009. The sale, or even the possibility of
sale, of the shares underlying the warrants and options could have an adverse
effect on the market price for our securities or on our ability to obtain future
public financing. If and to the extent this warrant and option are exercised,
you may experience dilution to your holdings.
  6
  The
conversion of our series A convertible preferred stock will result in
significant and immediate dilution of our existing stockholders and the book
value of their common stock.
  The
shares of series A convertible preferred stock issued in connection with the
acquisition of Lower Lakes are convertible into 2,419,355 shares of our common
stock, which, on an “as converted” basis, represents approximately 16% of our
aggregate outstanding common stock.  The conversion price of our
series A convertible preferred stock is subject to weighted average
anti-dilution provisions whereby, if Rand issues shares in the future for
consideration below the existing conversion price of $6.20, then the conversion
price of the series A convertible preferred stock would automatically be
decreased, allowing the holders of the series A convertible preferred stock to
receive additional shares of common stock upon conversion. Upon any conversion
of the series A convertible preferred stock, the equity interests of our
existing common stockholders, as a percentage of the total number of the
outstanding shares of our common stock, and the net book value of the shares of
our common stock will be significantly diluted.
  If
our founding officers and directors exercise their registration rights, it may
have an adverse effect on the market price of our common stock.
  Our
founding officers and directors and their affiliates and associates to whom
shares of our common stock were issued prior to our initial public offering are
entitled to demand that we register the resale of their shares of common stock
at any time after October 27, 2007, although they have not yet done so. If our
founders exercise their registration rights with respect to all of their shares
of common stock, then there will be an additional 1,000,000 shares of common
stock eligible for trading in the public market. The presence of this additional
number of shares of common stock eligible for trading in the public market may
have an adverse effect on the market price of our common stock.
  Future
acquisitions of vessels or businesses by Rand or Lower Lakes would subject Rand
and Lower Lakes to additional business, operating and industry risks, the impact
of which cannot presently be evaluated, and could adversely impact Rand’s or
Lower Lakes’ capital structure.
  Rand
intends to pursue other acquisition opportunities in an effort to diversify its
investments and/or grow Lower Lakes’ business. While neither Rand nor Lower
Lakes is presently committed to any additional acquisition, Rand is currently
actively pursuing one or more potential acquisition opportunities. Acquisitions
may be of individual or groups of vessels or of businesses operating in the
shipping or other industries. Following the acquisition of Lower Lakes, Rand
will not be limited to any particular industry or type of business that it may
acquire. Accordingly, there is no current basis for you to evaluate the possible
merits or risks of the particular business or assets that Rand may acquire, or
of the industry in which such business operates. To the extent Rand acquires a
financially unstable business, we may be affected by numerous risks inherent in
the acquired business’s operations. If Rand acquires a business in an industry
characterized by a high level of risk, we may be affected by the currently
unascertainable risks of that industry. Although Rand’s management will endeavor
to evaluate the risks inherent in a particular industry or target business, we
cannot assure you that we will properly ascertain or assess all of the
significant risk factors.
  In
addition, the financing of any acquisition completed by Rand could adversely
impact Rand’s capital structure as any such financing would likely include the
issuance of additional equity securities and/or the borrowing of additional
funds. The issuance of additional equity securities may significantly reduce the
equity interest of existing stockholders and/or adversely affect prevailing
market prices for Rand’s common stock. Increasing Rand’s indebtedness could
increase the risk of a default that would entitle the holder to declare all of
such indebtedness due and payable and/or to seize any collateral securing the
indebtedness. In addition, default under one debt instrument could in turn
permit lenders under other debt instruments to declare borrowings outstanding
under those other instruments to be due and payable pursuant to cross default
clauses. Accordingly, the financing of future acquisitions could adversely
impact our capital structure and your equity interest in Rand.
  Except as
required by law or the rules of any securities exchange on which our securities
might be listed at the time we seek to consummate an acquisition, you will not
be asked to vote on any proposed acquisition and you will not be entitled to
exercise conversion rights in connection with any such acquisition.
  Risks
Associated with the Shipping Industry
  The
cyclical nature of the Great Lakes dry bulk shipping industry may lead to
decreases in shipping rates, which may reduce Lower Lakes’ revenue and
earnings.
  The
shipping business, including the dry cargo market, has been cyclical in varying
degrees, experiencing fluctuations in charter rates, profitability and,
consequently, vessel values. Rand anticipates that the future demand for Lower
Lakes’ dry bulk carriers and dry bulk charter rates will be dependent upon
continued demand for imported commodities, economic growth in the United States
and Canada, seasonal and regional changes in demand, and changes to the capacity
of the Great Lakes fleet which cannot be predicted. Adverse economic, political,
social or other developments could decrease demand and growth in the shipping
industry and thereby reduce revenue and earnings. Fluctuations, and the demand
for vessels, in general, have been influenced by, among other
factors:
  7
  ·
                global
      and regional economic conditions;
  ·
                developments
      in international and Great Lakes
trade;
  ·
                changes
      in seaborne and other transportation patterns, such as port congestion and
      canal closures;
  ·
                weather
      and crop yields;
  ·
                political
      developments; and
  ·
                embargoes
      and strikes.
  The
market values of Lower Lakes’ vessels may decrease, which could cause Lower
Lakes to breach covenants in its credit facility and which could reduce earnings
and revenues as a result of potential foreclosures.
  Vessel
values are influenced by several factors, including:
  ·
                changes
      in environmental and other regulations that may limit the useful life of
      vessels;
  ·
                changes
      in Great Lakes dry bulk commodity supply and
  demand;
  ·
                types
      and sizes of vessels;
  ·
                development
      of and increase in use of other modes of
  transportation;
  ·
                governmental
      or other regulations; and
  ·
                prevailing
      level of charter rates.
  If the
market values of Lower Lakes’ owned vessels decrease, Lower Lakes may breach
some of the covenants contained in its credit facility. If Lower Lakes does
breach such covenants and Lower Lakes is unable to remedy the relevant breach,
its lenders could accelerate its debt and foreclose on the collateral, including
Lower Lakes’ vessels. Any loss of vessels would significantly decrease the
ability of Rand to generate revenue and income. In addition, if the book value
of a vessel is impaired due to unfavorable market conditions, or a vessel is
sold at a price below its book value, Rand would incur a loss that would reduce
earnings.
  A
failure to pass inspection by classification societies and regulators could
result in one or more vessels being unemployable unless and until they pass
inspection, resulting in a loss of revenues from such vessels for that period
and a corresponding decrease in earnings, which may be material.
  The hull
and machinery of every commercial vessel must be classed by a classification
society authorized by its country of registry, as well as being subject to
inspection by shipping regulatory bodies such as Transport Canada. The
classification society certifies that a vessel is safe and seaworthy in
accordance with the applicable rules and regulations of the country of registry
of the vessel and the United Nations Safety of Life at Sea Convention. Lower
Lakes’ owned fleet is currently enrolled with the American Bureau of
Shipping.
  A vessel
must undergo Annual Surveys, Intermediate Surveys, and Special Surveys by its
classification society, as well as periodic inspections by shipping regulators.
As regards classification surveys, in lieu of a Special Survey, a vessel’s
machinery may be on a continuous survey cycle, under which the machinery would
be surveyed periodically over a five-year period. Lower Lakes’ vessels are on
Special Survey cycles for hull inspection and continuous survey cycles for
machinery inspection. Every vessel is also required to be drydocked every four
to five years for inspection of the underwater parts of such
vessel.
  8
  Due to
the age of several of the vessels, the repairs and remediations required in
connection with such classification society surveys and other inspections may be
extensive and require significant expenditures. Additionally, until such time as
certain repairs and remediations required in connection with such surveys and
inspections are completed (or if any vessel fails such a survey or inspection),
the vessel may be unable to trade between ports and, therefore, would be
unemployable. Any such loss of the use of a vessel could have an adverse impact
on Rand’s revenues, results of operations and liquidity, and any such impact may
be material.
  Lower
Lakes’ business would be adversely affected if Lower Lakes failed to comply with
U.S. maritime laws or the Coasting Trade Act (Canada) provisions on coastwise
trade, or if those provisions were modified or repealed.
  Rand is
subject to the Shipping Act, 1916, and the Merchant Marine Act, 1920, commonly
referred to as the Jones Act, and other U.S. laws and the Coasting Trade Act
(Canada) that restrict domestic maritime transportation to vessels operating
under the flag of the subject state. In the case of the United States, in
addition, the vessels must have been built in the United States, be at least 75%
owned and operated by U.S. citizens and manned by U.S. crews. Compliance with
the foregoing legislation increases the operating costs of the vessels. With
respect to its U.S. flagged vessels, Rand will be responsible for monitoring the
ownership of its capital stock to ensure compliance with U.S. maritime laws. If
Rand does not comply with these restrictions, Rand will be prohibited from
operating its vessels in U.S. coastwise trade, and under certain circumstances
Rand will be deemed to have undertaken an unapproved foreign transfer, resulting
in severe penalties, including permanent loss of U.S. coastwise trading rights
for its vessels, and fines or forfeiture of the vessels.
  Over the
past decade, interest groups have lobbied Congress to modify or repeal U.S.
maritime laws so as to facilitate foreign flag competition. Foreign vessels
generally have lower construction costs and generally operate at significantly
lower costs than vessels in the U.S. markets, which would likely result in
reduced charter rates. Rand believes that continued efforts will be made to
modify or repeal these laws. If these efforts are successful, it could result in
significantly increased competition and have a material adverse effect on our
business, results of operations and financial condition.
  We
may be unable to maintain or replace our vessels as they age.
  As of
March 31, 2009, the average age of the vessels operated by Lower Lakes was
approximately 51 years. The expense of maintaining, repairing and upgrading
Lower Lakes’ vessels typically increases with age, and after a period of time
the cost necessary to satisfy required marine certification standards may not be
economically justifiable. There can be no assurance that Lower Lakes will be
able to maintain its fleet by extending the economic life of existing vessels,
or that our financial resources will be sufficient to enable us to make
expenditures necessary for these purposes. In addition, the supply of
replacement vessels is very limited and the costs associated with acquiring a
newly constructed vessel are prohibitively high. In the event that Lower Lakes
were to lose the use of any its vessels, our financial performance would be
adversely affected.
  Lower
Lakes is subject to environmental laws that could require significant
expenditures both to maintain compliance with such laws and to pay for any
uninsured environmental liabilities resulting from a spill or other
environmental disaster.
  The
shipping business and vessel operation are materially affected by government
regulation in the form of international conventions, United States and Canadian
treaties, national, state, provincial, and local laws, and regulations in force
in the jurisdictions in which vessels operate. Because such conventions,
treaties, laws and regulations are often revised, Rand cannot predict the
ultimate cost of compliance or its impact on the resale price or useful life of
Lower Lakes’ vessels. Additional conventions, treaties, laws and regulations may
be adopted which could limit Rand’s ability to do business or increase the cost
of its doing business, which may materially adversely affect its operations, as
well as the shipping industry generally. Lower Lakes is required by various
governmental and quasi-governmental agencies to obtain certain permits,
licenses, and certificates with respect to its operations and any increased cost
in connection with obtaining such permits, licenses and certificates, or the
imposition on Lower Lakes of the obligation to obtain additional permits,
licenses and certificates, could adversely affect Rand’s results of
operations.
  Canada
has adopted a regime of strict liability for oil pollution damage caused by
ships (Part 6 of the Marine Liability Act). In case of non-tanker vessels, such
as Lower Lakes’ vessels, a vessel’s registered owner is strictly liable for
pollution damage caused on the Canadian territory, in Canadian territorial
waters or in Canada’s exclusive economic zone by oil of any kind or in any form
including petroleum, fuel oil, sludge, oil refuse and oil mixed with wastes,
subject to certain defenses. The liability of the shipowner is, however, limited
in accordance with the provisions of the Convention on Limitation of Liability
for Maritime Claims, 1976, as amended by the Protocol of 1996. Pursuant to this
Convention, the shipowner can limit its liability to (i) 1 million Special
Drawing Right, or SDR, as defined by the International Monetary Fund for the
first 2,000 tons of tonnage, (ii) 400 SDR for each additional ton up to 30,000
tons of tonnage, (iii) 300 SDR for each additional ton up to 70,000 tons of
tonnage and (iv) 200 SDR for each additional ton of tonnage. In addition to the
Marine Liability Act, Lower Lakes’ vessels are also subject to other Canadian
laws and regulations that contain significant fine and penalty provisions
relating to the marine environment, pollution and discharges of hazardous
substances, including the Migratory Birds Convention Act, the Canadian
Environmental Protection Act, 1999, and the Fisheries Act.
  9
  The
United States Oil Pollution Act of 1990, or OPA, established an extensive
regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA affects all owners and operators whose vessels
trade in United States waters, which includes the Great Lakes and their
connecting and tributary waterways. Under OPA, vessel owners, operators and
bareboat charterers are “responsible parties” and are jointly, severally and
strictly liable (unless the spill results solely from the act or omission of a
third party, an act of God or an act of war) for all containment and clean-up
costs and other damages arising from vessel discharges of oil of any kind or in
any form.
  Lower
Lakes currently maintains pollution liability coverage
insurance.  However, if the damages from a catastrophic incident
exceed this insurance coverage, it could have a significant adverse impact on
Rand’s cash flow, profitability and financial position.
  Lower
Lakes is subject to vessel security regulations and will incur costs to comply
with recently adopted regulations and may be subject to costs to comply with
similar regulations which may be adopted in the future in response to
terrorism.
  Since the
terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the
Maritime Transportation Security Act of 2002, or MTSA, came into effect. To
implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard
issued regulations requiring the implementation of certain security requirements
aboard vessels operating in waters subject to the jurisdiction of the United
States. Similarly, in December 2002, amendments to the International Convention
for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention
dealing specifically with maritime security. The new chapter went into effect in
July 2004, and imposes various detailed security obligations on vessels and port
authorities, most of which are contained in the newly created ISPS Code. Among
the various requirements are:
  ·
                on-board
      installation of automatic information systems, or AIS, to enhance
      vessel-to-vessel and vessel-to-shore
  communications;
  ·
                the
      development of vessel security plans;
and
  ·
                compliance
      with flag state security certification
  requirements.
  The U.S.
Coast Guard regulations are intended to be aligned with these international
maritime security standards. Although Rand does not believe these additional
requirements will have a material financial impact on Lower Lakes’ operations,
Rand cannot assure you that there will be no interruption in operations to bring
vessels into compliance with the applicable requirements and any such
interruption could cause a decrease in revenues.
  The
operation of Lower Lakes’ vessels is dependent on the price and availability of
fuel. Continued periods of historically high fuel costs may materially adversely
affect Rand’s operating results.
  Rand’s
operating results may be significantly impacted by changes in the availability
or price of fuel for Lower Lakes’ vessels. Fuel prices have increased
substantially since 2004. Although price escalation clauses form part of
substantially all of Lower Lakes’ contracts of affreightment, which enable Lower
Lakes to pass the majority of its increased fuel costs on to its customers,
these measures may not be sufficient to enable Lower Lakes to fully recoup
increased fuel costs or assure the continued availability of its fuel supplies.
Although we are currently able to obtain adequate supplies of fuel, it is
impossible to predict the price of fuel. Political disruptions or wars involving
oil-producing countries, changes in government policy, changes in fuel
production capacity, environmental concerns and other unpredictable events may
result in fuel supply shortages and additional fuel price increases in the
future. There can be no assurance that Lower Lakes will be able to fully recover
its increased fuel costs by passing these costs on to its customers. In the
event that Lower Lakes is unable to do so, Rand’s operating results will be
adversely affected.
  10
  Governments
could requisition Lower Lakes’ vessels during a period of war or emergency,
resulting in loss of revenues and earnings from such requisitioned
vessels.
  The
United States or Canada could requisition title or seize Lower Lakes’ vessels
during a war or national emergency. Requisition of title occurs when a
government takes a vessel and becomes the owner. A government could also
requisition Lower Lakes vessels for hire, which would result in the government’s
taking control of a vessel and effectively becoming the charterer at a dictated
charter rate. Requisition of one or more of Lower Lakes’ vessels would have a
substantial negative effect on Rand, as Rand would potentially lose all or
substantially all revenues and earnings from the requisitioned vessels and
permanently lose the vessels. Such losses might be partially offset if the
requisitioning government compensated Rand for the requisition.
  The
operation of Great Lakes-going vessels entails the possibility of marine
disasters including damage or destruction of the vessel due to accident, the
loss of a vessel due to piracy or terrorism, damage or destruction of cargo and
similar events that may cause a loss of revenue from affected vessels and damage
Lower Lakes’ business reputation, which may in turn, lead to loss of
business.
  The
operation of Great Lakes-going vessels entails certain inherent risks that may
adversely affect Lower Lakes’ business and reputation, including:
  ·
                damage
      or destruction of vessel due to marine disaster such as a
      collision;
  ·
                the
      loss of a vessel due to piracy and
terrorism;
  ·
                cargo
      and property losses or damage as a result of the foregoing or less drastic
      causes such as human error, mechanical failure and bad
      weather;
  ·
                environmental
      accidents as a result of the foregoing;
and
  ·
                business
      interruptions and delivery delays caused by mechanical failure, human
      error, war, terrorism, political action in various countries, labor
      strikes or adverse weather
conditions.
  Any of
these circumstances or events could substantially increase Lower Lakes’ costs,
as for example, the costs of replacing a vessel or cleaning up a spill, or lower
its revenues by taking vessels out of operation permanently or for periods of
time. The involvement of Lower Lakes’ vessels in a disaster or delays in
delivery or damages or loss of cargo may harm its reputation as a safe and
reliable vessel operator and cause it to lose business.
  If Lower
Lakes’ vessels suffer damage, they may need to be repaired at Lower Lakes’ cost
at a drydocking facility.  The costs of drydock repairs are
unpredictable and can be substantial. Lower Lakes may have to pay drydocking
costs that insurance does not cover. The loss of earnings while these vessels
are being repaired and repositioned, as well as the actual cost of these
repairs, could decrease its revenues and earnings substantially, particularly if
a number of vessels are damaged or drydocked at the same time.
  Maritime
claimants could arrest Lower Lakes’ vessels, which could interrupt its cash
flow.
  Crew
members, suppliers of goods and services to a vessel, shippers of cargo, and
other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages against such vessel. In many jurisdictions,
a maritime lien holder may enforce its lien by arresting a vessel through
foreclosure proceedings. The arrest or attachment of one or more of Lower Lakes’
vessels could interrupt its cash flow and require it to pay large sums of funds
to have the arrest lifted.
  Item 1B.  Unresolved Staff
Comments
 
 None.
  11
 
 Item 2.  Properties
 
 We
maintain our executive offices at 461 Fifth Avenue, 25th Floor, New York, New
York 10017 pursuant to an agreement with ProChannel Management LLC, an
affiliate of Laurence S. Levy, our chairman of the board and chief executive
officer.  We currently lease the following properties:
 
 o
                Lower
      Lakes Towing leases approximately 4,500 square feet of warehouse space at
      207 Greenock Street, Port Dover, Ontario under a lease that expires
      October 2012.
 
 o
                Lower
      Lakes Towing leases approximately 5,000 square feet of office space at 517
      Main Street, Port Dover, Ontario under a lease that expires October
      2018.
 
 o
                Grand
      River leases approximately 1,300 square feet of space at 515 Moore Road,
      Suite 2, Avon Lake, Ohio under a lease that expires July 31,
      2011.
 
 o
                Grand
      River leases approximately 300 square feet at 3301 Veterans Drive. Suite
      210, Traverse City, Michigan under a lease that is renewed on a monthly
      basis.
 
 o
                Rand
      Finance leases approximately 175 square feet at 17 Wilson Road,
      Chelmsford, Massachusetts under that is renewed on a monthly
      basis.
 
 We
consider our current office space adequate for our current
operations.
 
 Item 3.  Legal
Proceedings
 
 The
nature of our business exposes us to the potential for legal proceedings related
to labor and employment, personal injury, property damage, and environmental
matters. Although the ultimate outcome of any legal matter cannot be predicted
with certainty, based on present information, including our assessment of the
merits of each particular claim, as well as our current reserves and insurance
coverage, we do not expect that any known legal proceeding will in the
foreseeable future have a material adverse impact on our financial condition or
the results of our operations.
 
 Item 4.  Submission of Matters to a Vote of
Security Holders
 
 No
matters were submitted to a vote of our stockholders during the fourth quarter
of the fiscal year covered by this report.
 
 
 PART II
 
 Item 5.  Market for the Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
 
 Our
common stock is currently traded on the NASDAQ Capital Market under the symbol
RLOG.  Prior to the expiration of our warrants on October 26, 2008,
our units and warrants traded on the NASDAQ Capital market under the symbols
RLOGU and RLOGW, respectively  The following table sets forth the high
and low sales prices for each full quarterly period within the two most recent
fiscal years.
 
 Common
      Stock
                Warrants
                UnitsQuarter
      Ended
                High
                Low
                High
                Low
                High
                LowJune
      30, 2007
                $7.35
                $5.00
                $2.76
                $1.70
                $11.90
                $11.65September
      30, 2007
                $6.50
                $5.17
                $2.13
                $1.05
                $*
                $*December
      31, 2007
                $6.50
                $5.11
                $2.48
                $1.45
                $11.50
                $6.00March
      31, 2008
                $6.45
                $4.90
                $1.89
                $0.30
                $10.50
                $5.00June
      30, 2008
                $5.97
                $4.95
                $1.19
                $0.05
                $6.60
                $5.41September
      30, 2008
                $6.10
                $4.90
                $0.99
                $0.05
                $7.50
                $5.78December
      31, 2008
                $5.00
                $3.41
                $0.21**
                $0.07**
                $5.84**
                $4.50**March
      31, 2009
                $4.05
                $2.34
                **
                **
                **
                **
 
 *No
trades of the Company’s Units were made during the quarter ended September 30,
2007.
 **Trading
of the Company’s warrants and units ceased on October 21, 2008 due to the
expiration of the Company’s warrants.
  12
  Holders
 
 As of
June 24, 2009, there were 21 holders of record of our common stock.
 
 Dividends
 
 We have
not paid any dividends on our common stock to date and do not intend to pay
dividends on our common stock in the near future. The payment of dividends in
the future will be contingent upon our revenues, earnings, capital requirements
and general financial condition. The payment of dividends is within the
discretion of our board of directors. Other than dividends which our board of
directors may determine to pay on our preferred stock, it is the present
intention of our board of directors to retain all earnings for future investment
and use in our business operations. Accordingly, our board of directors does not
anticipate declaring any dividends in the foreseeable future on our common
stock. In addition, no dividends may be declared or paid on our common stock
unless all accrued dividends on our preferred stock have been paid.
 
 Item 6.  Selected Financial
Data
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
 
 Item 7.  Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Introduction
 
 All
dollar amounts below $500,000 presented herein are in thousands, values greater
than $500,000 are presented in millions except share, per share and per day
amounts.
 
 The
following MD&A is written to help the reader understand our company. The
MD&A is provided as a supplement to, and should be read in conjunction with,
the Consolidated Financial Statements and the accompanying financial statement
notes of the Company appearing elsewhere in this Annual Report on Form 10-K for
the fiscal year ended March 31, 2009.
 
 Cautionary
Note Regarding Forward-Looking Statements
 
 This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such forward-looking statements involve
certain risks and uncertainties, including statements regarding our strategic
direction, prospects and future results. Certain factors, including factors
outside of our control, may cause actual results to differ materially from those
contained in the forward-looking statements.  All forward looking
statements included in this report are based on information available to us as
of the date hereof, and we assume no obligation to update or revise such
forward-looking statements to reflect events or circumstances that occur after
such statements are made. Such uncertainties include, among others, the
following factors:
 
 Overview
  Business
  Rand
Logistics, Inc. (formerly Rand Acquisition Corporation) was incorporated in the
State of Delaware on June 2, 2004 as a blank check company to effect a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating business.
  On March
3, 2006, we acquired all of the outstanding shares of capital stock of Lower
Lakes Towing Ltd., a Canadian corporation which, with its subsidiary Lower Lakes
Transportation Company, provides bulk freight shipping services throughout the
Great Lakes region. As part of the acquisition of Lower Lakes, we also acquired
Lower Lakes' affiliate, Grand River Navigation Company, Inc. Prior to the
acquisition, we did not conduct, or have any investment in, any operating
business. In this discussion of Rand's business, unless the context otherwise
requires, references to Rand include Rand and its direct and indirect
subsidiaries, and references to Lower Lakes' business or the business of Lower
Lakes mean the combined businesses of Lower Lakes Towing, Lower Lakes
Transportation and Grand River.
  13
  Rand's
shipping business is operated in Canada by Lower Lakes Towing and in the United
States by Lower Lakes Transportation. Lower Lakes Towing was organized in March
1994 under the laws of Canada to provide marine transportation services to dry
bulk goods suppliers and purchasers operating in ports in the Great Lakes that
were restricted in their ability to receive larger vessels. Lower Lakes has
grown from its origin as a small tug and barge operator to a full service
shipping company with a fleet of thirteen cargo-carrying vessels, including one
vessel is operated under a contract of affreightment. From its exclusively
Canadian beginnings, Lower Lakes has also grown to offer domestic services to
both Canadian and U.S. customers as well as cross-border routes. Lower Lakes
services the construction, electric utility and integrated steel industries
through the transportation of limestone, coal, iron ore, salt, grain and other
dry bulk commodities.
 
 We
believe that Lower Lakes is the only company providing significant domestic
port-to-port services to both Canada and the United States in the Great Lakes
region. Lower Lakes maintains this operating flexibility by operating both U.S.
and Canadian flagged vessels in compliance with the Shipping Act, 1916, and the
Merchant Marine Act, 1920, commonly referred to as the Jones Act, in the U.S.
and the Coasting Trade Act (Canada) in Canada.
 
 Results
of Operations for the fiscal year ended March 31, 2009 compared to the fiscal
year ended March 31, 2008.
  The
fiscal year ended March 31, 2009 was highlighted by several significant
events:
  (1)
                We
      operated the three former WMS time chartered vessels that we acquired on
      February 13, 2008 for a total of 797 Sailing Days, which we define as days
      a vessel is crewed and available for sailing, during the fiscal year
      ended  March 31, 2009. During the fiscal year ended March 31,
      2008, these three vessels sailed only 468 days due to a strike by WMS’s
      licensed officers.
  (2)
                We
      operated the two former Voyageur vessels for a total of 529 Sailing Days
      during the fiscal year ended March 31, 2009, compared to only 285 Sailing
      Days during the fiscal year ended March 31,
  2008.
  (3)
                We
      retired and scrapped our oldest and smallest vessel at the end of the 2008
      sailing season, and accordingly did not operate such vessel during the
      fiscal year ended March 31, 2009. We operated this vessel 233 Sailing Days
      during the fiscal year ended March 31,
2008.
  (4)
                Due
      to the repowering and other upgrading of the Saginaw, we operated this
      vessel only 222 Sailing Days during the fiscal year ended March 31, 2009,
      compared to 275 Sailing Days during the fiscal year ended March 31,
      2008.
  (5)
                Excluding
      the Saginaw, we operated the remaining Canadian and U.S. Core Vessels that
      Lower Lakes owned or operated at the time of our March, 2006 acquisition
      for 22 fewer Sailing Day during the fiscal year ended March 31, 2009
      compared to the fiscal year ended March 31, 2008.  This decrease
      was primarily the result of reduced operations in the three month period
      ended March 31, 2009 due to the impact of a weaker
  economy.
  (6)
                We
      benefited from improved freight rates on new and renewed contracts, as
      well as contractual rate increases from existing
  contracts.
  (7)
                Until
      December 2008, we benefited from improved vessel utilization realized from
      greater scheduling flexibility and increased backhaul opportunities
      available to our larger fleet, which allowed us to increase the percentage
      of time that the Company’s vessels were loaded.  Consequently,
      we moved significantly more cargo during the fiscal year ended March 31,
      2009 as compared to the fiscal year ended March 31,
  2008.
  (8)
                All
      of our customer contracts have fuel surcharge provisions whereby the
      increases in our fuel costs are passed on to customers.  Such
      increases in fuel surcharges impact our margin percentages, but do not
      reduce our margin dollars.
  (9)
                Due
      to the weakened economy, we experienced a significant slowdown from our
      aggregates and iron ore customers commencing in December 2008, as quarries
      were closed early for the winter and iron ore shipments to our major steel
      manufacturing customer were suspended.  Much of our aggregate
      and steel customer’s tonnage is carried in north to south trips; however,
      commencing in December, 2008, we were required to continue to meet
      customer contractual commitments for our backhaul customers (usually south
      to north) who remained open before the winter freeze and scheduled lock
      closures.  Accordingly, the remaining vessels operated through
      the end of the sailing season but were unable to maintain scheduling and
      operating efficiencies.
   14
  (10)
                The
      Canadian dollar weakened by approximately 23% versus the US dollar at
      March 31, 2009 as compared to March 31, 2008.  However, as a
      result of the timing of our Great Lakes season, Canadian revenues and
      costs were translated at an approximately 5% lower translation rate than
      in the prior year.
  15
 
  Selected
      Financial Information(USD
      in 000's)
                
                Fiscal year ending March 31,
      2009
                
                
                Fiscal year ending March 31,
      2008
                
                
                $ Change
                
                
                % ChangeRevenue:Freight
      and related revenue
                
                $
                85,832
                
                
                $
                70,985
                
                
                $
                14,847
                
                
                
                20.9
                %Fuel
      and other Surcharges
                
                $
                29,144
                
                
                $
                14,269
                
                
                $
                14,875
                
                
                
                104.2
                %Outside
      Voyage Charter revenue
                
                $
                19,210
                
                
                $
                9,515
                
                
                $
                9,695
                
                
                
                101.9
                %Total
                
                $
                134,186
                
                
                $
                94,769
                
                
                $
                39,417
                
                
                
                41.6
                %Expenses:Outside
      Voyage Charter Fees
                
                $
                17,665
                
                
                $
                9,436
                
                
                $
                8,229
                
                
                
                87.2
                %Vessel
      Operating expenses
                
                $
                81,346
                
                
                $
                69,117
                
                
                $
                12,229
                
                
                
                17.7
                %Repairs
      and Maintenance
                
                $
                5,162
                
                
                $
                3,844
                
                
                $
                1,318
                
                
                
                34.3
                %Sailing
      Days:
                
                
                3,148
                
                
                
                2,883
                
                
                
                265
                
                
                
                9.2
                %Per Day
      in Whole USD:Revenue
      per Sailing Day:Freight
      and related revenue
                
                $
                27,266
                
                
                $
                24,622
                
                
                $
                2,644
                
                
                
                10.7
                %Fuel
      and other Surcharges
                
                $
                9,258
                
                
                $
                4,949
                
                
                $
                4,309
                
                
                
                87.1
                %Expenses
      per Sailing Day:Vessel
      Operating expenses
                
                $
                25,841
                
                
                $
                23,974
                
                
                $
                1,867
                
                
                
                7.8
                %Repairs
      and Maintenance
                
                $
                1,640
                
                
                $
                1,333
                
                
                $
                307
                
                
                
                23.0
                %
 
  Management
believes that each of our vessels should achieve approximately 275 Sailing Days
in an average Great Lakes season assuming no major repairs or incidents and
normal dry-docking cycle times performed during the winter lay-up period. The
Company’s vessels sailed an average of approximately 262 Sailing days during the
2009 sailing season, which ended early due to the weakened economy, compared to
an average of 236 Sailing Days (excluding the acquired Voyageur vessels) during
the 2008 sailing season.  During the fiscal year ended March 31, 2009,
Sailing Days increased 265 days, or 9.2%, to 3,148 Sailing Days, despite the
early shutdown of customer quarries and cessation of iron ore shipments in
December 2008, from 2,883 Sailing Days during the fiscal year ended March 31,
2008.
  16
  The
following table summarizes the changes in the components of our revenue and
vessel operating expenses as a result of changes in Sailing Days during the
fiscal year ended March 31, 2009 compared to the fiscal year ended March 31,
2008:
  (USD
      in 000's)
                
                SailingDays
                
                
                Freight
      andRelatedRevenue
                
                
                Fuel
      andOtherSurcharges
                
                
                OutsideVoyageCharter
                
                
                TotalRevenue
                
                
                VesselOperatingExpensesFiscal
      year ended March 31, 2008
                
                
                2,883
                
                
                $
                70,985
                
                
                $
                14,269
                
                
                $
                9,515
                
                
                $
                94,769
                
                
                $
                69,117Changes
      in fiscal year ended March 31, 2009:Increase
      attributable to acquired WMS vessels
                
                
                329
                
                
                $
                12,074
                
                
                $
                5,671
                
                
                
                -
                
                
                $
                17,745
                
                
                $
                8,716Increase
      attributable to the acquired Voyageur vessels
                
                
                244
                
                
                $
                7,276
                
                
                $
                3,269
                
                
                
                -
                
                
                $
                10,545
                
                
                $
                6,577Sailing
      Days Lost due to retirement of  smallest vessel
                
                
                (233
                )
                
                $
                (4,748
                )
                
                $
                (1,094
                )
                
                
                -
                
                
                $
                (5,842
                )
                
                $
                (4,443
                )Changes
      due to the Saginaw Engine Upgrade
                
                
                (53
                )
                
                $
                (1,281
                )
                
                $
                690
                
                
                
                -
                
                
                $
                (591
                )
                
                $
                (1,251
                )Other
      factors
                
                
                (22
                )
                
                $
                1,526
                
                
                $
                6,339
                
                
                
                -
                
                
                $
                7,865
                
                
                $
                2,630Changes
      in Outside Voyage Charter Revenue
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                $
                9,695
                
                
                $
                9,695
                
                
                
                -Other
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Sub-Total
                
                
                265
                
                
                $
                14,847
                
                
                $
                14,875
                
                
                $
                9,695
                
                
                $
                39,417
                
                
                $
                12,229Fiscal
      Year ended March 31, 2009
                
                
                3,148
                
                
                $
                85,832
                
                
                $
                29,144
                
                
                $
                19,210
                
                
                $
                134,186
                
                
                $
                81,346
 
  Total
revenue during the fiscal year ended March 31, 2009 was $134.2 million, an
increase of $39.4 million, or 41.6%, compared to $94.8 million during the fiscal
year ended March 31, 2008.  This increase was primarily attributable
to increased Sailing Days, higher fuel surcharges, price increases, improved
vessel utilization and improved trade patterns.
  Freight
and other related revenue generated from the Company’s owned vessels increased
$14.8 million, or 20.9%, to $85.8 million during the fiscal year ended March 31,
2009 compared to $71 million during the fiscal year ended March 31, 2008.
Freight and related revenue per Sailing Day increased $2,644, or 10.7%, to
$27,266 per Sailing Day in the fiscal year ended March 31, 2009 compared to
$24,622 the fiscal year ended March 31, 2008.  This increase reflects
a combination of a larger fleet, price increases, higher water levels,
productivity improvements, improved backhaul utilization and improved trading
patterns.
  Fuel and
other pass through surcharges increased $14.9 million, or 104%, to $29.1 million
during the fiscal year ended March 31, 2009 compared to $14.3 million during the
fiscal year ended March 31, 2008. Fuel and other surcharges revenue per Sailing
Day increased $4,309 to $9,258 per Sailing Day in the fiscal year ended March
31, 2009 compared to $4,949 in the fiscal year ended March 31,
2008.
  Outside
Voyage Charter revenues increased $9.7 million, or 102%, to $19.2 million during
the fiscal year ended March 31, 2009 compared to $9.5 million during the fiscal
year ended March 31, 2008.  The increase in Outside Voyage Charter
revenues was due to the Company outsourcing contractual commitments that it
could not handle on a timely basis with its own capacity during the first eight
months of the fiscal year as a result of the repowering of the Saginaw, the
carryover effect from the strike against the WMS vessels in the fiscal year
ended March 31, 2008, and the Company’s practice to outsource a portion of its
normal business to optimize vessel efficiencies.
  Vessel
Operating Expenses increased $12.2 million, or 17.7%, to $81.3 million in the
fiscal year ended March 31, 2009 compared to $69.1 million in the fiscal year
ended March 31, 2008 which was attributable to crewing and operating the
Company’s vessels for an additional 265 Sailing Days.  Vessel
operating expenses per Sailing Day increased $1,867, or 7.8%, to $25,841 in the
fiscal year ended March 31, 2009 compared to $23,974 in the fiscal year ended
March 31, 2008.  The increased costs were primarily attributable to
higher fuel prices, which were passed on to our customers.
  17
  Repairs
and maintenance expenses, which consist of expensed winter work, increased $1.3
million to $5.2 million during the fiscal year ended March 31, 2009 from $3.8
million during the fiscal year ended March 31, 2008.  Repairs and
maintenance per Sailing Day increased $307 to $1,640 per Sailing Day in the
fiscal year ended March 31, 2009 from $1,333 during the fiscal year ended March
31, 2008   The increase was caused by $0.9 million of expenses
carried over from the Winter 2008 lay-up into the first quarter of fiscal year
ended March 31, 2009, as compared to a carryover of only $87 in the fiscal year
ended March 31, 2008.
  Our
general and administrative expenses decreased $0.6 million to $10.1 million
during the fiscal year ended March 31, 2009 from $10.7 million in the fiscal
year ended March 31, 2008. The decrease in general and administrative expenses
included the elimination of $0.7 million recorded by the consolidated WMS VIE in
the fiscal year ended March 31, 2008, offset by an increase of $439 in non-cash
equity compensation in the fiscal year ended March 31,
2009.  Excluding the WMS VIE, the cash portion of our general and
administrative expenses declined $263 to $9.2 million in the fiscal year ended
March 31, 2009 from $9.5 million during the fiscal year ended March 31,
2008.  Our general and administrative expense represented 7.6% of
revenues during the fiscal year ended March 31, 2009, a decrease from 11.3% of
revenues during the fiscal year ended March 31, 2008.  During the
fiscal year ended March 31, 2009, $3.4 million of our general and administrative
expenses was attributable to our parent company and $6.7 million was
attributable to our operating companies.
  Depreciation
expense rose $375 to $6.8 million during the fiscal year ended March 31, 2009
compared to $6.4 million during the fiscal year ended March 31,
2008.  The increase in depreciation expense was primarily attributable
to the full year of depreciation of the two Voyageur vessels acquired in the
second quarter of fiscal year ended March 31, 2008 and the depreciation expense
associated with the investment in the Saginaw repowering, offset by the
retirement of our oldest and smallest vessel at the end of the third quarter of
the fiscal year ended March 31, 2008.
  Amortization
of drydock costs increased $0.6 million to $2.1 million during the fiscal year
ended March 31, 2009 from $1.5 million during the fiscal year ended March 31,
2008 due to the drydocking of our two largest vessels during the 2008 winter
layup period.  During the fiscal year ended March 31, 2009, the
Company amortized the deferred drydock costs of six of its twelve vessels
compared to four vessels during the fiscal year ended March 31,
2008.
  Amortization
of intangibles decreased $253 to $1.7 million during the fiscal year ended March
31, 2009 from $1.9 million during the fiscal year ended March 31, 2008 due to
reduced amortization arising from the acquisition of the two Voyageur vessels in
the second quarter of the fiscal year ended March 31,
2008.  Amortization of chartering agreement costs of $337 incurred
during the fiscal year ended March 31, 2008 were not incurred in the fiscal year
ended March 31, 2009 as a result of the acquisition of the WMS vessels in the
fourth quarter of the fiscal year ended March 31, 2008.
  The
Company incurred a loss of $1.7 million on the retirement of its oldest and
smallest vessel in the fiscal year ended March 31,
2008.  Additionally, the WMS VIE realized a gain of $0.7 million on
the sale of the WMS vessels immediately prior to its deconsolidation from the
Company’s financial statements on February 13, 2009.
  As
a result of the items described above, during the fiscal year ended March 31,
2009, the Company’s operating income increased $18.7 million to $9.3 million
compared to an operating loss of $9.4 million during the fiscal year ended March
31, 2008.
  Interest
expense increased $1.5 million to $6.4 million during the fiscal year ended
March 31, 2009 from $4.9 million during the fiscal year ended March 31, 2008.
This increase in interest expense was a result of the additional indebtedness
incurred in connection with our acquisitions of the Voyager and WMS vessels and
the repowering upgrade to the Saginaw.  The Company also incurred
higher interest expense with its revolving credit facilities in connection with
the higher cash balances held on the Company’s balance sheet during the second
half of fiscal year ended March 31, 2008.
  We
recorded a loss on interest rate swap contracts of $2.8 million during the
fiscal year ended March 31, 2009 compared to a loss of $1.3 million incurred in
the fiscal year ended March 31, 2008 due to Company’s recording the fair value
of our two interest rate swap agreements, which were signed in connection with
our Amended and Restated Credit Agreement.
  The WMS
VIE was deconsolidated from the Company’s consolidated financial statements
effective February 13, 2008 following the acquisition of the WMS vessels,
resulting in a $302 loss.
  Our
income before income taxes was $141 in the fiscal year ended March 31, 2009
compared to a loss before income taxes of $16.4 million in the fiscal year ended
March 31, 2008.
  18
  Our
provision for income tax expense was $7.3 million during the fiscal year ended
March 31, 2009 compared to an income tax benefit of $5.0 million during the
fiscal year ended March 31, 2008.  The Company recorded a $6.0 million
valuation allowance against its US federal net deferred assets during the fourth
fiscal quarter ended March 31, 2009 due to taxable net operating losses for the
past three fiscal years.
  Our Net
Loss was $7.2 million in the fiscal year ended March 31, 2009 compared to a Net
Loss of $11.2 million in the fiscal year ended March 31, 2008.
  We
accrued $1.6 million for cash dividends on our preferred stock during the fiscal
year ended March 31, 2009 compared to $1.3 million during the fiscal year ended
March 31, 2008.  The dividends accrued at a rate of 9.75% for the
three month period ended March 31, 2009.  When the dividends are not
paid in cash, the rate increases 0.5% every six months to a cap of 12.0%, and
will increase to 10.25% effective July 1, 2009, assuming cash dividends have not
yet been paid.
  During
the fiscal year ended March 31, 2008, we recorded $2.0 million of Stock Warrant
Inducement Discount expense in connection with the $0.50 per warrant discount on
the 4.0 million warrants which were exercised during that fiscal
year.
  Our net
loss applicable to common stockholders decreased $5.7 million to a loss of $8.8
million during the fiscal year ended March 31, 2009, compared to a loss of $14.5
million during the fiscal year ended March 31, 2008.
  During
the fiscal year ended March 31, 2009, the Company operated five vessels in the
US and seven vessels in Canada, and  the percentage of our total
Freight and Other revenue, Fuel and other surcharge revenue, Vessel operating
expenses, repairs and maintenance costs, and combined depreciation and
amortization costs approximate the percentage of vessel ownership by
country.  Our Outside Voyage Charter revenue and costs relate solely to our
Canadian subsidiary and approximately 50% of our general and administrative
costs are incurred in Canada.  Approximately two-thirds of our interest
expense is incurred in Canada, consistent with our percentage of overall
indebtedness by country.  Approximately 70% of our loss on interest
rate swap contracts was realized in Canada based on the larger amount of
indebtedness and greater decrease of interest rates in Canada than in the US
during the fiscal year ended March 31, 2009. In addition, approximately $1.9
million of our $7.3 million of tax provision was incurred in Canada since a
valuation allowance of approximately $6 million was recorded in the US during
the fiscal year ended March 31, 2009.  All of our preferred stock dividends
are accrued in the US.
  Impact
of Inflation and Changing Prices
  During
the fiscal year ended  March 31, 2009, there were major fluctuations
in our fuel costs. However, our contracts with our customers provide for
recovery of these costs over specified rates through fuel
surcharges.  In addition, there were major changes in the exchange
rate between the US dollar and the Canadian dollar, which impacted our
translation of revenue and costs to US dollars by a reduction of approximately
5%.
  Liquidity
and Capital Resources
  Our
primary sources of liquidity are cash from operations, the proceeds of our
credit facility and proceeds from sales of our common stock. Our principal uses
of cash are vessel acquisitions, capital expenditures, drydock expenditures,
operations and interest and principal payments under our credit
facility.  Information on our consolidated cash flow is presented in
the consolidated statement of cash flows (categorized by operating, investing
and financing activities) which is included in our consolidated financial
statements for the fiscal years ended March 31, 2009 and March 31
2008.  We believe cash generated from our operations and availability
of borrowing under our credit facility will provide sufficient cash availability
to cover our anticipated working capital needs, capital expenditures and debt
service requirements for the next twelve months.  However, if the
Company experiences a material shortfall to its financial forecasts or if the
Company’s customers materially delay their receivable payments due to further
deterioration of economic conditions, the Company may breach its financial
covenants and collateral thresholds and be strained for
liquidity.  The company has implemented a program to reduce costs
relative to actual fiscal 2009 expenses, maintained its continued focus on
productivity gains and is closely monitoring customer credit and accounts
receivable balances.
  19
  Net cash
provided by operating activities for the fiscal year ended March 31, 2009 was
$5.8 million, an increase of $5.0 million compared to $0.8 million during the
fiscal year ended March 31, 2008. This increase was primarily due to
substantially higher cash earnings utilized to pay down the higher payables
balance at the beginning of the fiscal year ended March 31, 2009 and a $3.0
million decrease in drydock costs in the fiscal year ended March 31, 2009
compared to the fiscal year ended March 31, 2008.  During the fiscal
year ended March 31, 2009, the sum of net income and adjustments to reconcile
with net cash provided totaled $15.0 million, including $0.9 million of equity
compensation, offset by deferred drydock costs of $1.4 million and reductions in
cash provided from operating assets and liabilities of $7.8
million.  During the fiscal year ended March 31, 2008, the sum of net
income plus adjustments to reconcile with net cash used totaled $2.2 million and
cash paid for drydock costs equal to $4.4 million, offset by cash provided by
operating assets and liabilities equal to $7.4 million for a total of net cash
provided equal to $0.8 million.  The Company did not incur any
bad-debt write-offs or material slowdowns in receivable collections during the
fiscal year ended March 31, 2009.  The timing of the end of the
Company’s fiscal year in relation to the sailing season allows most of the prior
season’s receivables to be collected prior to the end of the Company’s fiscal
year. In addition, the later start of a sailing season can modestly reduce the
amount of accounts payable in the Company’s balance sheet at the end of our
fiscal year.
  Cash
used in investing activities decreased by $33.0 million to net cash used of $8.8
million during the fiscal year ended March 31, 2009 from $41.8 million during
the fiscal year ended March 31, 2008.  This decrease was attributable
to $24.5 million related to the acquisition of the Voyageur vessels and $17.3
million in purchases of fixed asset in the fiscal year ended March 31,
2008.
  Cash
flows provided from financing activities decreased $40.4 million to $1.0 million
during the fiscal year ended March 31, 2009 compared to $41.4 million in the
fiscal year ended March 31, 2008.  During the fiscal year ended March
31, 2009, the Company made net borrowings under its revolving credit facility of
$4.0 million and made principal payments on its term debt of $3.2
million.  During the fiscal year fiscal ended March 31, 2008, the
Company received $88.8 million in proceeds of long-term debt, including $17.1
million in connection with the Voyageur Transaction. The remaining $71.7 million
of the proceeds were received in connection with entering into the Amended and
Restated Credit Agreement on February 13, 2008 and used to finance the WMS
vessels acquisition and a portion of the Saginaw repowering project. In
addition, The Company and the consolidated WMS VIE paid off a combined $59.9
million of long-term debt and $2.5 million of debt financing costs in the fiscal
year ended March 31, 2008, offset by the proceeds of $2.7 million from a Blocked
Cash account on February 13, 2008.  During the fiscal year ended March
31, 2008, the Company also received $17.8 million of Warrant exercise proceeds
and revolver borrowings net of repayments of $5.6 million.
  During
the fiscal year ended March 31, 2009, long-term debt, including the current
portion, decreased $12.1 to $58.3 million from $70.4 million in the fiscal year
ending March 31, 2008, which reflected $3.2 million in scheduled principal
payments and an $8.9 million decrease attributable to the currency translation
of our Canadian debt into US dollars.
  Our
Amended and Restated Credit Agreement, as amended, requires the Company to meet
certain quarterly and annual financial covenants, including minimum EBITDA (as
defined therein), minimum fixed charge ratios, maximum senior debt-to-EBITDA
ratios, and maximum capital expenditures and drydock
expenditures.  The Company met those financial covenants during the
fiscal year ended March 31, 2009. The covenants are set in Canadian dollars in
order to better match the cash earnings and debt levels of the business by
currency.
  Preferred
Stock and Preferred Stock Dividends
 
 The
Company has accrued, but not paid, its preferred stock dividends since January
1, 2007.  The shares of the series A convertible preferred stock: rank
senior to the Company’s common stock with respect to liquidation and dividends;
are entitled to receive a cash dividend at the annual rate of 7.75% (based on
the $50 per share issue price), payable quarterly (subject to increases of 0.5%
for each six month period in respect of which the dividend is not timely paid,
up to a maximum of 12%, subject to reversion to 7.75% upon payment of all
accrued and unpaid dividends); are convertible into shares of the Company’s
common stock at any time at the option of the series A preferred stockholder at
a conversion price of $6.20 per share (based on the $50 per share issue price
and subject to adjustment) or 8.065 shares of common stock for each Series A
Preferred Share (subject to adjustment); are convertible into shares of the
Company’s common stock (based on a conversion price of $6.20 per share, subject
to adjustment) at the option of the Company if, after the third anniversary of
our acquisition of Lower Lakes, the trading price of the Company’s common stock
for 20 trading days within any 30 trading day period equals or exceeds $8.50 per
share (subject to adjustment); may be redeemed by the Company in connection with
certain change of control or acquisition transactions; will vote on an
as-converted basis with the Company’s common stock; and have a separate vote
over certain material transactions or changes involving the Company. The accrued
dividend payable at March 31, 2009 was $3.2 million, and at March 31, 2008 was
$1.6 million. As of March 31, 2009, the effective rate of preferred dividends
was 9.75% (8.75% as of March 31, 2008). The dividend rate will increase to
10.25% effective July 1, 2009 if the dividend is not paid in cash and will
increase 0.5% every six months thereafter until it reaches 12% or the accrued
dividends are paid in cash. The Company is limited in the payment of preferred
stock dividends by the fixed charge coverage ratio covenant in the Company’s
Amended and Restated Credit Agreement. In addition, the Company has made the
decision to make its investments in vessels before applying cash to pay
preferred stock dividends. Under the terms of the preferred stock, upon the
conversion of the preferred stock to common stock, a subordinated promissory
note will be issued whereby the cash dividends will accrue at the rates set for
the preferred stock and the note must be paid at the earlier of the second
anniversary of the conversion, or seven years from the initial issuance date of
the preferred stock, whichever is earlier.
  20
  Investments
in Capital Expenditures and Drydockings
  We
expended $11.3 million in paid and unpaid capital expenditures and drydock
expenses during the fiscal year ended March 31, 2009, including $6.7 million
relating to carryover from the 2008 Winter season, compared to $18.7 million,
including a carryover of $0.9 million, in the fiscal year ended March 31, 2008
(excluding the WMS vessel acquisition). Our capital expenditures and drydock
expenses for the winter 2009 season were $4.6 million, and we estimate that we
will incur approximately an additional $2.0 million of capital expenditures in
the quarter ended June 30, 2009 related to the 2009 Winter lay-up
period.
  Foreign
Exchange Rate Risk
  We have
foreign currency exposure related to the currency related remeasurements of
various financial instruments denominated in the Canadian dollar (fair value
risk) and operating cash flows denominated in the Canadian dollar (cash flow
risk). These exposures are associated with period to period changes in the
exchange rate between the U.S. dollar and the Canadian dollar.  At
March 31, 2009, our liability for financial instruments with exposure to foreign
currency risk was approximately CDN $47.2 million of term borrowings in Canada
and CDN $2.4 million of revolving borrowings in Canada.  Although we
have tried to match our indebtedness and cash flows from earnings by country,
the sudden change in exchange rates can increase the indebtedness converted to
US dollars before operating cash flows can make up for such a currency
conversion change.
  From a
cash flow perspective, our operations are insulated against changes in currency
rates as operations in Canada and the United States have revenues and
expenditures denominated in local currencies and our operations are cash flow
positive. However, as stated above, the majority of our financial liabilities
are denominated in Canadian dollars which exposes us to currency risks related
to principal payments and interest payments on such financial liability
instruments.
  Interest
Rate Risk
  We are
exposed to changes in interest rates associated with revolving our indebtedness
under our Amended and Restated Credit Agreement, which carries interest rates
which vary with Canadian Prime Rates and B.A. Rates for Canadian borrowings, and
US Prime Rates and Libor Rates on US borrowings.
  We
entered into two interest rate swap contracts for approximately 75% of our term
loans for the remaining term of such loans based on three month BA rates for the
Canadian term loans and three month US Libor rates for the US term
loans.  The rates on these instruments, prior to the addition of the
lender’s margin, are 4.09% on the Canadian term loans, and 3.65% on the US term
loans. We will be exposed to interest rate risk under our interest rate swap
contracts if such contracts are required to be amended or terminated earlier
than their termination dates.
  Critical accounting
policies
  Rand’s
significant accounting policies are presented in Note 2 to its audited
consolidated financial statements, and the following summaries should be read in
conjunction with the financial statements and the related notes included in this
annual report on Form 10-K. While all accounting policies affect the financial
statements, certain policies may be viewed as critical.
  21
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the application of
certain accounting policies, many of which require the Company to make estimates
and assumptions about future events and their impact on amounts reported in the
financial statements and related notes.  Since future events and their
impact cannot be determined with certainty, the actual results will inevitably
differ from our estimates.  Such differences could be material to the
financial statements..
  Revenue
Recognition
 
 The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis based on
origin-destination and cargo carried. In accordance with Emerging Issues Task
Force (“EITF”) Issue No. 91-09, “Revenue and Expense Recognition for
Freight Services in Progress” Method 5, voyage revenue is recognized
ratably over the duration of a voyage based on the relative transit time in each
reporting period when the following conditions are met: the Company has a signed
contract of affreightment, the contract price is fixed or determinable and
collection is reasonably assured.  Included in freight billings are
other fees such as fuel surcharges and other freight surcharges, which represent
pass-through charges to customers for toll fees, lockage fees and ice breaking
fees paid to other parties.  Fuel surcharges are recognized over the
duration of the voyage, while freight surcharges are recognized when the
associated costs are incurred. Freight surcharges are less than 5% of total
revenue.
  The
Company subcontracts excess customer demand to other freight
providers.  Service to customers under such arrangements is
transparent to the customer and no additional services are provided to
customers.  Consequently, revenues recognized for customers serviced
by freight subcontractors are recognized on the same basis as described
above.
  In
addition, all revenues are presented on a gross basis in accordance with the
guidance in Emerging Issues Task Force 99-19 (EITF 99-19), “Reporting Revenue
Gross as a Principal versus Net as an Agent.”
   Intangible
assets and goodwill
 
 Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. Chartering
agreement costs were primarily legal costs of establishing the time chartering
agreements with the WMS VIE, including loan and guaranty documentation. These
costs were amortized over the term of the time chartering agreement, and related
debt. Other intangibles are amortized as follows:
  Trademarks
      and trade names
                  
                  10
      years straight-lineNon-competition
      agreements
                  
                  4
      years straight-lineCustomer
      relationships and contracts
                  
                  15
      years straight-line
  Non-competition
agreements are amortized over the period which consists of the remainder of the
employment contract and the non-compete period after its
expiration.
  Although
customer contracts have a typical duration of only three to five years, the
Company has experienced a consistent track record of serial renewals by its
significant contract customers (and such customers comprise most of the
Company’s business).  The Company’s customer relationships are
fortified by the fact that there are a limited number of Great Lakes shipping
companies as well as a declining number of vessels operating on the Great
Lakes.  The Company has an additional advantage in that it operates
half of the vessels on the Great Lakes which are classified as “river-class
vessels” and capable of accessing docks and customers not accessible to larger
vessels.  Accordingly, customers have a substantial interest in
protecting their Great Lakes transportation relationships.  Based on
the foregoing, and in compliance with SFAS 142, the Company has determined that
15 years is the most appropriate “best estimate” amortization period for its
customer relationships and contracts. The Company has estimated a 10 year useful
life for its trademarks and trade names. In accordance with paragraph 12 of SFAS
142, since the Company cannot reliably determine the pattern of economic benefit
of the use of the customer relationships and trademarks and trade names, the
Company has determined that the straight line amortization is
appropriate.
  22
  Impairment
of Fixed Assets and Intangible Assets with Finite Lives
  Fixed
assets and finite-lived intangible assets are tested for impairment when a
triggering event occurs. Examples of such triggering events include a
significant disposal of a portion of such assets, an adverse change in the
market involving the business employing the related assets, a significant
decrease in the benefits realized from an acquired business, difficulties or
delays in integrating the business, and a significant change in the operations
of an acquired business. The Company has determined that there has been an
adverse change in our markets that could affect the valuation of our
assets.  Accordingly, as of March 31, 2009,  the Company
updated its estimates of undiscounted cash flows for each of its asset groups to
test our long-term assets for recoverability. These estimates are subject to
uncertainty.  We then compared those undiscounted cash-flows by asset
group to the sum of the carrying value of each asset group and determined that
there were no impairment indicators.
  Impairment
of Goodwill
  As of
March 31, 2009, the Company made its annual test of Goodwill. Significant
assumptions are inherent in this process, including estimates of our
undiscounted cashflows, discount rates, comparable companies and comparable
transactions. Discount rate assumptions are based on an assessment of the risk
inherent in the respective intangible assets. The Company presently has no
intangible assets not subject to amortization other than goodwill. The fair
market values of each of our reporting units exceeded the sum of the carrying
values of those reporting units at March 31, 2009.
  Income taxes
 
 The
Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes”  (“SFAS 109”).  SFAS 109 requires the
determination of deferred tax assets and liabilities based on the differences
between the financial statement and income tax bases of tax assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.  A valuation allowance is
recognized, if necessary, to measure tax benefits to the extent that, based on
available evidence, it is more likely than not that they will be realized. The
determination to set up a valuation allowance is dependent on (1) management’s
estimates of whether taxable income in future periods for each taxable entity is
sufficient that deferred income tax assets will be realized, except for the
change in foreign exchange loss, based on the performance of the entity and the
expected timing of the reversal of the deferred tax liabilities, and (2) tax net
operating losses in particular entities in recent years. Such management
estimates are subject to uncertainty.
  The
Company has adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”
(“FIN 48”) effective April 1, 2007. FIN 48 addresses the determination of how
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based
on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution. Establishing accruals for tax benefits
requires management to make estimates and assessments with respect to the
ultimate outcome of tax audit issues (if any) and amounts recorded on financial
statements. The ultimate resolution of such uncertain tax benefits may differ
from management’s estimate, potentially impacting the Company’s results of
operations, cashflows, or financial position.  However, the impact of
the Company’s reassessment of its tax positions in accordance with FIN 48 did
not have a material effect on the results of operations, financial condition or
liquidity.
  Stock-Based
Compensation
 
 The
Company has adopted SFAS No. 123(R), Share-Based Payment, using the modified
prospective method.  This method requires compensation cost to be
recognized beginning on the effective date based on the requirements of SFAS
123(R) for all share-based payments granted or modified after the effective
date.  Under this method, the Company recognizes compensation expense
for all newly granted awards and awards modified, repurchased or cancelled after
April 1, 2007. Compensation expense for the unvested portion of awards that were
outstanding at April 1, 2007 is recognized ratably over the remaining vesting
period based on the fair value at date of grant as calculated under the
Black-Scholes option pricing model. The Company applies business judgment in
factors determining the volatility to be used in the calculation.
  23
  Recently
Issued Pronouncements
  Determinationof the Useful Life of Intangible
Assets
 
 In April
2008, the FASB issued FASB Staff Position No. 142-3, Determination of the Useful
Life of Intangible Assets, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under FASB Statement No. 142, “Goodwill and
Other Intangible Assets”. The intent of FASB Staff Position No. 142-3 is to
improve the consistency between the useful life of a recognized intangible asset
under FASB Statement No. 142 and the period of expected cash flows used to
measure the fair value of the asset under FASB Statement No. 141(R) and
other US generally accepted accounting principles. FASB Staff Position No. 142-3
is effective for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years and early adoption is prohibited. The Company
will be required to adopt this standard for the fiscal year ending March 31,
2010. The Company is presently evaluating the impact of adopting this standard
on its consolidated financial statements.
  IFRS
 
 In
November of 2008, the SEC released a proposed roadmap regarding the potential
use by U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive
series of accounting standards published by the International Accounting
Standards Board (“IASB”). Under the proposed roadmap, the Company may be
required in fiscal 2015 to prepare financial statements in accordance with IFRS.
However, the SEC will make a determination in 2011 regarding the mandatory
adoption of IFRS. The Company is currently assessing the impact that this
potential change would have on its consolidated financial statements, and it
will continue to monitor the development of the potential implementation of
IFRS.
  Fair
Value Measurement
 
 In
September 2006, the FASB issued “SFAS” No. 157, Fair Value
Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
Specifically, this Statement sets forth a definition of fair value, and
establishes a hierarchy prioritizing the inputs to valuation techniques, giving
the highest priority to quoted prices in active markets for identical assets and
liabilities and the lowest priority to unobservable inputs. In
February 2008, the FASB issued FASB Staff Position FAS 157-2,
Effective Date of FASB Statement No. 157, which defers the implementation
for the non-recurring non-financial assets and liabilities from fiscal years
beginning after November 15, 2007 to fiscal years beginning after
November 15, 2008.  The disclosure requirements of SFAS No. 157
which took effect on January 1, 2008 are presented in Note 20. On
April 1, 2009, the Company will implement the previously-deferred
provisions of SFAS No. 157 for our non-financial assets and liabilities
which include goodwill and intangible assets. The Company does not anticipate
that the remaining provisions will have a material effect on the Company’s
consolidated financial position or results of operations when they become
effective.
  Statement
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and establishes a hierarchy that
categorizes and prioritizes the inputs to be used to estimate fair value. The
three levels of inputs used are as follows:
  Level
      1  –
                  Quoted
      prices in active markets for identical assets or
    liabilities.Level
      2  –
                  Inputs
      other than Level 1 that are observable for the asset or liability, either
      directly or indirectly, such asuoted
      prices for similar assets and liabilities in active markets; quoted prices
      for identical or similar assets or liabilities in markets that are not
      active; or other inputs that are observable or can be corroborated by
      observable market data by correlation or other means.Level
      3  –
                  Unobservable
      inputs that are supported by little or no market activity and that are
      significant to the fair value of the assets or
  liabilities.
  In April
2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly  (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance
for estimating fair value in accordance with SFAS No. 157 when the volume
and level of activity for the asset or liability have decreased significantly.
FSP FAS 157-4 also provides guidance on identifying circumstances that indicate
a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual
reporting periods ending after June 15, 2009. The Company will adopt FSP
FAS 157-4 in the first quarter of fiscal 2010 and it does not expect a material
impact on its consolidated financial statements upon adoption.
  24
  
 Fair value option for financial assets
and financial liabilities
 
 In
February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides all companies
the option to irrevocably elect to report recognized financial assets and
liabilities at fair value on a contract-by-contract basis. Effective as of the
beginning of the first fiscal year that begins after November 15, 2007, the
Company has the option of early adoption, provided the Company also elects to
apply the provisions of FASB Statement No. 157, “Fair Value
Measurements”.  SFAS 159 became effective for the Company on
April 1, 2008. The Company has selected the option not to measure eligible
financial assets and liabilities at fair value. Accordingly, the adoption of
Statement 159 had no impact on the Company’s consolidated financial
statements.
  Non-controlling
interests in consolidated financial statements
 
 On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. SFAS 160 applies
to all fiscal years beginning on or after December 15, 2009. The Company will be
required to adopt this standard for the fiscal year ending March 31, 2010 and is
presently evaluating the impact of adopting this standard on its consolidated
financial statements.
  Business
Combinations
 
 On
December 4, 2007, the FASB also issued SFAS No. 141(R), “Business Combinations”.
This statement also applies to fiscal years beginning on or after December 15,
2009. The Company will be required to adopt this standard for the fiscal year
ending March 31, 2010. The Company is presently evaluating the impact of
adopting this standard on its consolidated financial statements.
  Derivative
Instruments and Hedging Activities
 
 In March
2008, the FASB issued SFASNo.161, “Disclosures about
Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161
amends SFAS 133 to provide enhanced disclosure requirements surrounding how
and why an entity uses derivative instruments, how derivative instruments and
related hedged items are accounted for under SFAS 133 and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows. SFAS 161 is effective for the Company
as of the beginning of Fiscal 2010, including interim periods thereafter. The
implementation of SFAS 161 is not expected to have a material impact on the
Company’s consolidated financial statements.
  The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles for nongovernmental entities. SFAS 162 is
effective for interim and annual periods ending after September 15, 2009.The adoption of SFAS 162 is not anticipated to have an effect on
the Company’s consolidated financial statements.
  25
  Subsequent
Events
 
 In May
2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS
No. 165”). SFAS No. 165 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date; that is, whether that date represents the date the
financial statements were issued or were available to be issued. SFAS
No. 165 is effective for interim or annual financial periods ending after
June 15, 2009. The Company will adopt SFAS No. 165 in the first
quarter of fiscal 2010 and do not expect a material impact on its consolidated
financial statements upon adoption.
  Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies  (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends and
clarifies SFAS No. 141 (revised 2007),  Business
Combinations  (“SFAS No. 141(R)”) to address application issues
raised on initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. FSP FAS 141(R)-1 is effective on or after the
beginning of the first annual reporting on or after December 15, 2008. The
Company will apply FSP FAS 141(R)-1 to future acquisitions that close after
April 1, 2009.
  Recognition
and Presentation of Other-Than-Temporary Impairments
 
 In April
2009, the FASB issued FASB Staff Position Nos. FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments  (“FSP FAS 115-2 and FAS 124-2”). The objective of FSP FAS
115-2 and FAS 124-2 is to amend the other-than-temporary impairment guidance for
debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 is
effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company will adopt FSP FAS 115-2 and FAS 124-2 in the first quarter of
fiscal 2010 and does not expect a material impact on its consolidated financial
statements upon adoption.
  Interim
Disclosures about Fair Value of Financial Instruments
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 107-1 and Accounting
Principles Board (“APB”) No. 28-1, Interim Disclosures about Fair Value of
Financial Instruments  (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1
and APB 28-1 require disclosures about fair value of financial instruments in
interim reporting periods of publicly traded companies that were previously only
required to be disclosed in annual financial statements. FSP FAS 107-1 and APB
28-1 are effective for interim reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company will adopt FSP FAS 107-1 and APB 28-1 in the first quarter of
fiscal 2010. As FSP FAS 107-1 and APB 28-1 only amend the disclosure
requirements on fair value of financial instruments in interim periods, the
adoption of FSP FAS 107-1 and APB 28-1 will not affect its consolidated
financial statements.
  Accounting
for Transfers of financial Assets
 
 In
June 2009 the FASB issued SFAS 166, “Accounting for Transfers of financial
Assets — an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166
eliminates the concept of a qualifying special-purpose entity, creates more
stringent conditions for reporting a transfer of a portion of a financial asset
as a sale, clarifies other sale-accounting criteria, and changes the initial
measurement of a transferor’s interest in transferred financial assets. SFAS No.
166 is applicable for annual periods after November 15, 2009 and interim periods
therein and thereafter. The Company is currently assessing the impacts, if any,
on its consolidated financial statements.
  26
  Consolidation
of Variable Interest Entities
 
 In
June 2009 the FASB issued SFAS 167, “Amendments to FASB Interpretation
No. 46(R)” (“SFAS 167”).  SFAS 167 eliminates Interpretation 46(R)’s
exceptions to consolidating qualifying special-purpose entities, contains new
criteria for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary
of a variable interest entity. SFAS 167 also contains a new requirement that any
term, transaction, or arrangement that does not have a substantive effect on an
entity’s status as a variable interest entity, a company’s power over a variable
interest entity, or a company’s obligation to absorb losses or its right to
receive benefits of an entity must be disregarded in applying Interpretation
46(R)’s provisions. SFAS No. 167 is applicable for annual periods after November
15, 2009 and interim periods thereafter. The Company is currently assessing the
impacts, if any on the consolidated financial statements.
  In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (“FSP FAS 140-4 and FIN 46R-8”). FSP FAS 140-4 and
FIN 46R-8 require additional disclosures about transfers of financial assets and
involvement with variable interest entities. The requirements apply to
transferors, sponsors, servicers, primary beneficiaries and holders of
significant variable interests in a variable interest entity or qualifying
special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for financial
statements issued for reporting periods ending after December 15, 2008. FSP FAS
140-4 and FIN 46R-8 affect only disclosures and did not have a material impact
on the Company’s consolidated financial statements.
  Item
7A.  Quantitative
and Qualitative Disclosure about Market Risk
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
 
 Item 8.  Financial Statements and
Supplementary Data
 
 The
financial statements and supplementary data of Rand Logistics, Inc. required by
this Item are described in Item 15 of this Annual Report on Form 10-K and
are presented beginning on page F-1.
 
 Item 9.  Changes in and Disagreements with
Accountant on Accounting and Financial Disclosure
 
 None.
 
 Item 9A(T).  Controls and
Procedures
  Disclosure
Controls and Procedures
  As of
March 31, 2009 (the end of the period covered by this report), our
management carried out an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective.
  In
designing and evaluating our disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934), management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the desired
control objectives, as ours are designed to do, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We believe that our disclosure controls and
procedures provide such reasonable assurance.
  Management’sAnnual Report on Internal Control
Over Financial Reporting
  Our
senior management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) and Rule
15d-15(f) under the Securities Exchange Act of 1934), designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act.
  27
  Because
of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  Management
has evaluated the effectiveness of its internal control over financial reporting
as of March 31, 2009 based on the criteria set forth in a report entitledInternal Control—Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this evaluation, we have concluded that, as
of March 31, 2009, our internal control over financial reporting is effective
based on those criteria.
  Changes in Internal Control Over
Financial Reporting
 
 No change
occurred in our internal controls concerning financial reporting during the
fourth quarter ended March 31, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
 
 This
annual report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting of the Company. Our management report was not subject to attestation
by our registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management’s report in this annual
report.
 
 Item 9B.  Other
Information
 
 On June
23, 2009, Lower Lakes, Lower Lakes Transportation, Grand River and the other
Credit Parties thereto entered into a Second Amendment (the "Amendment"), to the
Amended and Restated Credit Agreement, dated as of February 13, 2008, with the
Lenders signatory thereto and General Electric Capital Corporation, as Agent.
Under the Amendment, the parties amended the definitions of "Fixed Charge
Coverage Ratio", “Fixed Charges”, “Funded Debt” and “Working Capital”, modified
the maximum amounts outstanding under the Canadian and US Revolving Credit
Facilities and modified the Minimum Fixed Charge Coverage Ratio and the Maximum
Senior Funded Debt to EBITDA Ratio. A copy of the Amendment is attached hereto
as Exhibit 10.37 and is incorporated by reference herein.
 
 
 PART III
 
 Item 10.  Directors, Executive Officers and
Corporate Governance of the Registrant
 
 Information
with respect to this item is incorporated by reference from our definitive Proxy
Statement to be filed with the SEC not later than 120 days after the end of
our fiscal year.
 
 Item 11.  Executive
Compensation
 
 Information
with respect to this item is incorporated by reference from our definitive Proxy
Statement to be filed with the SEC not later than 120 days after the end of
our fiscal year.
 
 Item 12.  Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
 
 Equity
Compensation Plan Information
 
 The
following table provides certain information, as of June 25, 2009, about our
common stock that may be issued upon the exercise of options, warrants and
rights, as well as the issuance of restricted shares granted to employees,
consultants or members of our Board of Directors, under our existing equity
compensation plan, the Rand Logistics, Inc. 2007 Long-Term Incentive
Plan.
 
 28
 
 Plan
      Category
                Number
      of Securities to
                  be
      Issued Upon Exercise
                  of
      Outstanding Options,
                  Warrants
      and Rights
                
                Weighted-Average
                  Exercise
      Price of
                  Outstanding
      Options,
                  Warrants
      and Rights
                
                Number
      of Securities
                  Remaining
      Available
                  for
      Future Issuance
                  Under
      Equity
                  Compensation
      PlanEquity
      compensation plans approved by security holders
                479,785
                
                $5.66
                
                1,526,035Equity
      compensation plans not approved by security holders
                —
                
                —
                
                —Total
                479,785
                
                $5.66
                
                1,526,035
 
 Item 13.  Certain Relationships and Related
Transactions, and Director Independence
 
 Information
with respect to this item is incorporated by reference from our definitive Proxy
Statement to be filed with the SEC not later than 120 days after the end of
our fiscal year.
  Item 14.  Principal Accountant Fees and
Services
 
 Information
with respect to this item is incorporated by reference from our definitive Proxy
Statement to be filed with the SEC not later than 120 days after the end of
our fiscal year.
 
 PART IV
 
 Item 15.  Exhibits and Financial Statement
Schedules
 
 (a)
                1.
                The
      financial statements at page F-1 are filed as a part of this Annual
      Report on Form 10-K.2.
                Financial
      statement schedules are omitted because they are not applicable or the
      required information is shown in the financial statements or notes
      thereto.3.
                Exhibits
      included or incorporated herein:See
      Exhibit Index below.
  29
  EXHIBIT INDEX
 
 ExhibitNo.
                Description2.1
                Stock
      Purchase Agreement, dated as of September 2, 2005, among Rand Acquisition
      Corporation, LL Acquisition Corp. and the stockholders of Lower Lakes
      Towing Ltd. (Omitted: Appendices-Seller Disclosure Schedule and Purchase
      Seller Disclosure Schedule; Exhibits - 1) Allocation among Sellers, 2)
      Employment Agreement, 3) Escrow Agreement, 4) Release, 5) Opinion of
      Sellers' Counsel, 6) Opinion of Rand's and Purchaser's Counsel, 7) Section
      116 Escrow Agreement, 8) Company Indebtedness, 9) Seller's Addresses, 10)
      Working Capital Statement, 11) Management Bonus Program, 12) Sellers
      Several Liability Allocation, 13) Financing Commitments (filed
      separately), 14) Bonus Program Participant Agreement and 15) Redemption
      Agreement). (1)2.2
                Amendment
      to Stock Purchase Agreement, dated December 29, 2005.
  (2)2.3
                Amendment
      to Stock Purchase Agreement, dated January 27, 2006.
(3)2.4
                Amendment
      to Stock Purchase Agreement, dated February 27, 2006.
  (4)3.1
                Amended
      and Restated Certificate of Incorporation, filed with the Secretary of
      State of the State of Delaware on March 3, 2006. (6)3.2
                Amended
      and Restated Certificate of Designations, filed with the Secretary of
      State of the State of Delaware on August 8, 2006. (8)3.3
                Second
      Amended and Restated By-laws. (15)4.1
                Specimen
      Unit Certificate. (5)4.2
                Specimen
      Common Stock Certificate. (5)4.3
                Specimen
      Warrant Certificate. (5)4.4
                Form
      of Unit Purchase Option granted to EarlyBirdCapital, Inc.
    (5)4.5
                Form
      of Warrant Agreement between Continental Stock Transfer & Trust
      Company and the Registrant. (5)10.1
                Registration
      Rights Agreement among the Registrant and the Founders.
  (5)10.2
                Form
      of Warrant Purchase Agreements among each of Laurence S. Levy, Isaac Kier
      and Sandeep D. Alva and EarlyBirdCapital, Inc. (5)10.3
                Preferred
      Stock Purchase Agreement, dated September 2, 2005, by and between Knott
      Partners LP, Matterhorn Offshore Fund Ltd., Anno LP, Good Steward Fund
      Ltd., Bay II Resources Partners, Bay Resource Partners L.P., Bay Resource
      Partners Offshore Fund Ltd., Thomas E. Claugus and Rand Acquisition
      Corporation. (1)10.4
                Employment
      Agreement, dated March 3, 2006, between Scott Bravener and Lower Lakes
      Towing Ltd. (6)10.5
                Employment
      Agreement, dated March 3, 2006, between James Siddall and Lower Lakes
      Towing Ltd. (6)10.6
                Management
      Bonus Plan, dated March 3, 2006. (6)10.7
                Stock
      Purchase Agreement, dated July 20, 2006, by and among Rand Logistics, Inc.
      and Islandia L.P., Knott Partners L.P., Matterhorn Offshore Fund Ltd.,
      CommonFund Hedged Equity Company, Shoshone Partners, LP, Finderne, LLC,
      Good Steward Trading Company SPC, Mulsanne LP, The Hummingbird Value Fund
      LP, The Hummingbird Microcap Value Fund LP, Terrier Partners L.P.,
      Performance Partners, LP, Performance Partners, Ltd., WTC-CIF Micro Cap
      Equity Portfolio, WTC-CTF Micro Cap Equity Portfolio, WTC-CIF Global
      Infrastructure Portfolio, Ratheon Master Pension Trust, Clariden-LUX
      Infrastructure Fund, Wynnefield Partners Small Cap Value, LP, Wynnefield
      Partners Small Cap Value, LP I, and Wynnefield Small Cap Value Offshore
      Fund, Ltd. (7)10.8
                Time
      Charter Agreement, dated as of August 1, 2006, between Lower Lakes
      Transportation Company and Wisconsin & Michigan Steamship Company.
      (7)10.9
                Guaranty,
      dated as of August 1, 2006, by Rand Logistics, Inc. in favor of Wisconsin
      & Michigan Steamship Company. (7)10.10
                Time
      Charter Guaranty, dated as of August 1, 2006, by Rand LL Holdings Corp. in
      favor of Wisconsin & Michigan Steamship Company.
(7)10.11
                Senior
      Subordinated Note Purchase Agreement, dated August 1, 2006, by and among
      Wisconsin & Michigan Steamship Company, Rand Finance Corp. and Oglebay
      Norton Marine Services Company, LLC.(7)10.12
                Award
      Agreement, dated October 11, 2006, between Rand Logistics, Inc. and Edward
      Levy. (9)10.13
                Award
      Agreement, dated October 11, 2006, between Rand Logistics, Inc. and Edward
      Levy. (9)
  30
  10.14
                Award
      Agreement, dated October 11, 2006, between Rand Logistics, Inc. and
      Laurence S. Levy. (9)10.15
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and Scott
      F. Bravener. (9)10.16
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and Joseph
      W. McHugh, Jr. (9)10.17
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and James
      W. Siddall. (9)10.18
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and
      Jeffrey P. Botham. (9)10.19
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and Isaac
      Kier. (9)10.20
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and
      Jonathan Brodie. (9)10.21
                Award
      Agreement, dated October 18, 2006, between Rand Logistics, Inc. and H.
      Cabot Lodge III. (9)10.22
                Restricted
      Share Award Agreement, dated January 17, 2007 between Rand Logistics, Inc.
      and Laurence S. Levy. (10)10.23
                Restricted
      Share Award Agreement, dated January 17, 2007 between Rand Logistics, Inc.
      and Edward Levy. (10)10.24
                Vessel
      Sale Agreement, dated as of March 23, 2007, between Grand River Navigation
      Company, Inc. and Lake Service Shipping Co. (11)10.25
                Warrant
      Exercise Agreement, dated April 30, 2007, among Rand Logistics, Inc. and
      Knott Partners, LP, Knott Partners Offshore Master Fund, LP, CommonFund
      Hedged Equity Company, Shoshone Partners, LP, Finderne, LLC, Good Steward
      Trading Company SPC, and Leonard & Margaret Frierman.
    (12)10.26
                First
      Amendment Agreement to Time Charter Guaranty, dated as of June 27, 2007,
      between Rand LL Holdings Corp. and Wisconsin & Michigan Steamship
      Company. (13)10.27
                Rand
      Logistics, Inc. 2007 Long-Term Incentive Plan, dated July 26, 2007.
      (17)10.28
                Crew
      Manning Agreement, dated August 27, 2007, between Lower Lakes Towing Ltd.
      and Voyageur Marine Transport Ltd. (14)10.29
                Contract
      of Affreightment, dated August 27, 2007, between Voyageur Marine Transport
      Ltd., Voyageur Maritime Trading Inc. and Lower Lakes Towing Ltd.
      (14)10.30
                Option
      Agreement, dated August 27, 2007, between Lower Lakes Towing Ltd. and
      Voyageur Maritime Trading Inc. (14)10.31
                Memorandum
      of Agreement, dated August 27, 2007, between Voyageur Marine Transport
      Ltd., Voyageur Pioneer Marine Inc. and Lower Lakes Towing Ltd.
      (14)10.32
                Guarantee,
      dated August 27, 2007, between Lower Lakes Towing Ltd. And GE Canada
      Finance Holding Company. (14)10.33
                Letter
      of Credit Agreement, dated August 27, 2007, between Lower Lakes Towing
      Ltd. and Heddle Marine Service Inc. (14)10.34
                Vessel
      Purchase Agreement, dated as of February 13, 2008 among Wisconsin &
      Michigan Steamship Company and Grand River Navigation Company, Inc and
      Rand LL Holdings Corp. (16)10.35
                Amended
      and Restated Credit Agreement, dated as of February 13, 2008, among Lower
      Lakes Towing Ltd., Lower Lakes Transportation Company, Grand River
      Navigation Company, Inc., the other credit parties signatory thereto,
      General Electric Capital Corporation, as Agent, National City Bank, as a
      Lender and as Co-Syndication Agent and the other Lenders signatory thereto
      from time to time. (16)10.36
                First
      Amendment to Amended and Restated Credit Agreement, dated as of June 24,
      2008, by and among Lower Lakes Towing Ltd., Lower Lakes Transportation
      Company, Grand River Navigation Company, Inc., the other Credit Parties
      signatory thereto, the other Lenders signatory thereto and General
      Electric Capital Corporation, as Agent. (18)10.37
                Second
      Amendment to Amended and Restated Credit Agreement, dated as of June 23,
      2009, by and among Lower Lakes Towing Ltd., Lower Lakes Transportation
      Company, Grand River Navigation Company, Inc., the other Credit Parties
      signatory thereto, the other Lenders signatory thereto and General
      Electric Capital Corporation, as Agent. (19)21
                Subsidiaries
      of Rand. (19)23
                Consent
      of Grant Thornton LLP, independent chartered registered chartered
      accounting firm. (19)31.1
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002. (19)31.2
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002. (19)32.1
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002. (19)32.2
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002. (19)
   31
 __________
 
 (1)
                Incorporated
      by reference to the Registrant's Amended Quarterly Report on Form
      10-QSB/A, filed with the Securities and Exchange Commission on January 20,
      2006.(2)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on January 3,
  2006.(3)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on January 31,
  2006.(4)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on March 1,
2006.(5)
                Incorporated
      by reference to the Registrant's Registration Statement on Form S-1 (SEC
      File No. 333-117051).(6)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on March 9,
2006.(7)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on August 2,
  2006.(8)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on August 10,
  2006.(9)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on October 19,
  2006.(10)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on January 18,
  2007.(11)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on March 26,
  2007.(12)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K/A, filed with
      the Securities and Exchange Commission on May 10, 2007.(13)
                Incorporated
      by reference to the Registrant's Annual Report on Form 10-KSB, filed with
      the Securities and Exchange Commission on June 29,
2007.(14)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on August 31,
  2007.(15)
                Incorporated
      by reference to the Registrant's Current Report on Form 8-K, filed with
      the Securities and Exchange Commission on December 17,
    2007.(16)
                Incorporated
      by reference to the Registrant's Quarterly Report on Form 10-QSB, filed
      with the Securities and Exchange Commission on February 14,
      2007.(17)
                Incorporated
      by reference to the Registrant’s Proxy Statement for the Annual Meeting of
      Stockholders held on September 11, 2007, filed with the Securities and
      Exchange Commission on July 30, 2007.(18)
                Incorporated
      by reference to the Registrant’s Annual Report on Form 10-K, filed with
      the Securities and Exchange Commission on June 28,
2008.(19)
                Filed
      herewith.
  32
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) 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.
  RAND
      LOGISTICS, INC.By:
                  /s/
      Laurence S. LevyLaurence
      S. LevyChairman
      of the Board and Chief Executive Officer
 Date:
June 25, 2009
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons, on behalf of the Registrant, and in the
capacities and on the dates indicated.
 
 Signature
                
                Title
                Date/s/
      Laurence S. Levy
                
                Chairman
      of the Board and
                June
      25, 2009Laurence
      S. Levy
                
                Chief
      Executive Officer(Principal
      Executive Officer)/s/
      Edward Levy
                
                President
                June
      25, 2009Edward
      Levy/s/
      Joseph W. McHugh, Jr.
                
                Vice
      President
                June
      25, 2009Joseph
      W. McHugh, Jr.
                
                and
      Chief Financial Officer(Principal
      Financial and Accounting Officer)/s/
      Isaac Kier
                
                Director
                June
      25, 2009Isaac
      Kier/s/
      Scott Bravener
                
                Director
                June
      25, 2009Scott
      Bravener/s/
      H. Cabot Lodge, III
                
                Director
                June
      25, 2009H.
      Cabot Lodge, III/s/
      Jonathan Brodie
                
                Director
                June
      25, 2009Jonathan
      Brodie/s/
      Michael D. Lundin
                
                Director
                June
      25, 2009Michael
      D. Lundin
    33
 REPORT
OF INDEPENDENT REGISTERED CHARTERED ACCOUNTING FIRM
  Board of
Directors and
 Shareholders
of Rand Logistics, Inc.
  We have
audited the accompanying consolidated balance sheets of Rand Logistics, Inc. (a
Delaware corporation) and its subsidiaries as of March 31, 2009 and March 31,
2008, and the related consolidated statements of operations, stockholders'
equity and other comprehensive income (loss), and cash flows for the years ended
March 31, 2009 and March 31, 2008.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting.  Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Rand Logistics, Inc. and its
subsidiaries as of March 31, 2009 and March 31, 2008, and the results of its
operations and its cash flows for the years ended March 31, 2009 and March 31,
2008 in conformity with accounting principles generally accepted in the United
States of America.
  /s/
Grant Thornton LLP
 Hamilton,
Canada
 June 23, 2009
 
 
 F-1
 RAND
LOGISTICS, INC.
 Consolidated
Balance Sheets
 (U.S. Dollars 000’s except for Shares and Per Share
data )
   March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008ASSETSCURRENTCash
      and cash equivalents
                  
                  $
                  1,953
                  
                  
                  $
                  5,626Accounts
      receivable (Note 4)
                  
                  
                  1,166
                  
                  
                  
                  3,468Prepaid
      expenses and other current assets (Note 5)
                  
                  
                  3,008
                  
                  
                  
                  3,122Income
      taxes receivable
                  
                  
                  22
                  
                  
                  
                  193Deferred
      income taxes (Note 6)
                  
                  
                  418
                  
                  
                  
                  1,355Total
      current assets
                  
                  
                  6,567
                  
                  
                  
                  13,764PROPERTY
      AND EQUIPMENT, NET (Note 7)
                  
                  
                  86,233
                  
                  
                  
                  96,349DEFERRED
      INCOME TAXES (Note 6)
                  
                  
                  12,140
                  
                  
                  
                  20,318DEFERRED
      DRYDOCK COSTS, NET (Note 8)
                  
                  
                  7,274
                  
                  
                  
                  9,082INTANGIBLE
      ASSETS, NET (Note 9)
                  
                  
                  13,497
                  
                  
                  
                  17,979GOODWILL
      (Note 9)
                  
                  
                  10,193
                  
                  
                  
                  10,193Total
      assets
                  
                  $
                  135,904
                  
                  
                  $
                  167,685LIABILITIESCURRENTBank
      indebtedness (Note 11)
                  
                  $
                  2,786
                  
                  
                  $
                  269Accounts
      payable
                  
                  
                  4,131
                  
                  
                  
                  14,985Accrued
      liabilities (Note 12)
                  
                  
                  11,087
                  
                  
                  
                  7,243Acquired
      Management Bonus Program (Note 22)
                  
                  
                  -
                  
                  
                  
                  3,000Interest
      rate swap contracts (Note 20)
                  
                  
                  3,899
                  
                  
                  
                  1,274Income
      taxes payable
                  
                  
                  -
                  
                  
                  
                  422Deferred
      income taxes (Note 6)
                  
                  
                  480
                  
                  
                  
                  1,508Current
      portion of long-term debt  (Note 13)
                  
                  
                  4,094
                  
                  
                  
                  3,521Total
      current liabilities
                  
                  
                  26,477
                  
                  
                  
                  32,222LONG-TERM
      DEBT  (Note 13)
                  
                  
                  54,240
                  
                  
                  
                  66,896OTHER
      LIABILITIES
                  
                  
                  232
                  
                  
                  
                  -DEFERRED
      INCOME TAXES (Note 6)
                  
                  
                  13,185
                  
                  
                  
                  14,703Total
      liabilities
                  
                  
                  94,134
                  
                  
                  
                  113,821COMMITMENTS
      AND CONTINGENCIES (Notes 14 and 15)STOCKHOLDERS'
      EQUITYPreferred
      stock, $.0001 par valueAuthorized
      1,000,000 shares, Issued and outstanding 300,000 shares (Note
      16)
                  
                  
                  14,900
                  
                  
                  
                  14,900Common
      stock, $.0001 par valueAuthorized
      50,000,000 shares, Issued and outstanding 12,890,927 shares (Note
      16)
                  
                  
                  1
                  
                  
                  
                  1Additional
      paid-in capital
                  
                  
                  61,675
                  
                  
                  
                  58,350Accumulated
      deficit
                  
                  
                  (29,228
                  )
                  
                  
                  (20,465
                  )Accumulated
      other comprehensive income (loss) (Note 26)
                  
                  
                  (5,578
                  )
                  
                  
                  1,078Total
      stockholders’ equity
                  
                  
                  41,770
                  
                  
                  
                  53,864Total
      liabilities and stockholders’ equity
                  
                  $
                  135,904
                  
                  
                  $
                  167,685
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 F-2
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Operations
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 Year
      ended
                  March
      31, 2009
                
                
                Year
      ended
                  March
      31, 2008REVENUEFreight
      and related revenue
                
                $
                85,832
                
                
                $
                70,985Fuel
      and other surcharges
                
                
                29,144
                
                
                
                14,269Outside
      voyage charter revenue
                
                
                19,210
                
                
                
                9,515TOTAL
      REVENUE
                
                
                134,186
                
                
                
                94,769EXPENSESOutside
      voyage charter fees (Note 17)
                
                
                17,665
                
                
                
                9,436Vessel
      operating expenses
                
                
                81,346
                
                
                
                69,117Repairs
      and maintenance
                
                
                5,162
                
                
                
                3,844General
      and administrative
                
                
                10,144
                
                
                
                10,678Depreciation
                
                
                6,803
                
                
                
                6,428Amortization
      of drydock costs
                
                
                2,141
                
                
                
                1,476Amortization
      of intangibles
                
                
                1,659
                
                
                
                1,912Amortization
      of chartering agreement costs
                
                
                -
                
                
                
                337Gain
      on sale of vessels by variable interest entity
                
                
                -
                
                
                
                (667
                )Loss
      on retirement of owned vessel
                
                
                -
                
                
                
                1,735Gain
      on foreign exchange
                
                
                (9
                )
                
                
                (163
                )124,911
                
                
                
                104,133OPERATING
      INCOME (LOSS)
                
                
                9,275
                
                
                
                (9,364
                )OTHER
      INCOME AND EXPENSESInterest
      expense (Note 18)
                
                
                6,368
                
                
                
                4,883Interest
      income
                
                
                (45
                )
                
                
                (235
                )Loss
      on interest rate swap contracts (Note 20)
                
                
                2,811
                
                
                
                1,338Write
      off of deferred financing cost on refinanced indebtedness
                
                
                -
                
                
                
                753Loss
      on deconsolidation of VIE (Note 23)
                
                
                -
                
                
                
                3029,134
                
                
                
                7,041INCOME
      (LOSS) BEFORE INCOME TAXES
                
                
                141
                
                
                
                (16,405
                )PROVISION
      (RECOVERY) FOR INCOME TAXES (Note 6)Current
                
                
                (141
                )
                
                
                372Deferred
                
                
                7,456
                
                
                
                (5,360
                )7,315
                
                
                
                (4,988
                )NET
      LOSS BEFORE MINORITY INTEREST
                
                
                (7,174
                )
                
                
                (11,417
                )MINORITY
      INTEREST (Note 23)
                
                
                -
                
                
                
                (176
                )NET
      LOSS
                
                
                (7,174
                )
                
                
                (11,241
                )PREFERRED
      STOCK DIVIDENDS
                
                
                1,589
                
                
                
                1,295STOCK
      WARRANT INDUCEMENT DISCOUNT (Note 16)
                
                
                -
                
                
                
                1,982NET
      LOSS APPLICABLE TO COMMON STOCKHOLDERS
                
                $
                (
      8,763
                )
                
                $
                (
      14,518
                )Net
      loss per share basic and diluted (Note 21)
                
                $
                (0.70
                )
                
                $
                (1.28
                )Weighted
      average shares basic and diluted
                
                
                12,558,956
                
                
                
                11,355,068
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 F-3
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Stockholders’ Equity and Other Comprehensive Income (Loss)
 (U.S.
Dollars 000’sexcept for Shares
and Per Share data)
 
 Common
      Stock
                
                
                Preferred
      Stock
                
                
                Additional
      Paid-In
                
                
                Accumulated
                
                
                Minority
      Interest
                
                
                Other
      Comprehensive
                
                
                Comprehensive
                
                
                Total
      Stockholders'Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                VIE
                
                
                Income
      (Loss)
                
                
                Loss
                
                
                EquityBalances,
      March 31, 2007
                
                
                8,127,177
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                38,407
                
                
                $
                (5,947
                )
                
                $
                176
                
                
                $
                (1,073
                )
                
                $
                (3,039
                )
                
                $
                46,464Net
      loss before minority interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (11,417
                )
                
                
                -
                
                
                
                -
                
                
                
                (11,417
                )
                
                
                (11,417
                )Minority
      interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                176
                
                
                
                (176
                )
                
                
                -
                
                
                
                -
                
                
                
                -Preferred
      dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,295
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,295
                )Warrant  conversion,
                  net
      of stock warrant
                  inducement
      discount (Note 16)
                
                
                3,964,965
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                19,825
                
                
                
                (1,982
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                17,843Restricted
      stock issued (Note 16)
                
                
                12,909
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75Stock
      options issued (Note 16)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                43
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                43Translation
      adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,151
                
                
                
                2,151
                
                
                
                2,151Balances,
      March 31, 2008
                
                
                12,105,051
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                58,350
                
                
                $
                (20,465
                )
                
                $
                -
                
                
                $
                1,078
                
                
                $
                (9,266
                )
                
                $
                53,864Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (7,174
                )
                
                
                -
                
                
                
                -
                
                
                
                (7,174
                )
                
                
                (7,174
                )Preferred
      dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,589
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,589
                )Unrestricted
      shares issued under
                  management
      bonus program
                  (Note
      22)
                
                
                478,232
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,645
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,645Warrant  conversion,
      net of expenses
                  (Note
      16)
                
                
                291,696
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                157
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                157Warrant
      extinguishment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9
                )Unrestricted
      stock issued (Note 16)
                
                
                15,948
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75Stock
      options issued (Note 16)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                457
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                457Translation
      adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (6,656
                )
                
                
                (6,656
                )
                
                
                (6,656
                )Balances,
      March 31, 2009
                
                
                12,890,927
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                61,675
                
                
                $
                (29,228
                )
                
                $
                -
                
                
                $
                (5,578
                )
                
                $
                (13,830
                )
                
                $
                41,770
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 F-4
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Cash Flows
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Year
      endedMarch
      31, 2009
                
                
                Year
      ended
                  March
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (7,174
                )
                
                $
                (11,417
                )Adjustments
      to reconcile net loss to net cash providedby
      operating activitiesDepreciation and amortization of drydock
      costs
                
                
                8,944
                
                
                
                7,904Amortization
      of intangibles, chartering agreement costs and deferred financing
      costs
                
                
                2,050
                
                
                
                2,666Deferred
      income taxes
                
                
                7,456
                
                
                
                (5,239
                )Loss
      on interest rate swap contracts
                
                
                2,811
                
                
                
                1,338Write
      off of deferred financing cost on refinanced indebtedness
                
                
                -
                
                
                
                753Loss
      on deconsolidation of VIE
                
                
                -
                
                
                
                302Equity
      compensation
                
                
                893
                
                
                
                480Gain
      on sale of vessels by VIE
                
                
                -
                
                
                
                (667
                )Loss
      on retirement of owned  vessel
                
                
                -
                
                
                
                1,688Deferred
      drydock costs paid
                
                
                (1,400
                )
                
                
                (4,415
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                2,302
                
                
                
                (1,487
                )Prepaid
      expenses and other current assets
                
                
                114
                
                
                
                (32
                )Accounts
      payable and accrued liabilities
                
                
                (10,219
                )
                
                
                8,642Other
      liabilities
                
                
                232
                
                
                
                -Income
      taxes payable
                
                
                (251
                )
                
                
                2505,758
                
                
                
                766CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                
                
                (9,045
                )
                
                
                (17,321
                )Sale
      proceeds of retired vessel
                
                
                250
                
                
                
                -Acquisition
      of business
                
                
                -
                
                
                
                (24,520
                )(8,795
                )
                
                
                (41,841
                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of warrants, net of expenses
                
                
                157
                
                
                
                17,843Warrant
      extinguishment
                
                
                (9
                )
                
                
                -Proceeds
      from long-term debt
                
                
                -
                
                
                
                88,841Long-term
      debt repayment
                
                
                (3,215
                )
                
                
                (43,372
                )Long-term
      debt repayment by VIE
                
                
                -
                
                
                
                (16,489
                )Proceeds
      of blocked account
                
                
                -
                
                
                
                2,700Debt
      financing costs
                
                
                -
                
                
                
                (2,519
                )Proceeds
      from bank indebtedness
                
                
                21,878
                
                
                
                4,284Repayment
      of bank indebtedness
                
                
                (17,798
                )
                
                
                (9,866
                )1,013
                
                
                
                41,422EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
                
                
                (1,649
                )
                
                
                (50
                )MINORITY
      INTEREST
                
                
                -
                
                
                
                294NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (3,673
                )
                
                
                591CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                5,626
                
                
                
                7,207ELIMINATION
      OF VIE CASH BALANCE ON DECONSOLIDATION
                
                
                -
                
                
                
                (2,172
                )CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
                
                $
                1,953
                
                
                $
                5,626SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayments
      for interest
                
                $
                6,003
                
                
                $
                4,038Payment
      of income taxes
                
                $
                -
                
                
                $
                132Unpaid
      purchase of property and equipment
                
                $
                905
                
                
                $
                -Shares
      issued under management bonus program
                
                $
                2,645
                
                
                $
                -
 
 The
accompanying notes are an integral part of these consolidated financial
statements
 F-5
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 
 
 1. DESCRIPTION
OF BUSINESS
  Rand
Logistics, Inc. (the “Company”) is a shipping company engaged in the operation
of bulk carriers on the Great Lakes. Rand Acquisition Corporation was
incorporated in Delaware on June 2, 2004 as a blank check company whose
objective was to acquire an operating business. On March 3, 2006, the Company,
through its wholly-owned subsidiary, LL Acquisition Corp., acquired all of the
outstanding shares of capital stock of Lower Lakes Towing Ltd. from the
shareholders of Lower Lakes, in accordance with the terms of the Stock Purchase
Agreement, dated September 2, 2005, by and among the Company, LL Acquisition
Corp. and the stockholders of Lower Lakes, as amended. Immediately following
completion of the acquisition, and in conjunction therewith, LL Acquisition
Corp. and Lower Lakes were amalgamated under Canadian law and the shares of
capital stock of Grand River Navigation Company, Inc. and Lower Lakes
Transportation Company owned by Lower Lakes Towing Ltd. at the time of the
amalgamation were transferred to the Company’s wholly-owned subsidiary, Rand LL
Holdings Corp. Upon completion of such transfer, the outstanding shares of Grand
River not owned by Rand LL Holdings Corp. were redeemed in accordance with the
terms of the Redemption Agreement, dated September 2, 2005, between Grand River
and GR Holdings, Inc. Following completion of the foregoing transactions, as of
March 3, 2006, each of Lower Lakes, Grand River and Lower Lakes Transportation
became indirect, wholly-owned subsidiaries of the Company. In conjunction with
the foregoing transactions, as of March 3, 2006, the Company, formerly known as
Rand Acquisition Corporation, changed its name to Rand Logistics,
Inc.
 
 2.        
SIGNIFICANT ACCOUNTING
POLICIES
 
 Basis
      of presentation and consolidation
 
 The
      consolidated financial statements are prepared in accordance with
      accounting principles generally accepted in the United States of America
      and include the accounts of Rand Finance Corp. and Rand LL Holdings Corp.,
      100% subsidiaries of the Company, and the accounts of Lower Lakes Towing
      Ltd., Lower Lakes Transportation Company Limited and Grand River
      Navigation Company, Inc., each of which is a 100% subsidiary of Rand LL
      Holdings Corp. and Wisconsin & Michigan Steamship Company (“WMS”), a
      variable interest entity (“VIE”) as discussed in Note 23, through February
      13, 2008. On February 28, 2007 Port Dover Steamship Company Limited, a
      100% wholly owned subsidiary of Lower Lakes Towing Ltd. was amalgamated
      under Canadian law with Lower Lakes Towing Ltd. and the amalgamated Lower
      Lakes Towing Ltd. is a 100% subsidiary of Rand LL Holdings
      Corp.
 
 The
consolidated financial statements include the accounts of the Company and all of
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. The assets of the acquired subsidiaries and
businesses have been adjusted to fair values as of the date of acquisition and
goodwill has been recognized for the difference between the purchase price and
fair value of the assets for the acquired subsidiaries and
businesses.
 
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
 
  Accounts
receivable and concentration of credit risk
  The
majority of the Company’s accounts receivable are amounts due from customers
with other accounts receivable including insurance and Goods and Service Tax
refunds accounting for the balance.  The majority of accounts
receivable are due within 30 to 60 days and are stated at amounts due from
customers net of an allowance for doubtful accounts. The Company extends credit
to its customers based upon its assessment of their credit worthiness and past
payment history. Accounts outstanding longer than the contractual payment terms
are considered past due.  The Company has an allowance for doubtful
accounts of $146 as of March 31, 2009 and $50 as of March 31,
2008.  The company has historically had no significant bad debts.
Interest is not accrued on outstanding receivables.
 
 
 F-6
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 2. SIGNIFICANT
ACCOUNTING POLICIES (continued)
 
 Revenue
and operating expenses recognition
 
 The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis based on
origin-destination and cargo carried. In accordance with Emerging Issues Task
Force (“EITF”) Issue No. 91-09, “Revenue and Expense Recognition for
Freight Services in Progress” Method 5, voyage revenue is recognized
ratably over the duration of a voyage based on the relative transit time in each
reporting period, when the following conditions are met: the Company has a
signed contract of affreightment, the contract price is fixed or determinable
and collection is reasonably assured.  Included in freight billings
are other fees such as fuel surcharges and other freight surcharges, which
represent pass-through charges to customers for toll fees, lockage fees and ice
breaking fees paid to other parties.  Fuel surcharges are recognized
ratably over the duration of the voyage, while freight surcharges are recognized
when the associated costs are incurred. Freight surcharges are less than 5% of
total revenue.
 
 Marine
operating expenses such as crewing costs, fuel, tugs and insurance are
recognized as incurred or consumed and thereby is recognized ratably in each
reporting period. Repairs and maintenance and other insignificant costs are
recognized as incurred.
 
 The
Company subcontracts excess customer demand to other freight
providers.  Service to customers under such arrangements is
transparent to the customer and no additional services are being provided to
customers.  Consequently, revenues recognized for customers serviced
by freight subcontractors are recognized on the same basis as described
above.  Costs for subcontracted freight providers, presented as
“outside voyage charter fees” on the statement of operation are recognized as
incurred and thereby is recognized ratably over the voyage.
 
 In
addition, all revenues are presented on a gross basis in accordance with the
guidance in Emerging Issues Task Force 99-19 (EITF 99-19), “Reporting Revenue
Gross as a Principal versus Net as an Agent.”
 
 Fuel
and lubricant inventories
 
 Raw
materials, fuel, and operating supplies, are accounted for on a first-in,
first-out cost method (based on monthly averages). Raw materials and fuel are
stated at the lower of actual cost (first-in, first-out method) or market.
Operating supplies are stated at actual cost or average cost.
  Intangible
assets and goodwill
 
 The
Company adopted Statements of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations" (“SFAS 141”) and SFAS No. 142, "Goodwill and other
Intangible Assets” (“SFAS 142”). SFAS No. 141 requires all business combinations
to be accounted for using the purchase method of accounting and that certain
intangible assets acquired in a business combination must be recognized as
assets separate from goodwill. SFAS No. 142 provides that intangible assets with
indefinite lives and goodwill will not be amortized but will be tested at least
annually for impairment and whenever events or changes in circumstances indicate
that the carrying value of the asset may not be recovered. As required by FAS
142, our impairment tests for goodwill and other indefinite-lived intangible
assets compare the estimated fair value of goodwill and other intangible assets
to the carrying value.
 
 Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. Chartering
agreement costs were primarily legal costs of establishing the time chartering
agreements with the VIE, including loan and guaranty documentation. These costs
were amortized over the term of the time chartering agreement, and related debt.
Other intangibles are amortized as follows:
  Trademarks
      and trade names
                10
      years straight-lineNon-competition
      agreements
                4
      years straight-lineCustomer
      relationships and contracts
                15
      years straight-line
  
 
 
 
 
 F-7
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 2.        
SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Property
and equipment
 
 Property
      and equipment are recorded at cost.  Depreciationmethods for
      capital assets are as follows:
  Vessels
                  4 -
      25 years straight-lineLeasehold
      improvements
                  7 -
      11 years straight-lineVehicles
                  20%
      declining-balance Furniture
      and equipment
                    20%
      declining-balanceComputer
      equipment
                    45%
      declining-balanceCommunication
      equipment
                    20%
      declining-balance
  Impairment
of Fixed Assets and Intangible Assets with Finite Lives
 
 Unlike
goodwill and indefinite-lived intangible assets, the accounting rules do not
provide for an annual impairment test in determining whether fixed assets (e.g.,
property, plant, and equipment) and finite-lived intangible assets (e.g.,
customer lists) are impaired. Instead, they require that a triggering event
occur before testing an asset for impairment. Examples of such triggering events
include a significant disposal of a portion of such assets, an adverse change in
the market involving the business employing the related asset, a significant
decrease in the benefits realized from an acquired business, difficulties or
delays in integrating the business, and a significant change in the operations
of an acquired business.
 
 Once a
triggering event has occurred, the impairment test employed is based on whether
the intent is to hold the asset for continued use or to hold the asset for sale.
If the intent is to hold the asset for continued use, the impairment test
involves a comparison of undiscounted cash flows against the carrying value of
the asset as an initial test. If the carrying value of such asset exceeds the
undiscounted cash flow, the asset would be deemed to be impaired. Impairment
would then be measured as the difference between the fair value of the fixed or
amortizing intangible asset and the carrying value to determine the amount of
the impairment. The Company generally determines fair value by using the
discounted cash flow method. If the intent is to hold the asset for sale and
certain other criteria are met (i.e., the asset can be disposed of currently,
appropriate levels of authority have approved sale, and there is an actively
pursuing buyer), the impairment test is a comparison of the asset’s carrying
value to its fair value less costs to sell. To the extent that the carrying
value is greater than the asset’s fair value less costs to sell, an impairment
loss is recognized for the difference. Assets held for sale are separately
presented on the balance sheet and are no longer depreciated. All of the
Company’s
 assets
have been deemed to be held and used.
 
 Impairment
of Goodwill and Indefinite-Lived Intangible Assets
 
 The
Company annually reviews the carrying value of intangible assets not subject to
amortization, which is its goodwill, to determine whether impairment may exist.
FASB Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, requires that goodwill and certain intangible assets be
assessed annually for impairment using fair value measurement techniques.
Specifically, goodwill impairment is determined using a two-step process. The
first step of the goodwill impairment test is used to identify potential
impairment by comparing the fair value of a reporting unit with its carrying
amount, including goodwill. The estimates of fair value of the Company’s two
reporting units, which was the Company’s Canadian and US operations (excluding
the parent), are determined using various valuation techniques with the primary
techniques being a discounted cash flow analysis and peer analysis. A discounted
cash flow analysis requires one to make various judgmental assumptions including
assumptions about future cash flows, growth rates, and discount rates. The
assumptions about future cash flows and growth rates are based on the Company’s
budget and long-term estimates. Discount rate assumptions are based on an
assessment of the risk inherent in the respective reporting units. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value,
the second step of the goodwill impairment test is performed to measure the
amount of impairment loss, if any. The second step of the goodwill impairment
test compares the implied fair value of the reporting unit’s goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit’s
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair value of goodwill
is determined in the same manner as the amount of goodwill recognized in a
business combination. That is, the fair value of the reporting unit is allocated
to all of the assets and liabilities of that unit (including any unrecognized
intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the purchase price paid
to acquire the reporting unit.  The Company determined that the fair
value of its two reporting units exceeded their carrying amounts, such that
goodwill of the reporting units were considered not impaired and the second
steps of the impairment testing were not necessary.
 
 
 F-8
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 The
impairment test for other intangible assets not subject to amortization consists
of a comparison of the fair value of the intangible asset with its carrying
value. If the carrying value of the intangible asset exceeds its fair value, an
impairment loss is recognized in an amount equal to that excess. The estimates
of fair value of intangible assets not subject to amortization are determined
using various discounted cash flow valuation methodologies. Significant
assumptions are inherent in this process, including estimates of discount rates.
Discount rate assumptions are based on an assessment of the risk inherent in the
respective intangible assets. The Company presently has no intangible assets not
subject to amortization other than goodwill.
 
 Deferred
      charges
 
 Deferred
      charges include capitalized drydock expenditures and deferred financing
      costs.  Drydock costs incurred during statutory Canadian and
      United States certification processes are capitalized and amortized on a
      straight-line basis over the benefit period, which is 60 months. Drydock
      costs include costs of work performed by third party shipyards,
      subcontractors and other direct expenses to complete the mandatory
      certification process. Deferred financing costs are amortized on a
      straight-line basis over the term of the related debt, which approximates
      the effective interest method.
 
 Repairs
and maintenance
 
 The
Company’s vessels require repairs and maintenance each year to ensure the fleet
is operating efficiently during the shipping season.  The majority of
repairs and maintenance are completed in January, February and March of each
year when the vessels are inactive.  The Company expenses such routine
repairs and maintenance costs.  Significant repairs to the Company’s
vessels, whether owned or available to the Company under a time charter, such as
major engine overhauls and major hull steel repairs, are capitalized and
amortized over the remaining life of the asset repaired, or remaining lease
term, whether it is engine equipment, the vessel, or leasehold improvements to a
vessel leased under time charter agreement.
 
 Presentation
of Taxes Collected from Customers (Gross Versus Net)
 
 The
Company has adopted EITF Issue No. 06-3, “How Taxes Collected from Customers and
Remitted to Governmental Authorities Should be Presented in the Income Statement
(That is, Gross Versus Net Presentation).”  The Company accounts for
sales taxes imposed on its services on a net basis in the consolidated statement
of operations
 
 
 F-9
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Income taxes
 
 The
Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes”  (“SFAS 109”).  SFAS 109 requires the
determination of deferred tax assets and liabilities based on the differences
between the financial statement and income tax bases of tax assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.  A valuation allowance is
recognized, if necessary, to measure tax benefits to the extent that, based on
available evidence, it is more likely than not that they will be
realized.
 
 Accounting
for uncertainty in income taxes
 
 The
Company has adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”
(“FIN 48”) effective April 1, 2007. FIN 48 addresses the determination of how
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based
on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution. The impact of the Company’s reassessment of
its tax positions in accordance with FIN 48 did not have a material effect on
the results of operations, financial condition or liquidity.
 
 The
adoption of FIN 48 did not result in a cumulative effect adjustment to
accumulated deficit. At April 1, 2007, the Company had no unrecognized tax
benefits which, if recognized, would favorably affect the effective income tax
rate in future periods.
 
 Consistent
with its historical financial reporting, the Company has elected to classify
interest expense related to income tax liabilities, when applicable, as part of
the interest expense in its Consolidated Statements of Operations rather than
income tax expense. The Company will continue to classify income tax penalties
as part of selling, general and administrative expense in its Consolidated
Statements of Operations.  To date, the Company has not incurred
material interest expenses or penalties relating to assessed taxation
years.
 
 There
have been no recent examinations by the Internal Revenue Services. The Company's
primary state tax jurisdictions are Michigan, Ohio and New York and its only
international jurisdiction is Canada. The following table summarizes the open
tax years for each major jurisdiction:
 
 Jurisdiction
                Open Tax
      YearsFederal
      (USA)
                2005
      - 2008Michigan
                2005 -
      2008Ohio
                2005
      - 2008New
      York
                2005
      - 2008Federal
      (Canada)
                2003
      - 2008Ontario
                2003
      - 2008
 
 Foreign
currency translation
 
 The
Company uses the U.S. Dollar as its reporting currency.  The
functional currency of Lower Lakes Towing Ltd. is the Canadian
Dollar.  The functional currency of the Company’s U.S. subsidiaries is
the U.S. Dollar.  In accordance with Statement of Financial Accounting
Standards No. 52, “Foreign Currency Translation,” assets and liabilities
denominated in foreign currencies are translated into U.S. Dollars at the rate
of exchange at the balance sheet date, while revenue and expenses are translated
at the weighted average rates prevailing during the respective
periods.  Components of shareholders’ equity are translated at
historical rates.  Exchange gains and losses resulting from
translation are reflected in accumulated other comprehensive income or
loss.
 
 Advertising
costs
 
 The
Company expenses all advertising costs as incurred. These costs are included in
administration costs and were insignificant during the periods
presented.
 
 
 F-10
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 2.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
 
 Estimates
and measurement uncertainty
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period.  Significant estimates included
in the preparation of these financial statements include the assumptions used in
determining whether assets are impaired and the assumptions used in determining
the valuation allowance for deferred income tax assets.  Actual
results could differ from those estimates.
  Benefit
      plans
 
 The
      Company contributes to employee Registered Retirement Savings Plans in
      Canada and 401K plans in the United States.  Contributions are
      expensed in operating expenses when incurred.  The Company made
      contributions of $882 in 2009 and $751 in
2008.
 
 Stock-based
compensation
 
 The
Company has adopted SFAS No. 123(R), Share-Based Payment, using the modified
prospective method.  This method requires compensation cost to be
recognized beginning on the effective date based on the requirements of SFAS
123(R) for all share-based payments granted or modified after the effective
date.  Under this method, the Company recognizes compensation expense
for all newly granted awards and awards modified, repurchased or cancelled after
April 1, 2007. Compensation expense for the unvested portion of awards that were
outstanding at April 1, 2007 is recognized ratably over the remaining vesting
period based on the fair value at date of grant as calculated under the
Black-Scholes option pricing model.
 
 Interest
rate swap contracts
 
 The
Company accounts for its two interest rate swap contracts on its term debt
utilizing Statement of Financial Accounting Standards No. 133 (SFAS 133),
“Accounting for Derivative Instruments and Hedging Activities,” as amended. All
changes in the fair value of the swap contracts are recorded in earnings and the
fair value of settlement cost to terminate the contracts is included in current
liabilities on the Consolidated Balance Sheet.
  Variable
interest entities
 
 In 2006,
the Company implemented FASB Interpretation (“FIN”) 46R, which requires that the
Company consolidate certain entities on the basis other than through ownership
of a voting interest of the entity (see Note 23). Two VIE’s have been identified
and one has been consolidated in accordance with FIN 46R.Though the Voyageur group
of companies (see Note 10) is a variable interest entity for Rand, it does not
meet the criteria for consolidation and hence is not consolidated.
  On
February 13, 2008, the Company entered into an asset purchase agreement with WMS
(a VIE until that date) to buy the entire remaining assets of the VIE. Based on
this reconsideration event, the Company is no longer the primary beneficiary
under FIN 46R and is no longer required to consolidate WMS financial statements.
However, the statement of operations as of March 31, 2008 includes the results
of WMS, as it was a VIE at that time.
  
 F-11
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
  3.         RECENTLY ISSUED
PRONOUNCEMENTS
 
 Determination
of the Useful Life of Intangible Assets
 
 In April
2008, the FASB issued FASB Staff Position No. 142-3,Determination of the
Useful Life of Intangible Assets, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement
No. 142,“Goodwill and Other
Intangible Assets”. The intent of FASB Staff Position No. 142-3 is to
improve the consistency between the useful life of a recognized intangible asset
under FASB Statement No. 142 and the period of expected cash flows used to
measure the fair value of the asset under FASB Statement No. 141(R) and
other U.S. generally accepted accounting principles. FASB Staff Position No.
142-3 is effective for fiscal years beginning after December 15, 2008 and
interim periods within those fiscal years and early adoption is prohibited. The
Company will be required to adopt this standard for the fiscal year ending March
31, 2010. The Company is presently evaluating the impact of adopting this
standard on its consolidated financial statements.
 
 IFRS
 
 In
November of 2008, the SEC released a proposed roadmap regarding the potential
use by U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive
series of accounting standards published by the International Accounting
Standards Board (“IASB”). Under the proposed roadmap, the Company may be
required in fiscal 2015 to prepare financial statements in accordance with IFRS.
However, the SEC will make a determination in 2011 regarding the mandatory
adoption of IFRS. The Company is currently assessing the impact that this
potential change would have on its consolidated financial statements, and it
will continue to monitor the development of the potential implementation of
IFRS.
 
 Fair
value measurement
 
 In
September 2006, the FASB issued “SFAS” No. 157, Fair Value
Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
Specifically, this Statement sets forth a definition of fair value, and
establishes a hierarchy prioritizing the inputs to valuation techniques, giving
the highest priority to quoted prices in active markets for identical assets and
liabilities and the lowest priority to unobservable inputs. In
February 2008, the FASB issued FASB Staff Position FAS 157-2,
Effective Date of FASB Statement No. 157, which defers the implementation
for the non-recurring nonfinancial assets and liabilities from fiscal years
beginning after November 15, 2007 to fiscal years beginning after
November 15, 2008.  The disclosure requirements of SFAS No. 157
which took effect on January 1, 2008 are presented in Note 20. On
April 1, 2009, the Company will implement the previously-deferred
provisions of SFAS No. 157 for our nonfinancial assets and liabilities
which include goodwill and intangible assets. The Company does not anticipate
that the remaining provisions will have a material effect on the Company’s
consolidated financial position or results of operations when they become
effective.
 
 Statement
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and establishes a hierarchy that
categorizes and prioritizes the inputs to be used to estimate fair value. The
three levels of inputs used are as follows:
 Level 1 –
Quoted prices in active markets for identical assets or
liabilities.
 Level 2 –
Inputs other than Level 1 that are observable for the asset or liability, either
directly or indirectly, such as
 quoted
prices for similar assets and liabilities in active markets; quoted prices for
identical or similar assets or liabilities
 in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data by
 correlation
or other means.
 Level 3 –
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
  
 F-12
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 
 3.        
RECENTLY ISSUED PRONOUNCEMENTS
(continued)
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly  (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance
for estimating fair value in accordance with SFAS No. 157 when the volume
and level of activity for the asset or liability have decreased significantly.
FSP FAS 157-4 also provides guidance on identifying circumstances that indicate
a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual
reporting periods ending after June 15, 2009. The Company will adopt FSP
FAS 157-4 in the first quarter of fiscal 2010 and it does not expect a material
impact on its consolidated financial statements upon adoption.
 
 Fair value option for financial assets
and financial liabilities
 
 In
February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides all companies
the option to irrevocably elect to report recognized financial assets and
liabilities at fair value on a contract-by-contract basis. Effective as of the
beginning of the first fiscal year that begins after November 15, 2007, the
Company has the option of early adoption, provided the Company also elects to
apply the provisions of FASB Statement No. 157, “Fair Value Measurements”.
Statement 159 was effective for the Company on April 1, 2008. The Company
has selected the option not to measure eligible financial assets and liabilities
at fair value. Accordingly, the adoption of Statement 159 had no impact on the
Company’s consolidated financial statements.
 
 Non-controlling
interests in consolidated financial statements
 
 On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. SFAS 160 applies
to all fiscal years beginning on or after December 15, 2009. The Company will be
required to adopt this standard for the fiscal year ending March 31, 2010 and is
presently evaluating the impact of adopting this standard on its consolidated
financial statements.
 
 
 Business
Combinations
 
 On
December 4, 2007, the FASB also issued SFAS No. 141(R), “Business Combinations”.
This statement also applies to fiscal years beginning on or after December 15,
2009. The Company will be required to adopt this standard for the fiscal year
ending March 31, 2010. The Company is presently evaluating the impact of
adopting this standard on its consolidated financial statements.
 
 Derivative
Instruments and Hedging Activities
 
 In March 2008, the FASBissuedSFASNo.161, “Disclosures
about Derivative Instruments and Hedging Activities” (“FAS 161”).SFAS 161 amendsSFAS 133 to provide enhanced
disclosure requirements surrounding how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for underSFAS 133 and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows.SFAS 161 is effective for the
Company as of the beginning of Fiscal 2010, including interim periods
thereafter. The implementation ofSFAS 161 is not expected to have a
material impact on the Company’s consolidated financial
statements.
  
 The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (“GAAP”) for nongovernmental entities. SFAS 162 is effective for interim and annual periods ending after
September 15, 2009.The adoption of SFAS 162 is not
anticipated to have an effect on the Company’s consolidated financial
statements.
 
 F-13
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 3.        
RECENTLY ISSUED PRONOUNCEMENTS
(continued)
 
 
 Subsequent
Events
 
 In May
2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS
No. 165”). SFAS No. 165 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date, that is, whether that date represents the date the
financial statements were issued or were available to be issued. SFAS
No. 165 is effective for interim or annual financial periods ending after
June 15, 2009. The Company will adopt SFAS No. 165 in the first
quarter of fiscal 2010 and do not expect a material impact on its consolidated
financial statements upon adoption.
  Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies  (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends and
clarifies SFAS No. 141 (revised 2007),  Business
Combinations  (“SFAS No. 141(R)”) to address application issues
raised on initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. FSP FAS 141(R)-1 is effective on or after the
beginning of the first annual reporting on or after December 15, 2008. The
Company will apply FSP FAS 141(R)-1 to future acquisitions that close after
April 1, 2009.
 
 Recognition
and Presentation of Other-Than-Temporary Impairments
 
 In April
2009, the FASB issued FASB Staff Position Nos. FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments  (“FSP FAS 115-2 and FAS 124-2”). The objective of FSP FAS
115-2 and FAS 124-2 is to amend the other-than-temporary impairment guidance for
debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 is
effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. The Company will adopt FSP FAS 115-2 and FAS 124-2 in the first quarter of
fiscal 2010 and does not expect a material impact on its consolidated financial
statements upon adoption.
 
 Interim
Disclosures about Fair Value of Financial Instruments
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 107-1 and Accounting
Principles Board (“APB”) No. 28-1, Interim Disclosures about Fair Value of
Financial Instruments  (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1
and APB 28-1 requires disclosures about fair value of financial instruments in
interim reporting periods of publicly traded companies that were previously only
required to be disclosed in annual financial statements. FSP FAS 107-1 and APB
28-1 is effective for interim reporting periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. The
Company will adopt FSP FAS 107-1 and APB 28-1 in the first quarter of fiscal
2010. As FSP FAS 107-1 and APB 28-1 only amends the disclosure requirements on
fair value of financial instruments in interim periods, the adoption of FSP FAS
107-1 and APB 28-1 will not affect its consolidated financial
statements.
 
 Accounting
for Transfers of financial Assets
 
 In
June 2009 the FASB issued SFAS 166, “Accounting for Transfers of financial
Assets — an amendment of FASB Statement No. 140” (SFAS 166). SFAS 166
eliminates the concept of a qualifying special-purpose entity, creates more
stringent conditions for reporting a transfer of a portion of a financial asset
as a sale, clarifies other sale-accounting criteria, and changes the initial
measurement of a transferor’s interest in transferred financial assets. SFAS No.
166 is applicable for annual periods after November 15, 2009 and interim periods
therein and thereafter. The Company is currently assessing the impacts, if any
on the consolidated financial statements.
 
 
 F-14
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 3.       
 RECENTLY ISSUED
PRONOUNCEMENTS (continued)
 
 Consolidation
of Variable Interest Entities,
 
 In
June 2009 the FASB issued SFAS 167, “Amendments to FASB Interpretation
No. 46(R)” (SFAS 167). SFAS 167 eliminates Interpretation 46(R)’s
exceptions to consolidating qualifying special-purpose entities, contains new
criteria for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary
of a variable interest entity. SFAS 167 also contains a new requirement that any
term, transaction, or arrangement that does not have a substantive effect on an
entity’s status as a variable interest entity, a company’s power over a variable
interest entity, or a company’s obligation to absorb losses or its right to
receive benefits of an entity must be disregarded in applying Interpretation
46(R)’s provisions. SFAS No. 167 is applicable for annual periods after November
15, 2009 and interim periods thereafter. The Company is currently assessing the
impacts, if any on the consolidated financial statements.
 
 In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (“FSP FAS 140-4 and FIN 46R-8”). FSP FAS 140-4 and
FIN 46R-8 require additional disclosures about transfers of financial assets and
involvement with variable interest entities. The requirements apply to
transferors, sponsors, servicers, primary beneficiaries and holders of
significant variable interests in a variable interest entity or qualifying
special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for financial
statements issued for reporting periods ending after December 15, 2008. FSP FAS
140-4 and FIN 46R-8 affect only disclosures and did not have a material impact
on the Company’s consolidated financial statements
 
 4.     
   ACCOUNTS RECEIVABLE
 
 Trade
receivables are presented net of an allowance for doubtful
accounts.  The allowance was $146 as of March 31, 2009 and $50 as of
March 31, 2008. The allowance for doubtful accounts reflects estimates of
probable losses in trade receivables.  The Company manages and
evaluates the collectability of its trade receivables as
follows:  Management reviews aged accounts receivable listings and
contact is made with customers that have extended beyond agreed upon credit
terms. Senior management and operations are notified such that when they are
contacted by such customers for a future delivery, the customer can be requested
to pay any past amounts, before any future cargo is booked for shipment.
Customer credit risk is also managed by reviewing the history of payments of the
customer, the size of the customer, the period of time within the shipping
season and demand for future cargos.
 
 5.     
   PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
 Prepaid
      expenses and other current assets are comprised of the
      following:
 
 March
      31,
                  2009
                
                
                March
      31,
                  2008Prepaid
      insurance
                
                $
                861
                
                
                $
                605Fuel
      and lubricants
                
                
                1,481
                
                
                
                1,966Deposits
      and other prepaids
                
                
                666
                
                
                
                551$
                3,008
                
                
                $
                3,122
 
 
 F-15
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 6.         INCOME
TAXES
 Income
(loss) before income taxes was derived from the following sources:
 
 Year
      endedMarch 31, 2009
                
                
                Year
      endedMarch 31, 2008United
      States
                
                $
                (2,868
                )
                
                $
                (11,409
                )Foreign
                
                
                3,009
                
                
                
                (4,996
                )$
                141
                
                
                $
                (16,405
                )
 
 The
      components of the provision (recovery) for income taxes are as
      follows:
 
 Year
      endedMarch 31, 2009
                
                
                Year
      endedMarch 31, 2008CurrentFederal
                
                $
                (244
                )
                
                $
                325State
      and local
                
                
                103
                
                
                
                47Deferred:Federal
                
                
                4,670
                
                
                
                (3,665
                )State
      and local
                
                
                832
                
                
                
                (516
                )Foreign
                
                
                1,954
                
                
                
                (1,179
                )$
                7,315
                
                
                $
                (4,988
                )
 
 
 
 The total
provision for income taxes differs from that amount which would be computed by
applying the Canadian and U.S. Federal income tax rate to income before
provision for income taxes as follows:
 
 Year
      ended
                  March 31,
      2009
                
                Year
      ended
                  March 31,
      2008Statutory
      federal income tax rate
                
                
                34.0
                %
                
                
                34.0
                %State
      and foreign income taxes
                
                
                494.8
                %
                
                
                4.9
                %Valuation
      allowance
                
                
                3,698.1
                %
                
                
                (0.4
                %)Change
      in compensation from cash to stock
                
                
                594.8
                %
                
                
                0.0
                %Other
                
                
                389.4
                %
                
                
                (7.1
                %)Effective
      income tax rate
                
                
                5,211.1
                %
                
                
                31.4
                %
 
 The
primary reason the effective income tax rate is higher than the statutory U.S.
federal tax rate is due to the recording of a valuation allowance for the amount
of excess U.S. federal deferred tax assets during the year ended March 31,
2009.  In addition, the Company changed the payment method of certain
of its management compensation from cash to stock during fiscal year ended March
31, 2009 which changed its characterization from deductible to non-deductible on
the Company’s Canadian tax return.
 
 F-16
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 6.         INCOME
TAXES (continued)
 
 The
significant components of current deferred tax assets and liabilities are as
follows:
 
 March
      31, 2009
                
                
                March
      31, 2008Asset:Accrued
      liabilities not yet deductible for tax
                
                $
                382
                
                
                $
                1,355Other
                
                
                36
                
                
                
                -Total
      current deferred tax assets
                
                $
                418
                
                
                $
                1,355Liability:Dry dock
      tax reserve
                
                
                480
                
                
                
                1,508Total
      current deferred tax liabilities
                
                $
                480
                
                
                $
                1,508Net
      current deferred tax liabilities
                
                $
                (62
                )
                
                $
                (153
                )
 
 
 The
significant components of long-term deferred tax assets and liabilities are as
follows:
 
 Year
      ended
                  March
      31, 2009
                
                
                Year
      ended
                  March 31,
      2008Long-term
      deferred tax assetsOperating
      loss carry forwards
                
                $
                15,887
                
                
                $
                20,119Deferred
      foreign exchange loss
                
                
                980
                
                
                
                -Interest
      rate swap
                
                
                1,238
                
                
                
                -Other
                
                
                (15
                )
                
                
                199$
                18,090
                
                
                $
                20,318Valuation
      allowance
                
                
                (5,950
                )
                
                
                -Net
      long-term deferred tax assets
                
                $
                12,140
                
                
                $
                20,318Long-term
      deferred tax liabilitiesSeparately
      identifiable Intangibles
                
                $
                2,816
                
                
                $
                3,596Deferred
      foreign exchange gain
                
                
                -
                
                
                
                311Depreciation
      and dry dock expenses
                
                
                10,369
                
                
                
                10,796Total
      long-term deferred tax liabilities
                
                $
                13,185
                
                
                $
                14,703Net
      long-term deferred tax (liabilities) assets
                
                $
                (1,045
                )
                
                $
                5,615
 
 The
Company establishes a valuation allowance when it is more likely than not that
it will not be able to realize the benefit of the deferred tax assets, or when
future deductibility is uncertain.  Periodically, the valuation
allowance is reviewed and adjusted based on management’s assessment of
realizable deferred tax assets.
 
 At March
31, 2009, the Company anticipated that its U.S. Federal net deferred tax assets
including net operating loss carry-forwards would not be utilized due to tax net
operating losses during the past three fiscal years and, as such has recorded a
full valuation allowance against the U.S. Federal net deferred tax
assets.  The Company determined that it was more likely than not that
the state deferred income tax assets will be realized, except for certain state
net operating losses are expected to expire unused, based on the expected timing
of the reversal of the net deferred tax liabilities.  The Company also
determined that it was more likely than not that the Canadian deferred income
tax assets will be realized, except for the foreign currency exchange loss,
based on performance of the entity and the expected timing of the reversal of
the deferred tax liabilities.
 
 F-17
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 6.         INCOME
TAXES (continued)
 
 At March
31, 2008, based on the weight of evidence regarding recoverability of the
Company's tax assets, no valuation allowance was provided for the Company’s
Federal, State or Foreign deferred tax assets, as the Company concluded that it
was more likely than not that the deferred income tax assets will be realized
based on performance of the entities prior to being acquired and based on
management’s future projections.
 
 At March
31, 2009, the Company had unused U.S. federal net operating loss carry-forwards
totaling $26,435 that expire between fiscal 2020 and 2029.  At March
31, 2009, the Company also had unused Canadian net operating loss carry-forwards
totaling $23,432 that expire between fiscal 2010 and 2030.
 
 
 7.         PROPERTY
AND EQUIPMENT
 
 Property
      and equipment are comprised of the
following:
 
 March
      31, 2009
                
                
                March
      31, 2008CostVessels
                
                $
                96,240
                
                
                $
                101,520Leasehold
      improvements
                
                
                2,110
                
                
                
                1,865Furniture
      and equipment
                
                
                209
                
                
                
                121Vehicles
                
                
                18
                
                
                
                -Computer,
      communication equipment and purchased software
                
                
                1,978
                
                
                
                1,592$
                100,555
                
                
                $
                105,098Accumulated
      depreciationVessels
                
                $
                13,537
                
                
                $
                8,301Leasehold
      improvements
                
                
                425
                
                
                
                250Furniture
      and equipment
                
                
                49
                
                
                
                35Vehicles
                
                
                3
                
                
                
                -Computer,
      communication equipment  and purchased software
                
                
                308
                
                
                
                16314,322
                
                
                
                8,749$
                86,233
                
                
                $
                96,349
 F-18
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 8.         DEFERRED
DRYDOCK COSTS
 
 Deferred
drydock costs are comprised of the following:
 
 March
      31, 2009
                
                
                March
      31, 2008Drydock
      expenditures
                
                $
                10,935
                
                
                $
                10,991Accumulated
      amortization
                
                
                3,661
                
                
                
                1,909$
                7,274
                
                
                $
                9,082
 
 
 The
      following table shows periodic deferrals of drydock cost and
      amortization.
 
 Balance
      as of March 31, 2007
                
                $
                5,895Drydock
      expenditure paid and accrued
                
                
                4,415Amortization
      of drydock cost
                
                
                (1,476
                )Foreign
      currency translation adjustment
                
                
                248Balance
      as of March 31, 2008
                
                
                9,082Drydock
      expenditure paid and accrued
                
                
                1,400Amortization
      of drydock cost
                
                
                (2,141
                )Foreign
      currency translation adjustment
                
                
                (1,067
                )Balance
      as of March 31, 2009
                
                $
                7,274
 
 9.
                INTANGIBLE
      ASSETS AND GOODWILL
 
 Intangibles
are comprised of the following:
 
 March
      31, 2009
                
                
                March
      31, 2008Intangible
      assetsDeferred
      financing costs
                
                $
                1,886
                
                
                $
                2,134Trademarks
      and trade names
                
                
                868
                
                
                
                1,003Non-competition
      agreements
                
                
                1,989
                
                
                
                2,298Customer
      relationships and contracts
                
                
                13,585
                
                
                
                15,959Total
      identifiable intangibles
                
                $
                18,328
                
                
                $
                21,394Accumulated
      amortizationDeferred
      financing costs
                
                $
                426
                
                
                $
                71Trademarks
      and trade names
                
                
                267
                
                
                
                208Non-competition
      agreements
                
                
                1,700
                
                
                
                1,326Customer
      relationships and contracts
                
                
                2,438
                
                
                
                1,8104,831
                
                
                
                3,415Total
      intangible assets
                
                $
                13,497
                
                
                $
                17,979Goodwill
                
                $
                10,193
                
                
                $
                10,193
 
 
 F-19
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  9.    
    INTANGIBLE ASSETS AND GOODWILL (continued)
 
 
 Intangible
asset amortization over the next five years is estimated as
follows:
 
 2010
                
                $
                1,6472011
                
                
                1,3572012
                
                
                1,3572013
                
                
                1,3572014
                
                
                993$
                6,711
 
 
 10.
                ACQUISITIONS
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited (“Voyageur”) and
Voyageur Pioneer Marine Inc. (collectively, the “Sellers”) pursuant to which
Lower Lakes purchased the assets of the bulk freight shipping business related
to the VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER (collectively, the
“Vessels”) from the Sellers for an aggregate purchase price of CDN $25,000 plus
certain adjustments. The acquisition was partially financedunder the Fifth Amendment
to the Credit Agreement with General Electric Capital Corporation, as Agent and
a lender, and GE Canada Finance Holding Company, as a lender, and certain of
each such party’s affiliates.   Pursuant to the Fifth Amendment,
among other things, (i) the outstanding balance of the Canadian term loan
facility was increased by CDN $18,000 to CDN $36,868. The estimated purchase
price allocation to the fair values of assets and liabilities acquired was as
follows:
  
 CDN
      $
                
                US
      $Purchase
      price
                
                
                25,774
                
                
                
                24,520Current
      assets
                
                
                374
                
                
                
                356Property
      and equipment
                
                
                16,576
                
                
                
                15,762Goodwill
                
                
                4,027
                
                
                
                3,831Other
      identifiable intangible assets
                
                
                4,797
                
                
                
                4,57125,774
                
                
                
                24,520
 
  Certain
customer contracts were also assigned to the Company under the Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management practices. Under
the Crew Manning Agreement, Voyageur is responsible for selecting and training
the Vessels’ crews, payroll, tax and pension administration, union negotiations
and disputes and ensuring compliance with applicable requirements of Canadian
maritime law. Under the Crew Manning Agreement, Lower Lakes is obligated to pay
Voyageur an annual fee of $175 and pay or reimburse Voyageur for its reasonable
crew payroll expenses.The
Company terminated the Crew Manning Agreement in March 2008.
  Also on August 27, 2007, Lower Lakes
entered into a Contract of Affreightment  (“COA”) with Voyageur and
Voyageur Maritime Trading Inc. (“VMT”) pursuant to which Voyageur and VMT made a
Canadian flagged vessel owned by VMT, the MARITIME TRADER (the “Trader”),
available exclusively to Lower Lakes for its use in providing transportation and
storage services for its customers. LLTL does not realize any significant
margin from this vessel.
  
 F-20
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 10.
                ACQUISITIONS
      (continued)
 
  In
connection with the COA, on August 27, 2007, Lower Lakes entered into an Option
Agreement (the "Option Agreement") with VMT pursuant to which Lower Lakes
obtained the option to acquire the Trader for CDN $5,000 subject to certain
adjustments. The option is exercisable between January 1, 2012 and December 31,
2017, subject to certain early exercise provisions. If, at any time prior to
expiration of the option, VMT receives a bona fide offer from a third party to
purchase the Trader which VMT wishes to accept, Lower Lakes shall have the right
to acquire the Trader at the option price.
  
 On
February 13, 2008, Grand River and Rand LL Holdings entered into and consummated
a Vessel Purchase Agreement with WMS providing for the purchase by Grand River
of three United States flagged vessels, the DAVID Z. NORTON, the EARL W. OGLEBAY
and the WOLVERINE, for an aggregate purchase price of $20,019 plus purchase
expenses.  Lower Lakes Transportation, had time chartered the acquired
vessels since August 1, 2006 pursuant to the terms of a Time Charter Agreement
between Lower Lakes Transportation and WMS, which also provided for an option to
purchase the vessels.
 
 Prior to
commencement of the 2008 sailing season, the Company transferred one of the
vessels acquired from WMS to Canadian registry for deployment as part of the
Company’s Canadian fleet.
 
 In
connection with the sale of vessels under the Vessel Purchase
Agreement:
 
 - WMS
repaid all amounts owed to Rand Finance Corp., a wholly owned subsidiary of Rand
Logistics, Inc., under that certain Note Purchase Agreement, dated as of August
1, 2006 as well as a subordinated note payable to a third party;
 
 - WMS
repaid all of its obligations due to National City Commercial Capital Company,
LLC under WMS’ financing arrangements with National City, the principal and
interest amounts of which were included in the hire payable by Lower Lakes
Transportation under the Time Charter Agreement; and
 
 - Grand
River and Rand LL Holdings agreed to bear certain wind-down costs of the sale
transaction and time charter agreement.
  As
discussed in Note 13 the credit agreement was also amended and restated. The
estimated purchase price allocation to the fair values of assets acquired is as
follows:
  
 US
      $Purchase
      price
                
                
                20,602Vessels
                
                
                20,602
  
 
 
 As
discussed in Note 23, WMS was identified as a VIE and WMS financial statements
were consolidated for the period from August 1, 2006 to February 13, 2008. After
this deconsolidation event the Company is not a primary beneficiary of WMS. The
WMS financials were deconsolidated on February 13, 2008.
 
 
 F-21
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 11.
                BANK
      INDEBTEDNESS
 
 As
discussed in detail in Note 13, the Company amended and restated the credit
agreement with its senior lender on February 13, 2008. At March 31, 2009 and
March 31, 2008, the Company had authorized operating lines of credit under this
restated credit agreement in the amounts of CDN $13,500 and US $13,500 with its
senior lender, and was utilizing $2,786 at March 31, 2009 ($269 at March 31,
2008), and maintained letters of credit of CDN $1,407.  The line of
credit bears interest at Canadian Prime Rate plus 2.75% or Canadian 30 day BA
rate plus 3.75% on Canadian dollar borrowings and U.S. Base rate plus 2.75% or
LIBOR plus 3.75% on U.S. Dollar borrowings and is secured under the same terms
and has the same financial covenants as described in Note 13. The effective
interest rates on the operating lines of credit at March 31, 2009 were 4.41% and
March 31, 2008 were 8.11% on the Canadian line of credit and 5.06% and 8%
respectively on the U.S. operating line of credit. Available collateral for
borrowings and letters of credit are based on eligible accounts receivable,
which are limited to 85% of those receivables that are not over 90 days old, not
in excess of 20% for one customer in each line and certain other standard
limitations. As of March 31, 2009, the Company was fully drawn on its two lines
of credit, however on April 1, 2009, the Company had access to its US $8,000
seasonal over advance facility (see Note 13).
 
 
 12.
                ACCRUED
      LIABILITIES
 
 Accrued
liabilities are comprised of the following:
 
 March
      31,
                    2009
                
                
                March
      31,
                    2008Transaction
      costs
                
                $
                48
                
                
                $
                244Payroll
      compensation and benefits
                
                
                1,879
                
                
                
                1,832Preferred
      stock dividends
                
                
                3,180
                
                
                
                1,592Professional
      fees
                
                
                749
                
                
                
                522Interest
                
                
                401
                
                
                
                428Winter
      work and capital expenditures
                
                
                2,731
                
                
                
                1,330Capital
      and franchise taxes
                
                
                307
                
                
                
                178Other
                
                
                1,792
                
                
                
                1,117$
                11,087
                
                
                $
                7,243
 
 
 13.      LONG-TERM
DEBT
 
 On
February 13, 2008, Lower Lakes Towing Ltd., Lower Lakes Transportation and Grand
River, as borrowers, Rand LL Holdings, Rand Finance and Rand Logistics, Inc., as
guarantors, General Electric Capital Corporation, as agent and lender, and
certain other lenders, entered into an Amended and Restated Credit Agreement
which (i) amended and restated the Credit Agreement to which the borrowers are a
party, dated as of March 3, 2006, in its entirety, (ii) restructured the
tranches of loans provided for under the 2006 Credit Agreement and advanced
certain new loans, (iii) financed, in part, the acquisition of the three vessels
by Grand River from WMS, and (iv) provided working capital financing, funded for
other general corporate purposes and funded for other permitted
purposes.  The Amended and Restated Credit Agreement provided for (i)
a revolving credit facility under which Lower Lakes Towing may borrow up to CDN
$13,500 with a seasonal over advance facility of US $8,000 (US $10,000 for
calendar year 2008 only), and a swing line facility of CDN $4,000 subject to
limitations, (ii) a revolving credit facility under which Lower Lakes
Transportation may borrow up to US $13,500 with a seasonal over advance facility
of US $8,000 (US $10,000 for calendar year 2008 only), and a swing line facility
of US $4,000 subject to limitations, (iii) a Canadian dollar denominated term
loan facility under which Lower Lakes Towing borrowed CDN $41,700 (iv) a US
dollar denominated term loan facility under which Grand River borrowed US
$22,000 (v) a Canadian dollar denominated “Engine” term loan facility under
which Lower Lakes Towing borrowed CDN $8,000.
  
 F-22
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 13.
                LONG-TERM
      DEBT (continued)
 
 Under the
Amended and Restated Credit Agreement, the revolving credit facilities and swing
line loans expire on April 1, 2013.  The outstanding principal amount
of the Canadian term loan borrowings are repayable as follows: (i) quarterly
payments of CDN $695 commencing September 1, 2008 and ending March 1, 2013 and
(ii) a final payment in the outstanding principal amount of the Canadian term
loan shall be payable upon the Canadian term loan facility’s maturity on April
1, 2013.  The outstanding principal amount of the US term loan
borrowings are repayable as follows: (i) quarterly payments of US $367
commencing September 1, 2008 and ending on March 1, 2013 and (iii) a final
payment in the outstanding principal amount of the US term loan shall be payable
upon the US term loan facility’s maturity on April 1, 2013.  The
outstanding principal amount of the Canadian “Engine” term loan borrowings are
repayable as follows: (i) quarterly payments of CDN $133 commencing quarterly
September 1, 2008 and ending March 1, 2013 and (iii) a final payment in the
outstanding principal amount of the Engine term loan shall be payable upon the
Engine term loan facility’s maturity on April 1, 2013.
  Borrowings
under the Canadian revolving credit facility, the Canadian term loan and the
Canadian swing line facility  bear an interest rate per annum, at the
borrowers’ option, equal to (i) the Canadian Prime Rate (as defined in the
Amended and Restated Credit Agreement), plus 2.75% per annum or (ii) the BA Rate
(as defined in the Amended and Restated Credit Agreement) plus 3.75% per
annum.  The US revolving credit facility,  the US term loan
and the US swing line facility bear interest, at the borrower’s option equal to
(i) LIBOR (as defined in the Amended and Restated Credit Agreement) plus 3.75%
per annum, or (ii) the US Base Rate (as defined in the Amended and Restated
Credit Agreement), plus 2.75% per annum.  Borrowings under the
Canadian “Engine” term loan bear an interest rate per annum, at the borrowers’
option, equal to (i) the Canadian Prime Rate (as defined in the Amended and
Restated Credit Agreement), plus 4.00% per annum or (ii) the BA Rate (as defined
in the Amended and Restated Credit Agreement) plus 5.00% per annum. The interest
rates may be adjusted quarterly commencing on the second quarter of fiscal year
2009 based upon the borrowers’ senior debt to EBITDA ratio as calculated in
accordance with the Amended and Restated Credit Agreement.
  Obligations
under the Amended and Restated Credit Agreement are secured by (i) a first
priority lien and security interest on all of the borrowers’ and guarantors’
assets, tangible or intangible, real, personal or mixed, existing and newly
acquired, (ii) a pledge by Rand LL Holdings of all of the outstanding capital
stock of the borrowers; (iii) a pledge the Registrant of all of the outstanding
capital stock of Rand LL Holdings and Rand Finance. The indebtedness of each
borrower under the Amended and Restated Credit Agreement is unconditionally
guarantied by each other borrower and by the guarantors, and such guaranty is
secured by a lien on substantially all of the assets of each borrower and each
guarantor.
  Under the
Amended and Restated Credit Agreement, the borrowers will be required to make
mandatory prepayments of principal on term loan borrowings (i) if the
outstanding balance of the term loans plus the outstanding balance of the
seasonal facilities exceeds the sum of 75% of the fair market value of the
vessels owned by the borrowers, less the amount of outstanding liens against the
vessels with priority over the lenders’ liens, in an amount equal to such
excess, (ii) in the event of certain dispositions of assets and insurance
proceeds (all subject to certain exceptions), in an amount equal to 100% of the
net proceeds received by the borrowers there from, and (iii) in an amount equal
to 100% of the net proceeds to a borrower from any issuance of a Borrower’s debt
or equity securities.
  The
Amended and Restated Credit Agreement contains certain covenants, including
those limiting the guarantors, the borrowers, and their subsidiaries’ ability to
incur indebtedness, incur liens, sell or acquire assets or businesses, change
the nature of their businesses, engage in transactions with related parties,
make certain investments or pay dividends.  In addition, the Amended
and Restated Credit Agreement requires the borrowers to maintain certain
financial ratios.  Failure of the borrowers or the guarantors to
comply with any of these covenants or financial ratios could result in the loans
under the Amended and Restated Credit Agreement being accelerated. The Company
is in compliance with those covenants as of March 31, 2009.
 
 On June
24, 2008, the Company entered into a First Amendment to the Amended and Restated
Credit Agreement, with the lenders signatory thereto and General Electric
Capital Corporation, as Agent.  Under the Amendment, the borrowers
amended the definition of “Fixed Charge Coverage Ratio,” modified the formula
for the maximum amounts outstanding under the Canadian and US Revolving Credit
Facilities and modified the measurement dates of the Maximum Capital
Expenditures (as defined therein).
 
 On June
23, 2009, the Company amended its Amended and Restated Credit Agreement as
discussed in Note 27.
 
 F-23
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 13.
                LONG-TERM
      DEBT (continued)
 
 
 The
effective interest rates on the term loans at March 31, 2009 including the
effect from interest rate swap contracts were 7.84% (7.84% at March 31, 2008) on
the Canadian term loan, 9.09% (9.09% at March 31, 2008) on the Canadian engine
loan and 7.40% (7.40% at March 31, 2008) on the US term loan. The actual
interest rate charged without the effect of interest rate swap contracts were
4.59% (7.62% at March 31, 2008) on the Canadian term loan, 5.84% (8.87% at March
31, 2008) on the Canadian engine loan and 5.01% (6.83% at March 31, 2008) on the
US term loan.
 
 March
      31, 2009
                
                
                March
      31, 2008a
                )
                Canadian
      term loan bearing interest at Canadian Prime rate plus 2.75% or Canadian
      BA rate plus 3.75% at the Company’s option.  The loan is
      repayable over a five year term until April 1, 2013 with current quarterly
      payments of CDN $695 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the company.
                
                $
                31,408
                
                
                $
                40,624b
                )
                Canadian
      engine term loan bearing interest at Canadian Prime rate plus 4% or
      Canadian BA rate plus 5% at the Company’s option.  The loan is
      repayable over a five year term until April 1, 2013 with current quarterly
      payments of CDN $133 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the company.
                
                
                6,026
                
                
                
                7,793c
                )
                US
      term loan bearing interest at LIBOR rate plus 3.75% or US base rate plus
      2.75% at the Company’s option. The loan is repayable over a five year term
      until April 1, 2013 with current quarterly payments of US $367 commencing
      September 1, 2008 until March 1, 2013 and the balance due April 1,
      2013.  The term loan is collateralized by the existing and newly
      acquired assets of the company.
                
                
                20,900
                
                
                
                22,000$
                58,334
                
                
                $
                70,417Less
      amounts due within 12 months
                
                
                4,094
                
                
                
                3,521$
                54,240
                
                
                $
                66,896
 
 
 Principal
payments are due as follows:
 
 2010
                
                $
                4,0942011
                
                
                4,0942012
                
                
                4,0942013
                
                
                4,0932014
                
                
                41,959$
                58,334
 
 
 F-24
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 14.       COMMITMENTS
 
 The
Company did not have any leases which met the criteria of a capital lease.
Leases which do not qualify as a capital lease are classified as operating
leases. Operating lease rental and sublease rental payments included in general
and administrative expenses are as follows:
 
 Year
      ended
                  March
      31, 2009
                
                
                Year
      ended
                  March
      31, 2008Operating
      lease
                
                $
                235
                
                
                $
                227Operating
      sublease
                
                
                144
                
                
                
                144$
                379
                
                
                $
                371
 
 The
Company entered into a bareboat charter agreement for the McKee Sons barge which
expires in 2018.  The chartering cost included in vessel operating
expenses was $695 for the year ended March 31, 2009 and $ 675 for the year ended
March 31, 2008. The lease was amended on February 22, 2008 to provide a lease
payment deferment in return for leasehold improvements. Total charter
commitments for the McKee vessel for the term of the lease before inflation
adjustment are given below.  The lease contains a clause whereby
annual payments escalate at the Consumer Price Index, capped at a maximum annual
increase of 3%.
 
 2010
                
                $
                6962011
                
                
                6962012
                
                
                6962013
                
                
                6962014
                
                
                696Thereafter
                
                
                3,711$
                7,191
 
 The
Company’s future minimum rental commitments under other operating leases are as
follows.
 
 2010
                
                $
                2172011
                
                
                1702012
                
                
                1282013
                
                
                842014
                
                
                63Thereafter
                
                
                341$
                1,003
 
 F-25
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 15.      CONTINGENCIES
 
 Rand is
not involved in any legal proceedings which are expected to have a significant
effect on its business, financial position, results of operations or liquidity,
nor is the Company aware of any proceedings that are pending or threatened which
may have a significant effect on the Company’s business, financial position, and
results of operations or liquidity. From time to time, Lower Lakes may be
subject to legal proceedings and claims in the ordinary course of business,
involving principally commercial charter party disputes. It is expected that
larger claims would be covered by insurance if they involve liabilities that may
arise from collision, other marine casualty, damage to cargoes, oil pollution,
death or personal injuries to crew, subject to customary deductibles. Those
claims, even if lacking merit, could result in the expenditure of significant
financial and managerial resources.  Most of these claims are for
insignificant amounts.  Given Management’s assessment that losses were
probable and reasonably estimable, and based on advice from the Company’s
outside counsel, a provision of $604 as of  March 31, 2009 and $363 as
of March 31, 2008 has been recorded for various claims.  Management
does not anticipate material variations in actual losses from the amounts
accrued related to these claims.
  On August
27, 2007, in connection with the COA and Option Agreement (see Note 10) with
Voyageur, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE
Canada.  Lower Lakes’ maximum future payments under the Guarantee are
limited to the Guaranteed Obligations plus the costs and expenses GE Canada
incurs while enforcing its rights under the Guarantee.  Lower Lakes’
obligations under the Guarantee shall become due should Voyageur fail to meet
certain financial covenants under the terms of its loan from GE Canada or if
Voyageur breaches certain of its obligations under the COA.  Lower
Lakes has several options available to it in the event that GE Canada intends to
draw under the Guarantee, including (i) the right to exercise its option for the
Trader under the Option Agreement and (ii) the right to make a subordinated
secured loan to Voyageur in an amount at least equal to the amount intended to
be drawn by GE Canada on terms as are reasonably satisfactory to GE Canada and
Voyageur.
  The
Company has determined that there is no carrying amount of the liability, for
the guarantor’s obligations under the guarantees under FIN 45.
  
 
 F-26
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 16.      STOCKHOLDERS’
EQUITY
 
 
 At
December 31, 2005, 10,100,000 shares of common stock were reserved for issuance
upon exercise of redeemable warrants and the underwriters’ unit purchase option.
    Each warrant allowed its holder to purchase one fully paid
and non-assessable share of the Company’s common stock at the price of $5.00 per
share. The warrants expired on October 26, 2008. Options and warrants issued in
conjunction with the Company’s initial public offering are equity linked
derivatives and accordingly represent off-balance sheet
arrangements.  The options and warrants meet the scope exception in
paragraph 11(a) of SFAS 133 and accordingly were not accounted for as
derivatives for purposes of SFAS 133, but instead were accounted for as
equity.
 
 On April
30, 2007, the Company entered into a Warrant Exercise Agreement with Knott
Partners, LP; Knott Partners Offshore Master Fund, LP; CommonFund Hedged Equity
Company; Shoshone Partners, LP; Finderne, LLC; Good Steward Trading Company SPC;
and Leonard & Margaret Frierman (the "Knott Entities"), pursuant to which
the Knott Entities agreed to exercise 1,504,000 of the Company's publicly traded
warrants and the Company agreed to accept $4.50, rather than the $5.00 exercise
price provided in the warrant, as the exercise price for each such warrant. On
the same date, the Company received $6,768, net of stock warrant inducement
discount, of proceeds from the exercise of the subject warrants and the Company
authorized the issuance of the 1,504,000 shares of its common stock issuable
upon exercise of such warrants.
 
 On
      May 4, 2007, the Company reduced the exercise price of its outstanding,
      publicly traded warrants to $4.50 (from the $5.00 exercise price provided
      by the original terms of the warrants) until July 13, 2007 (the extended
      “Expiration Time"). Any and all warrants properly exercised in accordance
      with the terms of the warrants prior to the Expiration Time were accepted
      by the Company at the reduced exercise price, and one share of registered
      common stock per warrant was issued to the exercising warrant holder.
      After the Expiration Time, the $5.00 exercise price included in the
      original terms of the warrants was reinstituted. Except for the reduced
      exercise price of the warrants prior to the Expiration Time, the terms of
      the warrants remain unchanged. The reduced exercise price applied to all
      of the Company’s currently outstanding publicly traded warrants, including
      those warrants still included as part of the units issued in the Company’s
      initial public offering. Each officer, director, employee and consultant
      of the Company had agreed not to exercise their warrants prior to the
      Expiration Time. As of July 13, 2007, 2,460,965 warrants had been
      exercised, pursuant to the program, generating proceeds of $11,075 net of
      stock warrant inducement discount.
 
 During
the year ended March 31, 2009, 89,885 warrants were exercised for cash ($449
gross proceeds).
 
 On
September 23, 2008, the Company announced an offer to holders of all
5,194,481 outstanding, publicly-traded warrants that would permit the exercise
of the warrants on amended terms, for a limited time.  The offer modified
the terms of the warrants to allow holders to receive one share of common stock
for every 25 warrants surrendered, without paying a cash exercise price. Prior
to the expiration of the offer on October 26, 2008, 5,045,275 warrants were
converted into common stock under this offer. The remaining 74,555 publicly
traded warrants expired on October 26, 2008.
 
 F-27
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
   
 16.      STOCKHOLDERS’ EQUITY (continued)
 
 The
following continuity schedule summarizes outstanding share purchase
warrants:
 
 Outstanding
      warrants
                
                
                Exercise
      Price
                
                
                Cumulative
      proceeds from exercise of warrantsBalance
      March 31, 2007
                
                
                9,196,180
                
                
                
                
                
                $
                19Issued
                
                
                -
                
                
                
                
                
                
                -Exercised
                
                
                (3,964,965
                )
                
                $
                4.50
                
                
                
                17,843Balance
      March 31, 2008
                
                
                5,231,215
                
                
                
                
                
                
                $
                17,862Exercised
                
                
                (89,885
                )
                
                
                5.00
                
                
                
                449Exercised
      under cashless offer
                
                
                (5,045,275
                )
                
                
                
                
                
                
                -Extinguished
                
                
                (21,500
                )
                
                
                
                
                
                
                (9
                )Expired
                
                
                (74,555
                )
                
                
                
                
                
                
                -Balance
      March 31, 2009
                
                
                -
                
                
                
                
                
                
                $
                18,302
 
 
 Exercise
price of $4.50 is net of $0.50 stock warrant inducement discount per stock
warrant from May 4, 2007 until July 13, 2007 and $5.00 at all other
periods.
 
 EarlyBirdCapital,
who acted as the representative to the underwriters in connection with the
Company's initial public offering, holds an underwriter’s option to purchase up
to 300,000 units at a purchase price of $9.90 per unit. Each unit consists of
one share of common stock and two warrants. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $6.25. If the
option is exercised in full, the Company would receive gross proceeds of
$2,970 and issue an additional 300,000 units consisting of 300,000 shares of the
Company’s common stock and 600,000 warrants. If all of these warrants are
exercised, the Company would issue an additional 600,000 shares of common stock
and receive additional gross proceeds of $3,750. The Company estimated that the
fair value of this option at the date of grant was approximately $558 ($1.86 per
Unit) using a Black-Scholes option-pricing model. The fair value of the option
has been estimated as of the date of grant using the following assumptions: (1)
expected volatility of 47.79%, (2) risk-free interest rate of 3.34% and (3)
expected life of 5 years. The option may be exercised by the holder for cash or
on a "cashless" basis, at the holder's option, such that the holder may use the
appreciated value of the option (the difference between the exercise prices of
the option and the underlying warrants and the market price of the units and
underlying securities) to exercise the option without the payment of any
cash.
 
 EarlyBirdCapital’s
      option was purchased for a de minimus amount and became exercisable in
      March, 2006, upon the consummation of the acquisition of Lower Lakes
      Towing Ltd. The underwriter's option expires on October 12,
      2009.
 
 The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences that may be determined
from time to time by the Board of Directors.
 
 The
shares of series A convertible preferred stock: rank senior to the Company’s
common stock with respect to liquidation and dividends; are entitled to receive
a cash dividend at the annual rate of 7.75% (based on the $50 per share
issue price), payable quarterly (subject to increases of 0.5% for each six month
period in respect of which the dividend is not timely paid, up to a maximum of
12%, subject to reversion to 7.75% upon payment of all accrued and unpaid
dividends); are convertible into shares of the Company’s common stock at any
time at the option of the series A preferred stockholder at a conversion price
of $6.20 per share (based on the $50 per share issue price and subject to
adjustment) or 8.065 shares of common stock for each Series A Preferred Share
(subject to adjustment); are convertible into shares of the Company’s common
stock (based on a conversion price of $6.20 per share, subject to adjustment) at
the option of the Company if, after the third anniversary of the acquisition,
the trading price of the Company’s common stock for 20 trading days within any
30 trading day period equals or exceeds $8.50 per share (subject to adjustment);
may be redeemed by the Company in connection with certain change of control or
acquisition transactions; will vote on an as-converted basis with the Company’s
common stock; and have a separate vote over certain material transactions or
changes involving the Company. The accrued dividend payable at March
31, 2009 was $ 3,180 and at March 31, 2008 was $1,592. As of March 31, 2009 the
effective rate of preferred dividends is 9.75% (8.75% as of March 31, 2008). The
rate will increase to 10.25% effective July 1, 2009 and will increase 0.5% every
six months thereafter until it reaches 12% or the accrued dividends are paid.
The Company is limited in the payment of preferred dividend by the fixed charge
coverage ratio as per the covenant in the amended and restated credit
agreement with the lender.
 
 F-28
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 16.      STOCKHOLDERS’ EQUITY (continued)
 
 On
January 17, 2007, the Company awarded 215,000 shares of its common stock, to two
key executives. The shares of common stock awarded (the "Restricted Shares")
were not registered under the Securities Act of 1933 and constitute "restricted
securities" within the meaning of the Act. The Restricted Shares were awarded
pursuant to Restricted Share Award Agreements (the "Award Agreements"), dated
January 17, 2007. The shares were valued at the closing price on January 17,
2008 of $6.72 per share. The Company has recorded expense of $361 in both 2008
and 2009. Pursuant to the Award Agreements: 44% of the Restricted Shares vested
on the date of the award; 6% of the Restricted Shares vested on March 31, 2007;
25% of the Restricted Shares  vested on March 31, 2008; and 25% of the
Restricted Shares vested on March 31, 2009. However, in order to facilitate the
Company's federal and state tax withholding obligations in respect of the
Restricted Stock awards, some of the Restricted Shares which vested on the date
of the award were withheld by the Company which paid the withholding taxes,
resulting in 120,400 shares actually issued.
 
 Since
January 2007, share-based compensation has been granted to Management and
directors from time to time. The Company had no surviving, outstanding
share-based compensation agreements with employees or directors prior to that
date except as described above. The Company has reserved 2,500,000 shares
for grants to management and directors under the 2007 Long Term Incentive Plan
(“LTIP”) for Employees, Officers, Directors and Consultants.  At
March 31, 2009, a total of 1,526,035 shares were available under the LTIP
for future awards.
  For all
share-based compensation, as employees and directors render service over the
vesting periods, expense is recorded to the same line items used for cash
compensation. Generally this expense is for the straight-line amortization of
the grant date fair market value adjusted for expected forfeitures. Other
capital is correspondingly increased as the compensation is recorded. Grant date
fair market value for all non-option share-based compensation is the closing
market value on the date of grant.
  The
general characteristics of issued types of share-based awards granted under the
Plans through March 31, 2009 are as follows:
  Restricted Shares — All
of the restricted shares granted to management to date generally vest over three
years. No new grants of restricted shares have been issued to Management since
January 2007.  All of the vested shares issued to non-employee outside
directors vest immediately.  The first award to non-employee outside
directors in the amount of 12,909 shares was made on February 13, 2008 for
services through March 31, 2008. The second award in the amount of 4,384 shares
for the services through June 30, 2008 was made on August 7, 2008. The third
award in the amount of 4,976 shares for the services through September 30, 2008
was made on October 21, 2008. The fourth award in the amount of 6,588 shares for
the services though December 31, 2008 was made on January 12, 2009.
  On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus
program as discussed in detail in Note 22. Pursuant to the terms of the
management bonus program, Rand issued 478,232 shares of common stock to the
employee participants.
 
 
 
 F-29
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 16.      STOCKHOLDERS’ EQUITY (continued)
 
 Stock Options — Stock
options granted to management employees vest over three years in equal annual
installments. All options issued through March 31, 2009, expire ten years from
the date of grant. Stock option grant date fair values are determined
at the date of grant using a Black-Scholes option pricing model, a closed-form
fair value model, based on market prices at the date of grant. At each grant
date the Company has estimated a dividend yield of 0%. The weighted average risk
free interest rate within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of the grant. This was
3.76% for the fiscal 2008 (February 2008) grants and 4.14% for the fiscal 2009
(July 2008) grants. The expected term represents the period of time the grants
are expected to be outstanding, generally six years and has been computed using
the “simplified method” per the Securities and Exchange Commission Staff
Accounting Bulletin 107. This method was allowed until December 31, 2007.
 However, on December 21, 2007, the SEC’s Staff issued Accounting Bulletin
No. 110 “SAB 110”, which will allow a company to continue to use the “simplified
method” under certain circumstances. We will continue to use the simplified
method as we do not have sufficient historical data to estimate the expected
term of share based award.Expected volatility for
grants is based on implied volatility of the Company’s closing stock price in
the period of time from the registration and listing of the stock until the time
of each grant since that period is currently shorter than the expected life of
the options. Expected volatility was 36.99% for the 2008 grants and 39.49% for
the 2009 grants. Options outstanding (479,785) at March 31, 2009, had a
remaining weighted average contractual life of approximately nine years and
one month. The Company has recorded compensation expenses of $457 for the year
ended March 31, 2009 ($43 for the year ended March 31, 2008). One third of the
stock options granted in February 2008 (243,199) and none of the stock options
granted in July 2008 (236,586), have vested as of March 31, 2009.
 
 Information
relating to grants, forfeitures, vesting, exercise, expense and tax effects are
contained in the following tables.
 
 Stock
      Options:
                
                March
      31, 2009
                
                
                March
      31, 2009
                
                
                March
      31, 2008
                
                
                March
      31, 2008Number
      of Options
                
                
                Weighted
      Average Exercise Price per Share
                
                
                Number
      of Options
                
                
                Weighted
      Average Exercise Price per ShareOutstanding
      - beginning of year
                
                
                243,199
                
                
                $
                5.81
                
                
                
                -
                
                
                $
                -Granted
                
                
                236,586
                
                
                
                5.50
                
                
                
                243,199
                
                
                
                5.81Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Expired
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Outstanding-end
      of year
                
                
                479,785
                
                
                $
                5.66
                
                
                
                243,199
                
                
                $
                5.81Other
      data
                    (In
      thousands except weighted average
      fair value):
                
                
                
                
                
                
                
                
                
                March
      31, 2009
                
                
                March
      31, 2008Weighted
      average grant date fair value of options granted during
    year
                
                
                
                
                
                
                
                
                
                $
                3.31
                
                
                $
                3.22Compensation
      expense
                
                
                
                
                
                
                
                
                
                
                457
                
                
                
                43Unrecognized
      compensation cost at March 31
                
                
                
                
                
                
                
                
                
                
                1,066
                
                
                
                740Weighted
      average remaining life for unrecognized compensation
                
                
                
                
                
                
                
                
                
                1.3
      years
                
                
                2.9
      years
 
 
 F-30
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 16.      STOCKHOLDERS’ EQUITY (continued)
 
 The fair
value of each option was determined using the Black-Scholes option pricing
model. The key input variables used in valuing the options during the years
ended March 31, were as follows:
 
 2009
                2008Dividend
      yield
                
                
                None
                NoneRisk-free
      interest rate
                
                
                4.14%
                3.76%Stock
      price volatility
                
                
                39.49%
                36.99%Estimated
      option term
                
                
                10
      years
                10
      years
  Restricted
      Stock:
                
                March
      31, 2009
                
                
                March
      31, 2009
                
                
                March
      31, 2008
                
                
                March
      31, 2008Number
      of Shares
                
                
                Weighted
      Average Value at Grant Date
                
                
                Number
      of Shares
                
                
                Weighted
      Average Value at Grant DateUnvested
      beginning of the year
                
                
                53,750
                
                
                $
                6.72
                
                
                
                107,500
                
                
                $
                6.72Granted
                
                
                15,948
                
                
                
                4.70
                
                
                
                12,909
                
                
                
                5.81Vested
                
                
                (69,698
                )
                
                
                6.27
                
                
                
                (66,659
                )
                
                
                6.54Cancelled
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Unvested-end
      of year
                
                
                -
                
                
                
                -
                
                
                
                53,750
                
                
                $
                6.72Other
      data (In thousands):
                
                
                
                
                
                
                
                
                
                March
      31, 2009
                
                
                March
      31, 2008Compensation
      expense
                
                
                
                
                
                
                
                
                
                $
                437
                
                
                $
                436Unrecognized
      compensation cost at March 31
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                361Weighted
      average remaining life for unrecognized compensation
                
                
                
                
                
                
                
                
                
                
                -
                
                
                1.0
      years
  
 
 17.      OUTSIDE
VOYAGE CHARTER FEES
 
 Outside
      voyage charter fees relate to the subcontracting of external vessels
      chartered to service the Company’s customers to supplement the existing
      shipments made by the Company’s operated
  vessels.
 
 18.       INTEREST
EXPENSE
 
 Interest
      expense is comprised of the
following:
 Year
      ended
                  March
      31, 2009
                
                
                Year
      ended
                  March
      31, 2008Bank
      indebtedness
                
                $
                768
                
                
                $
                306Amortization
      of deferred finance costs
                
                
                391
                
                
                
                417Long-term
      debt – senior
                
                
                4,423
                
                
                
                3,937Long-term
      debt – subordinated
                
                
                -
                
                
                
                215Interest
      rate swap
                
                
                786
                
                
                
                8$
                6,368
                
                
                $
                4,883
 
 
 F-31
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 19.      SEGMENT
INFORMATION
 
 The
Company has identified only one reportable segment under Statement of Financial
Accounting Standards No.131, “Disclosures about Segments of an Enterprise and
Related Information” (“SFAS 131”).
 
 Information
about geographic operations is as follows:
 
 Year
      ended
                  March 31,
      2009
                
                
                Year
      ended
                  March 31,
      2008Revenues
      by countryCanada
                
                $
                88,273
                
                
                $
                53,645United
      States
                
                
                45,913
                
                
                
                41,124$
                134,186
                
                
                $
                94,769Income
      (loss) before income taxes by countryCanada
                
                $
                3,009
                
                
                $
                (4,996
                )United
      States
                
                
                (2,868
                )
                
                
                (11,409
                )$
                141
                
                
                $
                (16,405
                )Net
      income (loss) applicable to common stockholders by countryCanada
                
                $
                1,034
                
                
                $
                (4,132
                )United
      States
                
                
                (9,797
                )
                
                
                (10,386
                )$
                (8,763
                )
                
                $
                (14,518
                )
 
 Revenues
from external customers are allocated based on the country of the legal entity
of the Company in which the revenues were recognized.
 
 March
      31, 2009
                
                
                March
      31, 2008Property
      and equipment by countryCanada
                
                $
                56,962
                
                
                $
                66,214United
      States
                
                
                29,271
                
                
                
                30,135$
                86,233
                
                
                $
                96,349Intangible
      assets by countryCanada
                
                $
                10,047
                
                
                $
                13,954United
      States
                
                
                3,450
                
                
                
                4,025$
                13,497
                
                
                $
                17,979Goodwill
      by countryCanada
                
                $
                8,284
                
                
                $
                8,284United
      States
                
                
                1,909
                
                
                
                1,909$
                10,193
                
                
                $
                10,193Total
      assets by countryCanada
                
                $
                92,052
                
                
                $
                114,023United
      States
                
                
                43,852
                
                
                
                53,662$
                135,904
                
                
                $
                167,685
 
  F-32
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 20.       FINANCIAL
INSTRUMENTS
 
 Fair
value of financial instruments
 
 Financial
instruments comprise cash and cash equivalents, accounts receivable, accounts
payable, long-term debts and accrued liabilities and bank indebtedness.The
estimated fair values of cash, accounts receivable, accounts payable and accrued
liabilities approximate book values because of the short-term maturities of
these instruments. The estimated fair value of senior debt approximates the
carrying value as the debt bears interest at variable interest rates, which are
based on rates for similar debt with similar credit rates in the open
market.
 
 The
Company adopted SFAS No. 157, “Fair Value Measurements”, (SFAS 157) as of
April 1, 2008, with the exception of the application of the statement to
non-recurring non-financial assets and non-financial liabilities. Non-recurring
non-financial assets and non-financial liabilities for which we have not applied
the provisions of SFAS 157 include those measured at fair value in goodwill
impairment testing, indefinite lived intangible assets measured at fair value
for impairment testing and those initially measured at fair value in a business
combination.
  SFAS 157
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value. This hierarchy prioritizes the inputs into three broad
levels as follows. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs are quoted prices
for similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial
instrument. Level 3 inputs are unobservable inputs based on our own assumptions
used to measure assets and liabilities at fair value. A financial asset or
liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.
  The
following table provides the liabilities carried at fair value measured on a
recurring basis as of March 31, 2009:
  Carrying
      value at
                  March
      31, 2009
                Fair
      Value Measurements at March 31, 2009Quoted prices in
                  active
      markets
                  (Level
      1)
                Significant other
                  observable
                  inputs
                  (Level
      2)Interest
      rate swap contracts liability
                $       3,899
                $         -
                $       3,899
 
  Interest
rate swap contracts are measured at fair value using available rates on the
similar instruments and are classified within Level 2 of the valuation
hierarchy.
  The
Company has recorded a liability of $3,899 as of March 31, 2009 ($1,274 as of
March 31, 2008) for two interest rate swap contracts on the Company’s term debt.
For the year ended March 31, 2009 the fair value adjustment of the interest rate
swap contracts has resulted in a loss of $2,811 ($1,338 for the year ended March
31, 2008). This loss is included in the earnings and the fair value of
settlement cost to terminate the contracts is included in current liabilities on
the Consolidated Balance Sheet.
 
 F-33
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 20.       FINANCIAL
INSTRUMENTS (continued)
 
 Foreign
exchange risk
 
 Foreign
currency exchange risk to the Company results primarily from changes in exchange
rates between the Company’s reporting currency, the U.S. Dollar and the Canadian
dollar.  The Company is exposed to fluctuations in foreign exchange as
a significant portion of revenue and operating expenses are denominated in
Canadian dollars.
 
 Interest
rate risk
  The
Company is exposed to fluctuations in interest rates as a result of its banking
facilities and senior debt bearing variable interest rates.
  The
Company is exposed to interest rate risk due to its long-term debt agreement,
which requires that at least 50% of the outstanding term debt is hedged with
interest rate swaps. Effective February 15, 2008, the Company entered into a CDN
$49,700 interest rate swap derivative to pay interest at a fixed rate of
approximately 4.09% on its CDN $49,700 term debt and receive 3-month BA variable
rate interest payments quarterly through April 1, 2013. The notional amount of
the Canadian debt swap decreases with each scheduled principle payment, except
that the hedged amount decreases an additional CDN $15,000 on December 1, 2009.
Additionally, effective February 15, 2008, the Company entered into a US $22,000
interest rate swap derivative to pay interest at a fixed rate of approximately
3.65% on its US $22,000 term debt and receive 3-month LIBOR variable rate
interest payments quarterly through April 1, 2013. The notional amount of the US
debt swap decreases with each scheduled principle payment
  Credit
risk
  Accounts
receivable credit risk is mitigated by the dispersion of the Company’s customers
among industries and the short shipping season.
  Liquidity
risk
 
 The
current tightening of credit in financial markets and the general economic
downturn may adversely affect the ability of our customers and suppliers to
obtain financing for significant operations and purchases and to perform their
obligations under agreements with us. The tightening could result in a decrease
in, or cancellation of, existing business, could limit new business, could
negatively impact our ability to collect our accounts receivable on a timely
basis, and could affect the eligible receivables that are collateral for our
lines of credit.
 
 F-34
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 21.       EARNINGS
PER SHARE
 
 The
Company has a total of 12,890,927 common shares issued and outstanding, out of
an authorized total of 50,000,000 shares. The fully diluted calculation utilizes
a total of 14,978,311 shares for the year ended March 31, 2009 and 14,798,990
shares for the year ended March 31, 2008 based on the following calculations.
Since the calculation is anti-dilutive, the basic and fully diluted weighted
average shares outstanding are 12,558,956 and 11,355,068 for 2009 and
2008. Warrants issued from the initial prospectus and over allotment
converts to 1,022,581 based on the average yearly share price as of March 31,
2008 of $6.21. There are no warrants outstanding as of March 31, 2009. In
connection with the Company’s initial public offering, the Company issued to the
representative of the underwriters in the initial public offering, for a de
minimus amount, an option to purchase up to a total of 300,000 units, with each
unit consisting of one share of common stock and two warrants.  The
units issuable upon exercise of the option are identical to those issued in the
Company’s initial public offering except that the warrants included in the units
underlying the option have an exercise price of $6.25 per share.  The
option will be exercisable by the holder at $9.90 per unit commencing upon the
consummation of a business combination by the Company and will expire on October
26, 2009.  The underwriter units are excluded from the dilution
calculation on an annual basis as the exercise price of $9.90 exceeded the
estimated market value.
 
 Year
      ended
                  March
      31, 2009
                
                
                Year
      ended
                  March
      31, 2008Numerator:Net
      loss before minority interest
                
                $
                (7,174
                )
                
                $
                (11,417
                )Preferred
      stock dividends
                
                
                (1,589
                )
                
                
                (1,295
                )Minority
      interest
                
                
                -
                
                
                
                176Stock
      warrant inducement discount
                
                
                -
                
                
                
                (1,982
                )Net
      loss available to common stockholders
                
                $
                (8,763
                )
                
                $
                (14,518
                )Denominator:Weighted
      average common shares for basic EPS
                
                
                12,558,956
                
                
                
                11,355,068Effect
      of dilutive securities:Total  outstanding
      warrants
                
                
                -
                
                
                
                5,231,215Average
      exercise price
                
                
                -
                
                
                
                5.00Average
      price during period
                
                
                4.65
                
                
                
                6.21Shares
      that could be acquired with the proceeds of warrants
                
                
                -
                
                
                
                4,208,634Dilutive
      share due to warrants
                
                
                -
                
                
                
                1,022,581Long
      term incentive stock option plan
                
                
                479,785
                
                
                
                30,483Average
      exercise price of stock options
                
                
                5.66
                
                
                
                5.81Share
      that could be acquired with the proceeds of options
                
                
                -
                
                
                
                28,497Dilutive
      shares due to options
                
                
                -
                
                
                
                1,986Weighted
      average convertible preferred shares at $6.20
                
                
                2,419,355
                
                
                
                2,419,355Weighted
      average common shares for diluted EPS
                
                
                12,558,956
                
                
                
                11,355,068Basic
      EPS
                
                $
                (0.70
                )
                
                $
                (1.28
                )Diluted
      EPS
                
                $
                (0.70
                )
                
                $
                (1.28
                )
 
 F-35
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 22.         ACQUIRED
MANAGEMENT BONUS PROGRAM
 
 On March
3, 2006, in connection with the closing of the acquisition of Lower Lakes, the
Company adopted a management bonus program (“the Program”), the participants of
which were employed by Lower Lakes or its affiliates.  Participants
were eligible to receive awards based on a formula that adjusts an aggregate
initial plan account balance of $3,000 by audited earnings before interest,
taxes, depreciation and amortization for fiscal years 2007 and 2008. The Company
had previously recorded additional liabilities of $439 to date for this
program.
 
 On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus
program. Pursuant to the terms of the Program, Rand issued 478,232 shares of
common stock to the employee participants for $2,645. In addition, $467 was paid
in cash to former employee participants and for payments of certain
participants’ withholding taxes. The Company has remaining liabilities of $103
for this program. The Company granted registration rights to any participant
that is issued shares of the Company's common stock in settlement of an award
under the Management Bonus Program.
 
 23.         VARIABLE
INTEREST ENTITIES
 
 In the
normal course of business, the Company interacts with various entities that may
be variable interest entities (VIEs) under the subjective guidelines of FIN46R.
WMS was determined to be a type of VIE, which must be consolidated in accordance
with FIN-46R from August 1, 2006 to February 13, 2008.
  On August
1, 2006, Lower Lakes Transportation Company, an indirect wholly-owned subsidiary
of the Company, entered into a Time Charter Agreement (the "Time Charter
Agreement") with WMS, an unaffiliated third party.  Under the Time
Charter Agreement, WMS made three United States flag vessels owned by WMS, the
DAVID Z. NORTON, the EARL W. OGLEBAY and the WOLVERINE (the "Vessels"),
available exclusively to LLTC for LLTC's use in providing transportation and
storage services for its customers.  The basic charter period under
the Time Charter Agreement would have expired on December 31, 2008, and LLTC had
the option to extend the charter period through December 31,
2013.  The Time Charter Agreement also provided LLTC the option of
purchasing the Vessels at any time during the charter period at a price based,
in part, generally on the amount of WMS indebtedness outstanding at the time of
purchase relating to WMS's acquisition and maintenance of the
Vessels.  Rand and its subsidiary, Rand LL Holdings Corp. ("Rand LL
Holdings"), each executed separate guaranties in favor of WMS with respect to
separate financial obligations of LLTC under the Time Charter Agreement. On June
27, 2007, Rand LL Holdings Corp. and Wisconsin & Michigan Steamship Company
entered into a First Amendment Agreement to the Time Charter Guaranty, dated
June 27, 2007, pursuant to which the parties amended certain definitions
relating to its financial covenants to remain in compliance with such financial
covenants.
  On
February 13, 2008 the Company exercised its purchase option and entered into an
asset purchase agreement with WMS (a VIE until that date) to buy the vessel
assets of the VIE. Based on this reconsideration event, the Company is no longer
the primary beneficiary under FIN46R and are no longer required to consolidate
WMS financial statements. The statement of operations as of March 31, 2008
includes the results of WMS through February 13, 2008, at which point WMS was
deconsolidated from the balance sheet. As a result of the deconsolidation
process, a loss of $302 was recorded in the books of the company.
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited and Voyageur
Pioneer Marine Inc. pursuant to which Lower Lakes purchased VOYAGEUR INDEPENDENT
and the VOYAGEUR PIONEER from the Sellers.
  Certain
customer contracts were also assigned to the Company under a Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management practices. Under
the Crew Manning Agreement, Voyageur’s responsible for selecting and training
the Vessels’ crews, payroll, tax and pension administration, union negotiations
and disputes and ensuring compliance with applicable requirements of Canadian
maritime law. Under the Crew Manning Agreement, Lower Lakes was obligated to pay
Voyageur an annual fee of $175 and pay or reimburse Voyageur for its reasonable
crew payroll expenses.The
Company terminated the Crew Manning Agreement in March 2008.
  
 F-36
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
  23. VARIABLE
INTEREST ENTITIES(continued)
  
  Also on
August 27, 2007, Lower Lakes entered into a Contract of
Affreightment  (“COA”) with Voyageur and Voyageur Maritime Trading Inc
(“VMT”) pursuant to which Voyageur and VMT made a Canadian flagged vessel owned
by VMT, the MARITIME TRADER (the “Trader”), available exclusively to Lower Lakes
for its use in providing transportation and storage services for its
customers.
  In
connection with the COA, on August 27, 2007, Lower Lakes entered
into an Option Agreement (the "Option Agreement") with VMT pursuant to
which Lower Lakes obtained the option to acquire the Trader for CDN $5,000
subject to certain adjustments. The option is exercisable between January
1, 2012 and December 31, 2017, subject to certain early exercise
provisions. If, at any time prior to expiration of the option, VMT receives
a bona fide offer from a third party to purchase the Trader which VMT
wishes to accept, Lower Lakes shall have the right to acquire the
Trader at the option price.
 
 On August
27, 2007, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE Canada.
Under the Guarantee, Lower Lakes has several options available to it in the
event that GE Canada intends to draw under the Guarantee, including (i) the
right to exercise its option for the Trader under an Option Agreement and (ii)
the right to make a subordinated secured loan to Voyageur in an amount at least
equal to the amount intended to be drawn by GE Canada on terms as are reasonably
satisfactory to GE Canada and Voyageur.
 
 Though
the Voyageur group of companies (Voyageur and its subsidiaries) is a variable
interest entity for Rand, the Company is not deemed the “Primary Beneficiary” of
Voyageur as Voyageur retains right on returns in managing its owned vessel
costs. Though the Company has guaranteed Voyageur’s indebtedness to enable the
undisrupted use in providing transportation and storage services for its
customers, the Voyageur’s equity is over 10% in the vessel. The orderly
liquidation value of the vessel exceed the Voyageur’ indebtedness, such that the
Company’s exposure is limited. The maximum exposure of the Company in the event
of a Voyageur default is CDN $1,250 representing the guarantee of Voyageur’s
indebtedness to GE Canada, unless the Company exercises its purchase option
which is also less than the orderly liquidation value. Therefore the Company is
not required to consolidate Voyageur’s financial statements. Voyageur became a
VIE to the Company on August 27, 2007. There is no change in a previous
conclusion about whether a VIE should be consolidated. The Company has not
provided support to the VIE when it was not contractually obliged to do so.
Voyageur is a privately held Canadian corporation and operates a Canadian
flagged vessel in The Great Lakes region for bulk shipping, which operates under
a Contract of Affreightment with the Company.
 
 24.      RELATED
PARTY TRANSACTIONS
 
 The
Company presently occupies office space provided by companies
controlled by our chief executive officer and our president. Such related
parties have agreed that it will make such office space, as well as
certain office and secretarial services, available to the Company, as may
be required by the Company from time to time. The Company agreed to pay
such affiliates $12 per month effective October 16, 2006, such that total lease
expense for the year paid to such affiliates was $144 in 2009 and $144 in
2008.  The Company reimbursed such affiliates for certain out of
pocket costs of $28 in 2009 and $15 in 2008 for office expenses. The statement
of operations for the year ended March 31, 2009 and 2008 include $172 and $ 159
respectively, related to this agreement.
 
 25.       ECONOMIC
DEPENDENCE
 
 The
Company had two major customers in excess of 10% of revenue in 2009 and
2008.  The customers in excess of 10% of revenues accounted for a
total of 33% in 2009 and 31% in 2008 of net revenues.
 
 F-37
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 
 26.      ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
 
 SFAS No.
130, “Reporting Comprehensive
Income”; establishes standards for the reporting and display of
comprehensive income (loss), which is defined as the change in equity arising
from non-owner sources.  Comprehensive income (loss) is reflected in
the Consolidated Statement of Stockholder’s equity and Other Comprehensive
Income (Loss).  The components of, and changes in, comprehensive
income (loss) and accumulated other comprehensive income (loss) consist of
translation adjustments arising from the translation of the parent Company
accounts in the Canadian subsidiary from Canadian dollar functional currency to
U.S. dollar reporting currency.  Included in comprehensive income
(loss) and accumulated other comprehensive income (loss) are the effects of
foreign currency translation adjustments loss of $6,656 in 2009 ($2,151 income
in 2008).
 
 27.      SUBSEQUENT
EVENT
 
 On June
23, 2009, Lower Lakes, Lower Lakes Transportation, Grand River and the other
Credit Parties thereto entered into a Second Amendment (the "Amendment"), to the
Amended and Restated Credit Agreement, dated as of February 13, 2008, with the
Lenders signatory thereto and General Electric Capital Corporation, as Agent.
Under the Amendment, the parties amended the definitions of "Fixed Charge
Coverage Ratio", “Fixed Charges”, “Funded Debt” and “Working Capital”, modified
the maximum amounts outstanding under the Canadian and US Revolving Credit
Facilities and modified the Minimum Fixed Charge Coverage Ratio and the Maximum
Senior Funded Debt to EBITDA Ratio.
 
   F-38