UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549
 
 Form
10-Q
 
 R
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the Quarterly Period Ended June 30, 2009or£
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Transition Period
      from                    to
 
 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
 
 Indicate
by checkmark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act of 1934during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No
o
 
 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 (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
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
 
 12,890,927
shares of Common Stock, par value $.0001, were outstanding at August 10,
2009.
  
  RAND
LOGISTICS, INC.
  INDEX
  PART
      I. FINANCIAL INFORMATION
                
                1Item
      1. Financial Statements
                
                1Item
      2. Management's Discussion and Analysis of Financial
      Condition and Results of Operations
                
                32Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                
                44Item
      4. Controls and Procedures
                
                44PART
      II. OTHER INFORMATION
                
                44Item
      1. Legal Proceedings
                
                44Item
      1A. Risk Factors
                
                44Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                
                44Item
      3. Defaults Upon Senior Securities
                
                44Item
      4. Submission of Matters to a Vote of Security
      Holders
                
                44Item
      5. Other Information
                
                44Item
      6. Exhibits
                
                45
  i
  PARTI. FINANCIAL INFORMATION
  Item
1.  Financial Statements.
  RAND
LOGISTICS, INC.
 Consolidated
Balance Sheets (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
  June
      30,
                
                
                March
      31,2009
                
                
                2009ASSETSCURRENTCash and cash
      equivalents
                
                $
                3,998
                
                
                $
                1,953Accounts receivable (Note
      3)
                
                
                12,960
                
                
                
                1,166Prepaid expenses and other
      current assets (Note 4)
                
                
                2,642
                
                
                
                3,008Income taxes
      receivable
                
                
                9
                
                
                
                22Deferred income
      taxes
                
                
                415
                
                
                
                418Total
      current assets
                
                
                20,024
                
                
                
                6,567PROPERTY
      AND EQUIPMENT, NET (Note 6)
                
                
                90,645
                
                
                
                86,233DEFERRED
      INCOME TAXES
                
                
                11,817
                
                
                
                12,140DEFERRED
      DRYDOCK COSTS, NET (Note 7)
                
                
                7,133
                
                
                
                7,274INTANGIBLE
      ASSETS, NET (Note 8)
                
                
                13,841
                
                
                
                13,497GOODWILL
      (Note 8)
                
                
                10,193
                
                
                
                10,193Total
      assets
                
                $
                153,653
                
                
                $
                135,904LIABILITIESCURRENTBank indebtedness (Note
      9)
                
                $
                13,081
                
                
                $
                2,786Accounts
    payable
                
                
                6,473
                
                
                
                4,131Accrued liabilities (Note
      10)
                
                
                10,227
                
                
                
                11,087Interest rate swap contracts
      (Note 18)
                
                
                2,857
                
                
                
                3,899Income taxes
      payable
                
                
                2
                
                
                
                –Deferred income
      taxes
                
                
                536
                
                
                
                480Current portion of long-term
      debt  (Note 11)
                
                
                4,316
                
                
                
                4,094Total
      current liabilities
                
                
                37,492
                
                
                
                26,477LONG-TERM
      DEBT  (Note 11)
                
                
                56,103
                
                
                
                54,240OTHER
      LIABILITIES
                
                
                232
                
                
                
                232DEFERRED
      INCOME TAXES
                
                
                13,898
                
                
                
                13,185Total
      liabilities
                
                
                107,725
                
                
                
                94,134COMMITMENTS
      AND CONTINGENCIES (Notes 12 and 13)STOCKHOLDERS’
      EQUITYPreferred stock, $.0001 par
      value,Authorized 1,000,000 shares,
      Issued and outstanding 300,000shares (Note
    14)
                
                
                14,900
                
                
                
                14,900Common stock, $.0001 par
      valueAuthorized 50,000,000 shares,
      Issued and outstanding12,890,927 shares (Note
      14)
                
                
                1
                
                
                
                1Additional paid-in
      capital
                
                
                61,806
                
                
                
                61,675Accumulated
      deficit
                
                
                (27,386
                )
                
                
                (29,228
                )Accumulated other
      comprehensive loss
                
                
                (3,393
                )
                
                
                (5,578
                )Total
      stockholders’ equity
                
                
                45,928
                
                
                
                41,770Total
      liabilities and stockholders’ equity
                
                $
                153,653
                
                
                $
                135,904
  The
accompanying notes are an integral part of these consolidated financial
statements.
  1
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Operations (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Three
      months ended
                
                
                Three
      months endedJune
      30, 2009
                
                
                June
      30, 2008REVENUEFreight
      and related revenue
                
                $
                24,145
                
                
                $
                27,301Fuel
      and other surcharges
                
                
                3,309
                
                
                
                9,418Outside
      voyage charter revenue
                
                
                1,797
                
                
                
                6,687TOTAL
      REVENUE
                
                
                29,251
                
                
                
                43,406EXPENSESOutside
      voyage charter fees (Note 15)
                
                
                1,786
                
                
                
                6,246Vessel
      operating expenses
                
                
                17,886
                
                
                
                25,555Repairs
      and maintenance
                
                
                654
                
                
                
                888General
      and administrative
                
                
                2,397
                
                
                
                2,469Depreciation
                
                
                2,008
                
                
                
                1,618Amortization
      of drydock costs
                
                
                578
                
                
                
                567Amortization
      of intangibles
                
                
                409
                
                
                
                431Loss
      on foreign exchange
                
                
                47
                
                
                
                225,765
                
                
                
                37,776OPERATING
      INCOME
                
                
                3,486
                
                
                
                5,630OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                
                
                1,429
                
                
                
                1,674Interest
      income
                
                
                (1
                )
                
                
                (5
                )Gain
      on interest rate swap contracts (Note 18)
                
                
                (1,273
                )
                
                
                (1,234
                )155
                
                
                
                435INCOME
      BEFORE INCOME TAXES
                
                
                3,331
                
                
                
                5,195PROVISION  FOR
      INCOME TAXES (Note 5)Current
                
                
                -
                
                
                
                -Deferred
                
                
                1,046
                
                
                
                2,5161,046
                
                
                
                2,516NET
      INCOME
                
                
                2,285
                
                
                
                2,679PREFERRED
      STOCK DIVIDENDS
                
                
                443
                
                
                
                363NET
      INCOME APPLICABLE TO COMMON STOCKHOLDERS
                
                $
                1,842
                
                
                $
                2,316Net
      income per share basic (Note 19)
                
                $
                0.14
                
                
                $
                0.19Net
      income per share diluted
                
                $
                0.14
                
                
                $
                0.18Weighted
      average shares basic
                
                
                12,890,927
                
                
                
                12,105,051Weighted
      average shares diluted
                
                
                12,890,927
                
                
                
                14,796,536
  The
accompanying notes are an integral part of these consolidated financial
statements.
 2
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Stockholders’ Equity and Other Comprehensive Income (Loss)
(Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Common
      Stock
                
                
                Preferred
      Stock
                
                
                Additional
                
                
                Accumulated
                
                
                Other
      Comprehensive Income
                
                
                Comprehensive
                
                
                Total
      Stockholders’Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Paid-In
      Capital
                
                
                Deficit
                
                
                (Loss)
                
                
                Income
      (Loss)
                
                
                EquityBalances,
      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 undermanagement
      bonus program(Note 20)
                
                
                478,232
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,645
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,645Warrant
      conversion, net of expenses (Note 14)
                
                
                291,696
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                157
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                157Warrant
      extinguishment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (9
                )
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (9
                )Unrestricted
      stock issued (Note 14)
                
                
                15,948
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                75
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                75Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                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
                )
                
                $
                41,770Net
      income
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,285
                
                
                
                --
                
                
                
                2,285
                
                
                
                2,285Preferred
      dividend
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (443
                )
                
                
                --
                
                
                
                --
                
                
                
                (443
                )Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131Translation
      adjustment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,185
                
                
                
                2,185
                
                
                
                2,185Balances,
      June 30, 2009
                
                
                12,890,927
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                61,806
                
                
                $
                (27,386
                )
                
                $
                (3,393
                )
                
                $
                4,470
                
                
                $
                45,928
  The
accompanying notes are an integral part of these consolidated financial
statements.
  3
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Cash Flows (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Three
      months ended
                
                
                Three
      months endedJune
      30, 2009
                
                
                June
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet income
                
                $
                2,285
                
                
                $
                2,679Adjustments to reconcile net
      income to net cash usedby operating
      activitiesDepreciation and amortization
      of drydock costs
                
                
                2,586
                
                
                
                2,185Amortization of intangibles
      and deferred financing costs
                
                
                505
                
                
                
                536Deferred income
      taxes
                
                
                1,046
                
                
                
                2,536Gain on interest rate swap
      contracts
                
                
                (1,273
                )
                
                
                (1,234
                )Equity
      compensation
                
                
                131
                
                
                
                156Deferred drydock costs
      paid
                
                
                --
                
                
                
                (305
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (11,794
                )
                
                
                (17,420
                )Prepaid expenses and other
      current assets
                
                
                366
                
                
                
                (1,683
                )Accounts payable and accrued
      liabilities
                
                
                1,710
                
                
                
                (358
                )Other
    liabilities
                
                
                --
                
                
                
                232Income taxes
      payable
                
                
                15
                
                
                
                --(4,423
                )
                
                
                (12,676
                )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase of property and
      equipment
                
                
                (2,408
                )
                
                
                (3,475
                )Sale proceeds of retired
      vessel
                
                
                --
                
                
                
                250(2,408
                )
                
                
                (3,225
                )CASH
      FLOWS FROM FINANCING ACTIVITIESLong-term debt
      repayment
                
                
                (1,078
                )
                
                
                --Proceeds from bank
      indebtedness
                
                
                10,184
                
                
                
                17,8659,106
                
                
                
                17,865EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
                
                
                (230
                )
                
                
                (236
                )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                2,045
                
                
                
                1,728CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                1,953
                
                
                
                5,626CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
                
                $
                3,998
                
                
                $
                7,354SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayments for
      interest
                
                $
                1,444
                
                
                $
                1,007Payment of income
      taxes
                
                $
                --
                
                
                $
                --Unpaid purchase of property
      and equipment
                
                $
                233
                
                
                $
                2,946
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                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. (“Rand Finance”) and Rand LL Holdings Corp., 100%
subsidiaries of the Company, and the accounts of Lower Lakes Towing Ltd. (“Lower
Lakes Towing”), Lower Lakes Transportation Company (“Lower Lakes
Transportation”) and Grand River Navigation Company, Inc. (“Grand River”), each
of which 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. In the opinion of management, the interim
financial statements contain all adjustments necessary (consisting of normal
recurring accruals) to present fairly the financial information contained
herein. Operating results for the interim period presented are not necessarily
indicative of the results to be expected for a full year, in part due to the
seasonal nature of the business. The comparative balance sheet amounts are
derived from the March 31, 2009 audited consolidated financial statements. The
statements and related notes have been prepared pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements that were included
in the Company’s Annual Report on Form 10-K for the period ended March 31,
2009.
  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 Services 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’s allowance for doubtful
accounts was $157 as of June 30, 2009 and $146 as of March 31,
2009.  The Company has historically had no significant bad debts.
Interest is not accrued on outstanding receivables.
  5
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  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
  Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. The
intangibles are amortized as follows:
  Trademarks
      and trade names
                      Non-competition
      agreements
                      Customer
      relationships and contracts
                  
                  10
      years straight-line
                      4
      years straight-line
                      15
      years straight-line
  6
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
(continued)
  Property and Equipment
  Property
and equipment are recorded at cost.  Depreciation methods for capital
assets are as follows:
  Vessels
                        Leasehold
      improvements
                        Vehicles
                        Furniture
      and equipment
                        Computer
      equipment
                        Communication
      equipment
                  
                  4 -
      25 years straight-line
                        7 -
      11 years straight-line
                        20%
      declining-balance
                        20%
      declining-balance
                        45%
      declining-balance
                        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.
  7
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
(continued)
  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 are 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
forecast 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.  As of March 31, 2009 the Company
conducted an annual test and 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. There are no events or changes in circumstances during the
quarter that indicate that its carrying amount may not be
recoverable.
  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 generally 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.
  8
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
(continued)
  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.
  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 not 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.
  9
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
(continued)
   There
have been no recent examinations by the Internal Revenue Service. 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 stockholders’ 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.
  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.
  Stock-based
Compensation
  The
Company has adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”),
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.
  10
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
(continued)
  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, “Accounting for
Derivative Instruments and Hedging Activities,” (“SFAS 133”) 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 No. 46R, “Consolidation of Variable
Interest Entities: Interpretations of FASB Interpretation No. 46” (“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 21). Though
the Voyageur group of companies is a variable interest entity for Rand, it does
not meet the criteria for consolidation and hence is not
consolidated.
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS
  Fair Value
Measurements
  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 deferred 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
related to the Company’s financial assets and liabilities, which took effect on
January 1, 2008 are presented in Note 18. On April 1, 2009, the Company
implemented the previously-deferred provisions of SFAS No. 157 for our
nonfinancial assets and liabilities which include goodwill and intangible
assets. The Company determined that the remaining provisions did not have a
material effect on the Company’s consolidated financial position or results of
operations when they became 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.
  11
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  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  has adopted FSP FAS 157-4 in
the first quarter of fiscal 2010 and it did not have a material impact on its
consolidated financial statements upon
adoption.
  Non-controlling
Interests in Consolidated Financial Statements
  On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (“SFAS 160”), an amendment of ARB No. 51.
SFAS 160 requires entities to report non-controlling (minority) interests of
consolidated subsidiaries as a component of shareholders’ equity on the balance
sheet, include all earnings of a consolidated subsidiary in consolidated results
of operations, and treat all transactions between an entity and the
non-controlling interest as equity transactions between the
parties.  SFAS 160 applies to all fiscal years beginning on or after
December 15, 2008. The Company has adopted this standard as of April 1, 2009,
however, the Company does not have any partially owned subsidiaries to
consolidate, and therefore the application of this standard has no impact on its
consolidated financial statements.
  Derivative
Instruments and Hedging Activities
  In March
2008, the FASB issued SFAS No. 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 effectivefor fiscal years beginning
after November 15, 2008. The Company has adopted SFAS 161 as of April 1,
2009, which had no impact on the Company’s consolidated financial
statements.
  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” (“FSP FAS 142-3”), 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 FSP FAS 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. FSP FAS 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 has adopted this
standard for the fiscal year ending March 31, 2010. The adoption of FSP FAS
142-3 did not have a material impact on the Company’s consolidated financial
statements.
  12
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS
(continued)
  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. SFAS No. 141R
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008, and interim periods within those fiscal years. The
Company has adopted SFAS No. 141R effective April 1, 2009 and there was no
impact on the Company’s consolidated financial statements, however, any business
combinations we engage in will be recorded and disclosed in accordance with this
statement.
  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. This FSP is effective for interim and annual reporting periods
ending after June 15, 2009.  The impact of adoption did not have a material
impact on the Company’s consolidated financial statements.
  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. This standard is
effective for interim and annual periods ending after June 15,
2009.  The Company has adopted FSP FAS 107-1 and APB 28-1 as of
June 30, 2009, as required.
  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. This standard is effective for
interim and annual periods ending after June 15, 2009. The Company has adopted
SFAS No. 165 as of June 30, 2009. The disclosure requirements of SFAS
No. 165 as applicable to the Company are presented in Note 22.
  13
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS
(continued)
  The
Hierarchy of Generally Accepted Accounting Principles
  In
June 2009, the FASB issued Statement No. 168,“The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, a replacement of FASB Statement No. 162” (“FAS 168”). The
objective of FAS 168 is to replace Statement 162 and to establish the FASB
Accounting Standards Codification as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. The standard is
effective for interim and annual periods ending after September 15, 2009,
or the Company’s second 2010 fiscal quarter. The Company does not expect FAS 168
to have a significant impact on its financial position, results of operations,
or cash flows.
  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 beginning
after November 15, 2009 and interim periods therein. 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. The
Company adopted FSP FAS 140-4 and FIN 46R-8 as of the quarter ending December
31, 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.
  14
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  3.
                  ACCOUNTS
      RECEIVABLE
 Trade
receivables are presented net of an allowance for doubtful
accounts.  The allowance was $157 as of June 30, 2009 and $146 as of
March 31, 2009. 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 by the
customer, the size and credit quality of the customer, the period of time
remaining in the shipping season and the demand for future cargos.
  4.
                  PREPAID
      EXPENSES AND OTHER CURRENT
ASSETS
  Prepaid
expenses and other current assets are comprised of the following:
  June
      30,
                
                
                March
      31,2009
                
                
                2009Prepaid
      insurance
                
                $
                501
                
                
                $
                861Fuel
      and lubricants
                
                
                1,756
                
                
                
                1,481Deposits
      and other prepaids
                
                
                385
                
                
                
                666$
                2,642
                
                
                $
                3,008
  5.
                INCOME
      TAXES
  The
Company's effective tax rate was 31.4% for the three months ended June 30, 2009
compared to 48.4% for the three months ended June 30, 2008. The effective tax
rate for the prior fiscal period was higher than its statutory tax rate
primarily due to an additional $677 tax expense resulting from a change in a
compensation method from cash to stock.
  6.
                  PROPERTY
      AND EQUIPMENT
  Property
and equipment are comprised of the following:
  June
      30,
                
                
                March
      31,2009
                
                
                2009CostVessels
                
                $
                103,076
                
                
                $
                96,240Leasehold
      improvements
                
                
                2,133
                
                
                
                2,110Furniture
      and equipment
                
                
                229
                
                
                
                209Vehicles
                
                
                20
                
                
                
                18Computer,
      communication equipment and purchased software
                
                
                2,098
                
                
                
                1,978$
                107,556
                
                
                $
                100,555Accumulated
      depreciationVessels
                
                $
                15,951
                
                
                $
                13,537Leasehold
      improvements
                
                
                471
                
                
                
                425Furniture
      and equipment
                
                
                61
                
                
                
                49Vehicles
                
                
                5
                
                
                
                3Computer,
      communication equipment and purchased software
                
                
                423
                
                
                
                30816,911
                
                
                
                14,322$
                90,645
                
                
                $
                86,233
  15
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  7.
                  DEFERRED
      DRYDOCK COSTS
  Deferred
drydock costs are comprised of the following:
  June
      30,
                
                
                March
      31,2009
                
                
                2009Drydock
      expenditures
                
                $
                11,563
                
                
                $
                10,935Accumulated
      amortization
                
                
                4,430
                
                
                
                3,661$
                7,133
                
                
                $
                7,274
  The
following table shows periodic deferrals of drydock cost and
amortization.
  Balance
      as of March 31, 2008
                
                $
                9,082Drydock
      expenditures paid and accrued
                
                
                1,400Amortization
      of drydock cost
                
                
                (2,141
                )Foreign
      currency translation adjustment
                
                
                (1,067
                )Balance
      as of March 31, 2009
                
                $
                7,274Amortization
      of drydock cost
                
                
                (578
                )Foreign
      currency translation adjustment
                
                
                437Balance
      as of June 30, 2009
                
                $
                7,133
  8.
                INTANGIBLE
      ASSETS AND GOODWILL
  Intangibles
are comprised of the following:
  June
      30,
                    2009
                
                
                March
      31,
                    2009Intangible
      assetsDeferred financing
      costs
                
                $
                1,978
                
                
                $
                1,886Trademarks and trade
      names
                
                
                918
                
                
                
                868Non-competition
      agreements
                
                
                2,103
                
                
                
                1,989Customer relationships and
      contracts
                
                
                14,462
                
                
                
                13,585Total identifiable
      intangibles
                
                $
                19,461
                
                
                $
                18,328Accumulated
      amortizationDeferred financing
      costs
                
                $
                542
                
                
                $
                426Trademarks and trade
      names
                
                
                305
                
                
                
                267Non-competition
      agreements
                
                
                1,944
                
                
                
                1,700Customer relationships and
      contracts
                
                
                2,829
                
                
                
                2,4385,620
                
                
                
                4,831Total
      intangible assets
                
                $
                13,841
                
                
                $
                13,497Goodwill
                
                $
                10,193
                
                
                $
                10,193
 
 Intangible
asset amortization over the next five years is estimated as
follows:
  Period
      ending June 30, 2010
                  
                  $
                  1,598Period
      ending June 30, 2011
                  
                  
                  1,439Period
      ending June 30, 2012
                  
                  
                  1,439Period
      ending June 30, 2013
                  
                  
                  1,343Period
      ending June 30, 2014
                  
                  
                  1,056$
                  6,875
  16
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  9.
                BANK
      INDEBTEDNESS
  As
discussed in detail in Note 11, the Company amended and restated the Credit
Agreement with its senior lender on February 13, 2008.  At June 30,
2009 and March 31, 2009, the Company had authorized operating lines of credit
under its amended and restated credit agreement in the amounts of CDN $13,500
and US $13,500 with its senior lender, and was utilizing CDN $3,500 at June 30,
2009 (CDN $2,359 at March 31, 2009) and US $10,071 at June 30, 2009 (US $916 at
March 31, 2009), and maintained letters of credit of CDN $1,403.  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
11.  The effective interest rates on the operating lines of credit at
June 30, 2009 were 4.22% and March 31, 2009 were 4.41% on the Canadian line of
credit and 4.18% and 5.06% 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 June 30, 2009 the
Company had additional credit availability of $7,117 based on eligible
receivables and the seasonal overadvance facility.
  10.
                  ACCRUED
      LIABILITIES
  Accrued
liabilities are comprised of the following:
  June
      30,
                
                
                March
      31,2009
                
                
                2009Payroll
      compensation and benefits
                
                $
                2,731
                
                
                $
                1,879Preferred
      stock dividends
                
                
                3,624
                
                
                
                3,180Professional
      fees
                
                
                679
                
                
                
                749Interest
                
                
                288
                
                
                
                401Winter
      work and capital expenditures
                
                
                520
                
                
                
                2,731Capital
      and franchise taxes
                
                
                299
                
                
                
                307Other
                
                
                2,086
                
                
                
                1,840$
                10,227
                
                
                $
                11,087
  11.
                  LONG-TERM
      DEBT
  On
February 13, 2008, Lower Lakes Towing, 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, funds for
other general corporate purposes and funds 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 overadvance 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 overadvance 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.
  17
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  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 guaranteed 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
was in compliance with those covenants as of June 30,
2009.
  18
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  LONG-TERM
      DEBT (continued)
  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 this 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 further amended its Amended and Restated Credit Agreement.
Under this Amendment, the parties amended the definitions of “Fixed Charge
Coverage Ratio”, “Fixed Charges”, “Funded Debt” and “Working Capital”, modified
the maximum amount and duration of the seasonal overadvance facilities 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.
  The
effective interest rates on the term loans at June 30, 2009, including the
effect from interest rate swap contracts, were 7.84% (7.84% at March 31, 2009)
on the Canadian term loan, 9.09% (9.09% at March 31, 2009) on the Canadian
engine loan and 7.40% (7.40% at March 31, 2009) on the US term loan. The actual
interest rate charged without the effect of interest rate swap contracts were
4.18% (4.59% at March 31, 2009) on the Canadian term loan, 5.43% (5.84% at March
31, 2009) on the Canadian engine loan and 4.42% (5.01% at March 31, 2009) on the
US term loan.
  June
      30,
                    2009
                
                
                March
      31,
                    2009a)
                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.
                
                $
                33,465
                
                
                $
                31,408b)
                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.
                
                
                6,420
                
                
                
                6,026c)
                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.
                
                
                20,534
                
                
                
                20,900$
                60,419
                
                
                $
                58,334Less
      amounts due within 12 months
                
                
                4,316
                
                
                
                4,094$
                56,103
                
                
                $
                54,240
  19
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  LONG-TERM
      DEBT (continued)
  Principal
payments are due as follows:
  Period
      ending June 30, 2010
                
                $
                4,316Period
      ending June 30, 2011
                
                
                4,316Period
      ending June 30, 2012
                
                
                4,315Period
      ending April 01, 2013
                
                
                47,472$
                60,419
  12.
                  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:
  Three
      months ended
                  June
      30, 2009
                
                
                Three
      months ended
                  June
      30, 2008Operating
      lease
                
                $
                58
                
                
                $
                59Operating
      sublease
                
                
                36
                
                
                
                36$
                94
                
                
                $
                95
  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 $232 for three months ended June 30, 2009 and 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%.
  Period
      ending June 30, 2010
                
                $
                696Period
      ending June 30, 2011
                
                
                696Period
      ending June 30, 2012
                
                
                696Period
      ending June 30, 2013
                
                
                696Period
      ending June 30, 2014
                
                
                696Thereafter
                
                
                3,479$
                6,959
  The
Company’s future minimum rental commitments under other operating leases are as
follows:
  Period
      ending June 30, 2010
                
                $
                196Period
      ending June 30, 2011
                
                
                167Period
      ending June 30, 2012
                
                
                120Period
      ending June 30, 2013
                
                
                75Period
      ending June 30, 2014
                
                
                64Thereafter
                
                
                313$
                935
  20
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  13.
                  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 $771 as of June 30,
2009 and $604 as of March 31, 2009 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 21) 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.
  21
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  STOCKHOLDERS’
      EQUITY
  At
December 31, 2005, 10,100,000 shares of common stock were reserved for issuance
upon exercise of redeemable warrants and the underwriter’s unit purchase
option.  Each redeemable 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 redeemable warrants expired on October 26,
2008. The underwriter’s options and redeemable warrants issued in conjunction
with the Company’s initial public offering are equity linked derivatives and
accordingly represent off-balance sheet arrangements.  The
underwriter’s options and redeemable 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.
  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 remaining
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.
  The
following 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.
  22
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                STOCKHOLDERS’
      EQUITY (continued)
  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 June 30, 2009 was $ 3,624 and at March 31, 2009 was $3,180.
As of June 30, 2009 the effective rate of preferred dividends is 9.75% (9.75% as
of March 31, 2009). 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
dividends by the fixed charge coverage ratio as per the covenant in the Amended
and Restated Credit Agreement.
  23
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  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
Company’s 2007 Long Term Incentive Plan (“LTIP”) for Employees, Officers,
Directors and Consultants.  At June 30, 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 June 30, 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 20. Pursuant to the terms of the management bonus
program, Rand issued 478,232 shares of common stock to the employee
participants.
  24
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  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
June 30, 2009, had a remaining weighted average contractual life of
approximately eight years and nine months. The Company has recorded compensation
expenses of $131 for the quarter ended June 30, 2009 ($66 for the quarter ended
June 30, 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 June 30, 2009.
  15.
                  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.
  16.
                  INTEREST
      EXPENSE
  Interest
expense is comprised of the following:
  Three
      months
                  ended
                  June
      30, 2009
                
                
                Three
      months
                  ended
                  June
      30, 2008Bank
      indebtedness
                
                $
                134
                
                
                $
                180Amortization
      of deferred financing costs
                
                
                96
                
                
                
                108Long-term
      debt – senior
                
                
                720
                
                
                
                1,316Interest
      rate swap
                
                
                479
                
                
                
                70$
                1,429
                
                
                $
                1,674
  25
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  17.
                  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:
  Three
      months
                  ended
                  June 30, 2009
                
                
                Three
      months
                  ended
                  June 30, 2008Revenue
      by countryCanada
                
                $
                19,369
                
                
                $
                27,370United
      States
                
                
                9,882
                
                
                
                16,036$
                29,251
                
                
                $
                43,406
  Revenues
from external customers are allocated based on the country of the legal entity
of the Company in which the revenues were recognized.
  June
      30,
                    2009
                  
                  
                  March
      31,
                    2009Property
      and equipment by countryCanada
                  
                  $
                  61,903
                  
                  
                  $
                  56,962United
      States
                  
                  
                  28,742
                  
                  
                  
                  29,271$
                  90,645
                  
                  
                  $
                  86,233Intangible
      assets by countryCanada
                  
                  $
                  10,534
                  
                  
                  $
                  10,047United
      States
                  
                  
                  3,307
                  
                  
                  
                  3,450$
                  13,841
                  
                  
                  $
                  13,497Goodwill
      by countryCanada
                  
                  $
                  8,284
                  
                  
                  $
                  8,284United
      States
                  
                  
                  1,909
                  
                  
                  
                  1,909$
                  10,193
                  
                  
                  $
                  10,193Total
      assets by countryCanada
                  
                  $
                  105,593
                  
                  
                  $
                  92,052United
      States
                  
                  
                  48,060
                  
                  
                  
                  43,852$
                  153,653
                  
                  
                  $
                  135,904
  26
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  18.
                  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. On April 1, 2009, we adopted the requirements of SFAS No.
157 for non-recurring non-financial assets and liabilities, which had been
deferred for one year under FSP FAS 157-2, “Effective Date of FASB Statement No.
157.”
  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 June 30, 2009:
  Fair
      Value Measurements at June 30, 2009Carrying
      value at
                  June
      30, 2009
                Quoted
      prices in
                  active
      markets
                  (Level
      1)
                Significant
      other
                  Observable
                  Inputs
                  (Level
      2)Interest
      rate swap contracts liability
                $       2,857
                $         -
                $       2,857
  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 $2,857 as of June 30, 2009 ($3,899 as of
March 31, 2009) for two interest rate swap contracts on the Company’s term debt.
For the three months ended June 30, 2009 the fair value adjustment of the
interest rate swap contracts has resulted in a gain of $1,273 ($1,234 for three
months ended June 30, 2008).  This gain 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.
  27
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  18.
                  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 principal 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.
  28
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  19.
                  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 total of
15,310,282 shares for the quarter ended June 30, 2009 and 14,796,536 shares for
the quarter ended June 30, 2008 are based on the following
calculations.  Since the calculation for June 30, 2009 is
anti-dilutive, the basic and fully diluted weighted average shares outstanding
are 12,890,927. There are no warrants outstanding as of June 30, 2009. For the
quarter ended June 30, 2008, warrants issued from the initial prospectus and
over allotment converts to 272,130 based on the average quarterly share price of
$5.27. Convertible preferred shares converts to 2,419,355 common shares based on
a price of $6.20. 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.
  Three
      months ended
                  June
      30, 2009
                
                
                Three
      months ended
                  June
      30, 2008Numerator:Net
      income before preferred stock dividend
                
                $
                2,285
                
                
                $
                2,679Preferred
      stock dividends
                
                
                (443
                )
                
                
                (363
                )Net
      income available to common stockholders
                
                $
                1,842
                
                
                $
                2,316Denominator:Weighted
      average common shares for basic EPS
                
                
                12,890,927
                
                
                
                12,105,051Effect
      of dilutive securities:Total
      outstanding warrants
                
                
                --
                
                
                
                5,231,215Average
      exercise price
                
                
                --
                
                
                
                5.00Average
      price during period
                
                
                3.60
                
                
                
                5.27Shares
      that could be acquired with the proceeds of
                
                
                --warrants
                
                
                --
                
                
                
                4,959,085Dilutive
      share due to warrants
                
                
                --
                
                
                
                272,130Long-term
      incentive stock option plan
                
                
                479,785
                
                
                
                243,199Average
      exercise price of stock options
                
                
                5.66
                
                
                
                5.81Share
      that could be acquired with the proceeds ofoptions
                
                
                --
                
                
                
                --Dilutive
      shares due to options
                
                
                --
                
                
                
                --Weighted
      average convertible preferred shares at$6.20
                
                
                2,419,355
                
                
                
                2,419,355Weighted
      average common shares for diluted EPS
                
                
                12,890,927
                
                
                
                14,796,536Basic
      EPS
                
                $
                0.14
                
                
                $
                0.19Diluted
      EPS
                
                $
                0.14
                
                
                $
                0.18
  29
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  20.
                  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.
  On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the 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 $111 for the
Program.
  21.
                  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.
  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. (“Voyageur”) 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 was 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.
  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 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.
  30
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  21.
                  VARIABLE
      INTEREST ENTITIES (continued)
  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 because Voyageur manages its own vessel costs and absorbs the majority
of expected losses or receives the majority of expected residual returns. The
Company has guaranteed Voyageur’s indebtedness to enable the undisrupted use in
providing transportation and storage services for Rand’s customers. However, the
orderly liquidation value of the vessel exceeds 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, the value of 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. 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.  The Company continues to evaluate new
investments for the application of FIN 46(R) and regularly reviews all existing
entities in connection with any reconsideration events (as defined in FIN 46(R))
that may result in an entity becoming a VIE or in the Company becoming the
primary beneficiary of an existing VIE. 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.
  22.
                  SUBSEQUENT
      EVENT
  The
Company has evaluated subsequent events through August 10, 2009 and no
event has occurred from the balance sheet date through that date that would
impact the consolidated financial statements.
  31
 Item2.  Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
  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 Quarterly Report on Form 10-Q
for the three month period ended June 30, 2009.
  Cautionary
Note Regarding Forward-Looking Statements
  This
quarterly report on Form 10-Q contains forward-looking statements, including
those relating to our capital needs, business strategy, expectations and
intentions. Statements that use the terms “believe”, “anticipate”, “expect”,
“plan”, “estimate”, “intend” and similar expressions of a future or
forward-looking nature identify forward-looking statements for purposes of the
U.S. federal securities laws or otherwise. For these statements and all other
forward-looking statements, we claim the protection of the Safe Harbor for
Forward-Looking Statements contained in the Private Securities Litigation Reform
Act of 1995.
  Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy or are otherwise beyond our control and some
of which might not even be anticipated.  Forward-looking statements
reflect our current views with respect to future events and because our business
is subject to such risks and uncertainties, actual results, our strategic plan,
our financial position, results of operations and cash flows could differ
materially from those described in or contemplated by the forward-looking
statements contained in this report.
  Important
factors that contribute to such risks include, but are not limited to, those
factors set forth under “Risk Factors” on our Form 10-K filed with the
Securities and Exchange Commission on June 25, 2009 as well as the following:
the effect of the economic downturn in our markets; the weather conditions on
the Great Lakes; and our ability to maintain and replace our vessels as they
age.  The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with other cautionary
statements that are included in this report. We undertake no obligation to
publicly update or review any forward-looking statements, whether as a result of
new information, future developments or otherwise.
  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 our business, unless the context otherwise
requires, references to Rand, we, us and the Company 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.
  32
  Our
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 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
  Three
month period ended June 30, 2009 compared to the three month period ended June
30, 2008:
  The three
month period ended June 30, 2009 was highlighted by several significant changes
as compared to the three month period ended June 30, 2008:
  (1)
              There
      was a significant reduction in demand from our customers in the three
      month period ended June 30, 2009 compared to the three month period ended
      June 30, 2008 due to the weakened economy and the resultant delayed
      openings of our customers’ facilities.  Such factors reduced our
      vessel scheduling flexibility and decreased the overall operating
      efficiency of our fleet.  The sharp decline in customer demand
      in the three month period ended June 30, 2009 reduced both revenues from
      our own vessels and outside charter revenues as compared to the three
      month period ended June 30, 2008; however, the reduction of outside
      charter revenues had minimal impact on our
  margins.
  (2)
              We
      partially offset decreases in demand for the transportation of certain
      commodities with increased business from our grain and salt
      customers.
  (3)
              As
      a result of the net reduced demand from our customers, our total Sailing
      Days, which we define as days a vessel is crewed and available for
      sailing, decreased 43 days, or 4.5%, to 912 Sailing Days during the three
      month period ended June 30, 2009 from 955 Sailing Days during the three
      month period ended June 30, 2008.
  (4)
              Due
      to the repowering and other upgrading of the Saginaw during the three
      month period ended June 30, 2008, we operated this vessel an additional 72
      Sailing Days during the three month period ended June 30,
      2009.
  (5)
              Due
      to reduced demand from our customers, we did not sail the McKee Sons
      during the three month period ended June 30, 2009.  We operated
      the McKee Sons for 91 Sailing Days during the three month period ended
      June 30, 2008.
  (6)
              Excluding
      the Saginaw and the McKee Sons, we operated our remaining ten Canadian and
      U.S. vessels for 24 fewer Sailing Days in the three month period
      ended  June 30, 2009 than in the three month period
      ended  June 30, 2008.
  (7)
              We
      benefited from additional new business and contractual rate increases from
      existing customers.
  (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
      significantly impact our margin dollars.  Due to reduced fuel
      prices during the three month period ended June 30, 2009, fuel surcharge
      revenues declined sharply as compared to the three month period ended June
      30, 2008.
  (9)
              The
      Canadian dollar weakened by approximately 13% versus the US dollar,
      averaging approximately $0.86 USD per CAD during the three month period
      ended at June 30, 2009 compared to approximately $0.99 USD per CAD during
      the three month period ending June 30, 2008.  The Company’s
      balance sheet translation rate increased from $0.79 USD per CAD at March
      31, 2009 to $0.86 USD per CAD at June 30,
2009.
  33
  Selected
Financial Information
  (USD
      in 000’s)
              
              Three
      month period ended June 30, 2009
              
              
              Three
      month period ended June 30, 2008
              
              
              $
      Change
              
              
              %
      ChangeRevenue:Freight
      and related revenue
              
              $
              24,145
              
              
              $
              27,301
              
              
              $
              (3,156
              )
              
              
              (11.6
              )
      %Fuel
      and other Surcharges
              
              
              3,309
              
              
              
              9,418
              
              
              
              (6,109
              )
              
              
              (64.9
              )
      %Outside
      Voyage Charter revenue
              
              
              1,797
              
              
              
              6,687
              
              
              
              (4,890
              )
              
              
              (73.1
              )
      %Total
              
              $
              29,251
              
              
              $
              43,406
              
              
              $
              (14,155
              )
              
              
              (32.6
              )%Expenses:Outside
      Voyage Charter Fees
              
              $
              1,786
              
              
              $
              6,246
              
              
              $
              (4,460
              )
              
              
              (71.4
              )
      %Vessel
      Operating expenses
              
              $
              17,886
              
              
              $
              25,555
              
              
              $
              (7,669
              )
              
              
              (30.0
              )
      %Repairs
      and Maintenance
              
              $
              654
              
              
              $
              888
              
              
              $
              (234
              )
              
              
              (26.4
              )
      %Sailing
      Days:
              
              
              912
              
              
              
              955
              
              
              
              (43
              )
              
              
              (4.5
              )
      %Per Day in Whole
      USD:Revenue per Sailing
      Day:Freight
      and related revenue
              
              $
              26,475
              
              
              $
              28,587
              
              
              $
              (2,112
              )
              
              
              (7.4
              )
      %Fuel
      and other Surcharges
              
              $
              3,628
              
              
              $
              9,862
              
              
              $
              (6,234
              )
              
              
              (63.2
              )
      %Expenses per Sailing
      Day:Vessel
      Operating expenses
              
              $
              19,612
              
              
              $
              26,759
              
              
              $
              (7,147
              )
              
              
              (26.7
              )
      %Repairs
      and Maintenance
              
              $
              717
              
              
              $
              930
              
              
              $
              (213
              )
              
              
              (22.9
              )
      %
  Management
believes that each of our vessels should achieve approximately 91 Sailing Days
in an average first fiscal quarter, assuming no major repairs or incidents and
normal dry-docking cycle times performed during the winter lay-up
period.
  34
  The
following table summarizes the changes in the components of our revenue and
vessel operating expenses as well as changes in Sailing Days during the three
month period ended June 30, 2009 compared to the three month period ended June
30, 2008:
  (USD
      in 000’s)
              
              Sailing
      Days
              
              
              Freight
      and Related Revenue
              
              
              Fuel
      and Other Surcharges
              
              
              Outside
      Voyage Charter
              
              
              Total
      Revenue
              
              
              Vessel
      Operating ExpensesThree
      month period ended June 30, 2008
              
              
              955
              
              
              $
              27,301
              
              
              $
              9,418
              
              
              $
              6,687
              
              
              $
              43,406
              
              
              $
              25,555Changes
      in the three month period ended June 30, 2009:Decrease
      attributable to weaker Canadian dollar
              
              
              -
              
              
              $
              (2,282
              )
              
              $
              (306
              )
              
              $
              (284
              )
              
              $
              (2,872
              )
              
              $
              (1,641
              )Net
      decrease attributable to reduced customer demand (excluding currency
      impact)
              
              
              (43
              )
              
              $
              (874
              )
              
              $
              (5,803
              )
              
              $
              -
              
              
              $
              (6,677
              )
              
              $
              (6,028
              )Changes
      in Outside Charter Revenue (excluding currency impact)
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (4,606
              )
              
              $
              (4,606
              )
              
              $
              -Sub-Total
              
              
              (43
              )
              
              $
              (3,156
              )
              
              $
              (6,109
              )
              
              $
              (4,890
              )
              
              $
              (14,155
              )
              
              $
              (7,669
              )Three
      month period ended June 30, 2009
              
              
              912
              
              
              $
              24,145
              
              
              $
              3,309
              
              
              $
              1,797
              
              
              $
              29,251
              
              
              $
              17,886
  Total
revenue during the three month period ended June 30, 2009 was $29.3 million, a
decrease of $14.1 million, or 32.6%, compared to $43.4 million during the three
month period ended June 30, 2008.  This decrease was primarily
attributable to reduced fuel surcharges, the weaker Canadian dollar, and reduced
customer demand, which is further discussed below.
  Freight
and related revenue generated from Company-operated vessels decreased $3.2
million, or 11.6%, to $24.1 million during the three month period ended June 30,
2009 compared to $27.3 million during the three month period ended June 30,
2008. Freight and related revenue per Sailing Day decreased $2,112, or 7.4%, to
$26,475 per Sailing Day in the three month period ended June 30, 2009 compared
to $28,587 in the three month period ended June 30, 2008.  This
decrease was attributable to a weaker Canadian dollar and less efficient trade
patterns during the three month period ended June 30, 2009, slightly offset by
higher pricing and improved productivity.
  Fuel
and other pass through surcharges decreased $6.1 million, or 64.9%, to $3.3
million during three month period ended June 30, 2009 compared to $9.4 million
during the three month period ended June 30, 2008. Fuel and other surcharges
revenue per Sailing Day decreased $6,234 to $3,628 per Sailing Day in the three
month period ended June 30, 2009 compared to $9,862 in the three month period
ended June 30, 2008.
  Outside
Voyage Charter revenues decreased $4.9 million, or 73.1%, to $1.8 million during
the three month period ended June 30, 2009 compared to $6.7 million during the
three month period ended June 30, 2008.  The Company’s practice is to
outsource a portion of its normal business to optimize vessel efficiencies. The
decrease in outside charter revenue was attributable to a reduction in customer
demand and certain shipments being delayed by customers into our second fiscal
quarter.
  Vessel
Operating Expenses decreased $7.7 million, or 30.0%, to $17.9 million in the
three month period ended June 30, 2009 compared to $25.6 million in the three
month period ended June 30, 2008.  This decrease was primarily
attributable to reduced fuel costs, reduced vessel operating days and a weaker
Canadian dollar, offset by a $415 increase in vessel incident
costs.  Vessel operating expenses per Sailing Day decreased $7,147, or
26.7%, to $19,612 in the three month period ended June 30, 2009 compared to
$26,759 in the three month period ended June 30, 2008.
  35
  Repairs
and maintenance expenses, which consist of expensed winter work, decreased $234
to $0.7 million during the three month period ended June 30, 2009 from $0.9
million during the three month period ended June 30, 2008.  Repairs
and maintenance per Sailing Day decreased $213 to $717 per Sailing Day in the
three month period ended June 30, 2009 from $930 during the three month period
ended June 30, 2008.  This decrease was related to the timing of
completing the Winter 2009 lay-up work in the three month period ended June 30,
2009 as compared to the timing of completing the Winter 2008 lay-up work in the
three month period ended June 30, 2008.
  Our
general and administrative expenses decreased $72 to $2.4 million during the
three month period ended June 30, 2009 from $2.5 million in the three month
period ended June 30, 2008. The decrease in general and administrative expenses
was a result of cost reductions and the weaker Canadian dollar offset by a loan
amendment fee of $436 during the three month period ending June 30,
2009.  Our general and administrative expense represented 8.2% of
revenues during the three month period ended June 30, 2009, a increase from 5.7%
of revenues during the three month period ended June 30, 2008.  During
the three month period ended June 30, 2009, $0.6 million of our general and
administrative expenses was attributable to our parent company and $1.8 million
was attributable to our operating companies, including the loan amendment
fee.
  Depreciation
expense rose $390 to $2.0 million during the three month period ended June 30,
2009 compared to $1.6 million during the three month period ended June 30,
2008.  The increase was primarily attributable to capital expenditures
related to the repowering of the Saginaw and capital expenditures during the
2009 winter lay-up period.
  Amortization
of drydock costs remained flat at $0.6 million during the three month period
ended June 30, 2009.  An increase in drydock expenses from the Winter
2009 drydock of the Mississagi was offset by the translation of the weaker
Canadian dollar.  During the three month period ended June 30, 2009,
the Company amortized the deferred drydock costs of seven of its twelve vessels
compared to six vessels during the three month period ended June 30,
2008.
  Amortization
of intangibles decreased $22 to $409 during the three month period ended June
30, 2009 from $431 during the three month period ended June 30, 2008, primarily
due to the translation of the weaker Canadian dollar during the three month
period ended June 30, 2009.
  As a
result of the items described above, during the three month period ended June
30, 2009, the Company’s operating income decreased $2.1 million to $3.5 million
compared to $5.6 million during the three month period ended June 30,
2008.
  Interest
expense decreased $245 to $1.4 million during the three month period ended June
30, 2009 from $1.7 million during the three month period ended June 30, 2008.
This decrease in interest expense was primarily a result of the translation of
the weaker Canadian dollar and to a lesser extent lower interest rates on the
Company’s revolving credit facility balances, offset by a slightly higher
average debt balance during the three month period ended June 30,
2009.
  We
recorded a gain on interest rate swap contracts of $1.3 million during the three
month period ended June 30, 2009 compared to a gain of $1.2 million incurred in
the three month period ended June 30, 2008 due to recording the fair value of
our two interest rate swap agreements.
  Our
income before income taxes was $3.3 million in the three month period ended June
30, 2009 compared to income before income taxes of $5.2 million in the three
month period ended June 30, 2008.
  Our
provision for income tax expense was $1.0 million during the three month period
ended June 30, 2009 compared to an income tax expense of $2.5 million during the
three month period ended June 30, 2008.  The Company's effective tax
rate was 31.4% for the three month period ended June 30, 2009 compared to 48.4%
for the three month period ended June 30, 2008.  The effective tax
rate for the three month period ended June 30, 2008 was higher than its
statutory tax rate primarily due to an additional $0.7 million tax expense
resulting from a change in compensation method from cash to
stock.  Additionally, the Company recorded a valuation allowance
against its US federal net deferred tax assets during the three month period
ended March 31, 2009 due to taxable net operating losses for the past three
fiscal years, although income tax expense had been previously recorded in the US
during the three month period ended June 30, 2008.
  36
  Our Net
Income was $2.3 million in the three month period ended June 30, 2009 compared
to Net Income of $2.7 million in the three month period ended June 30,
2008.
  We
accrued $443 for cash dividends on our preferred stock during the three month
period ended June 30, 2009 compared to $363 during the three month period ended
June 30, 2008.  The dividends accrued at a rate of 9.75% for the three
month period ended June 30, 2009.  When the dividends are not paid in
cash, the rate increases 0.5% every six months to a cap of 12.0%, and increased
to 10.25% effective July 1, 2009.
  Our net
income applicable to common stockholders decreased $474 to $1.8 million during
the three month period ended June 30, 2009 compared to $2.3 million during the
three month period ended June 30, 2008.
  During
the three month period ended June 30, 2009, the Company operated four 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 vessels operated 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 gain on interest rate swap
contracts was realized in Canada based on the larger amount of indebtedness in
Canada during the three month period ended June 30, 2009. In addition,
substantially all of our tax provision was incurred in Canada during the three
month period ended June 30, 2009, since a valuation allowance has been recorded
in the US since the three month period ended March 31, 2009.  All of
our preferred stock dividends are accrued in the US.
  Impact
of Inflation and Changing Prices
  During
the three month period ended June 30, 2009, there were major reductions in our
fuel costs. Our contracts with our customers provide for recovery of fuel 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 our Canadian subsidiary’s revenue and
costs to US dollars by a reduction of approximately 13%.
  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 three month periods ended June 30, 2009 and June 30,
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 fiscal
2010 expenses relative to actual fiscal 2009 expenses, maintained its continued
focus on productivity gains and is closely monitoring customer credit and
accounts receivable balances.
  Net cash
used by operating activities for the three month period ended June 30, 2009 was
$4.4 million, a decrease of $8.3 million compared to $12.7 million of net cash
used during the three month period ended June 30, 2008.  This decrease
was primarily attributable to reduced growth in receivables during the three
month period ended June 30, 2009, particularly relating to the substantially
higher fuel surcharges and outside charter revenues during the three month
period ended June 30, 2008.  The timing of the Company’s fiscal year
in relation to the sailing season results in a substantial growth in receivables
during the Company’s first fiscal quarter after the winter lay-up
period.
  Cash used
in investing activities decreased by $0.8 million to $2.4 million during the
three month period ended June 30, 2009 compared to $3.2 million during the three
month period ended June 30, 2008.  This decrease was attributable to
reduced payments of carryover capital expenditures in the Winter 2009 lay-up
period as compared to the Winter 2008 lay-up period, offset by $250 of proceeds
from the scrap sale of a vessel during the three month period ended June 30,
2008.
  37
  Cash
flows provided from financing activities decreased $8.8 million to $9.1 million
during the three month period ended June 30, 2009 compared to $17.9 million in
the three month period ended June 30, 2008.  During the three month
period ended June 30, 2009, the Company made net borrowings under its revolving
credit facility of $10.2 million and made principal payments on its term debt of
$1.1 million.  Borrowing proceeds under the Company’s revolving credit
facility were reduced from $17.9 million in the three month period ended June
30, 2008 to $10.2 million in the three month period ending June 30,
2009.
  During
the three month period ended June 30, 2009, long-term debt, including the
current portion, increased $2.1 million to $60.4 million from $58.3 million at
March 31, 2009, which reflected an increase of $3.2 million from a strengthening
Canadian dollar from its low point during the three month period ended June 30,
2009, offset by the $1.1 million scheduled principal payment made during such
period.
  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
three month period ended June 30, 2009.  The covenants are set in
Canadian dollars in order to better match the cash earnings and debt levels of
the business by currency.
  On June
23, 2009, Lower Lakes Towing, Lower Lakes Transportation Company, Grand River
Navigation Company, Inc. and the other Credit Parties thereto entered into a
Second Amendment (the “Amendment”), to the Amended and Restated Credit Agreement
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 and duration of the seasonal overadvance facilities 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.
  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 June 30, 2009 was $3.6 million compared to $3.2 million at
March 31, 2009. During the three month period ended June 30, 2009, the effective
rate of preferred dividends was 9.75%. The dividend rate increased 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 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
later of the second anniversary of the conversion, or seven years from the
initial issuance date of the preferred stock.
  Investments
in Capital Expenditures and Drydockings
  We
invested $1.7 million in paid and accrued capital expenditures and incurred no
drydock expenses during the three month period ended June 30, 2009, relating to
carryover from the 2009 Winter season. Our capital expenditures and drydock
expenses paid and accrued for the Winter 2009 season were approximately $6.4
million.
  38
  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
June 30, 2009, our liability for financial instruments with exposure to foreign
currency risk was approximately CDN $46.4 million of term borrowings in Canada
and CDN $3.5 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 as converted
to US dollars before operating cash flows can make up for such a currency rate
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 1 to its consolidated
financial statements, and the following summaries should be read in conjunction
with the financial statements and the related notes included in this quarterly
on Form 10-Q. While all accounting policies affect the financial statements,
certain policies may be viewed as critical.
  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.
  39
  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.  The 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.
  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 determined that there was an adverse change
in our markets that could affect the valuation of our assets during the three
month period ended March 31, 2009.  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 cash flows, 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 as of March 31, 2009.  There were no
events or changes in circumstances during the three month period ended June 30,
2009 that indicated that its carrying amount may not be
recoverable.
  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 not 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.
  40
  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, cash flows, 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.
  Recently
Issued Pronouncements
  Fair
Value Measurements
  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 related to the
Company’s financial assets and liabilities, which took effect on January 1, 2008
are presented in Note 17. On April 1, 2009, the Company implemented the
previously-deferred provisions of SFAS No. 157 for our non-financial assets and
liabilities which include goodwill and intangible assets. The Company determined
that the remaining provisions did not have a material effect on the Company’s
consolidated financial position or results of operations when they became
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.
  41
  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 adopted FSP FAS 157-4 in the first
quarter of fiscal 2010, which did not have a material 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” (“SFAS 160”), an amendment of ARB No. 51.
SFAS 160 requires entities to report non-controlling (minority) interests of
consolidated subsidiaries as a component of shareholders’ equity on the balance
sheet, include all earnings of a consolidated subsidiary in consolidated results
of operations and treat all transactions between an entity and the
non-controlling interest as equity transactions between the
parties.  SFAS 160 applies to all fiscal years beginning on or after
December 15, 2008. The Company adopted this standard as of April 1, 2009;
however, the Company does not have any partially owned subsidiaries to
consolidate and therefore the application of this standard has no impact on the
Company’s consolidated financial statements.
  Derivative
Instruments and Hedging Activities
  In March
2008, the FASB issued SFAS No. 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 effectivefor fiscal years beginning
after November 15, 2008. The Company adopted SFAS 161 as of April 1, 2009
and it has had no impact on the Company’s consolidated financial
statements.
  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” (“FSP FAS 142-3”), 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 FSP FAS 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. FSP FAS 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 adopted this standard
for the fiscal year ending March 31, 2010. The adoption of FSP FAS 142-3 did not
have a material impact on the Company’s consolidated financial
statements.
  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. SFAS No. 141R
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008, and interim periods within those fiscal years. The
Company adopted SFAS No. 141R effective April 1, 2009 and there was no impact on
the Company’s consolidated financial statements; however, any future business
combinations will be recorded and disclosed in accordance with FSP FAS
141(R)-1.
  42
  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 are effective for interim and annual
reporting periods ending after June 15, 2009.  The adoption of FSP FAS
115-2 and FAS 124-2 did not have a material impact on the Company’s consolidated
financial statements.
  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 disclosure 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. This standard is
effective for interim and annual periods ending after June 15,
2009.  The Company has adopted FSP FAS 107-1 and APB 28-1 as of
June 30, 2009, as required.
  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. This standard is effective for
interim and annual periods ending after June 15, 2009. The Company has adopted
SFAS No. 165 as of June 30, 2009. The disclosure requirements of SFAS
No. 165 as applicable to the Company are presented in Note 22.
  The
Hierarchy of Generally Accepted Accounting Principles
  In
June 2009, the FASB issued Statement No. 168,“The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, a replacement of FASB Statement No. 162” (“FAS 168”). The
objective of FAS 168 is to replace FASB Statement 162 and to establish the FASB
Accounting Standards Codification as
the source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles. The standard is
effective for interim and annual periods ending after September 15, 2009,
or the Company’s second 2010 fiscal quarter. The Company does not expect FAS 168
to have a significant impact on the Company’s consolidated financial
statements.
  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 beginning
after November 15, 2009 and interim periods thereof. The Company is currently
assessing the impact of SFAS 167 on the Company’s 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. The
Company adopted FSP FAS 140-4 and FIN 46R-8 as the quarter ending December 31,
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.
  43
  Item3.  Quantitative and Qualitative Disclosures 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.
  Item4.  Controls and
Procedures.
  As of
June 30, 2009, 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.
  No change
occurred in our internal controls concerning financial reporting during the
three month period ended June 30, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
   PARTII. OTHER INFORMATION
  Item
1.  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.
  Item1A.  Risk
Factors.
  There has
been no material change to our Risk Factors from those presented in our Form
10-K for the fiscal year ended March 31, 2009.
  Item2.  Unregistered Sales of Equity Securities and Use
of Proceeds.
  None.
  Item3.  Defaults Upon Senior Securities.
  None.
  Item4.  Submission of Matters to a Vote of Security
Holders.
  None.
  Item5.  Other Information.
  None.
  44
  Item6.  Exhibits.
  (a)
Exhibits
  31.1
              Chief
      Executive Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              Chief
      Financial Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              Chief
      Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              Chief
      Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
  45
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 RAND
      LOGISTICS, INC.Date:
      August 11, 2009
              
              /s/
      Laurence S. LevyLaurence
      S. LevyChairman
      of the Board and ChiefExecutive
      Officer (Principal Executive Officer)Date:
      August 11, 2009
              
              /s/
      Joseph W. McHugh, Jr.Joseph
      W. McHugh, Jr.Chief
      Financial Officer (Principal Financial and Accounting
    Officer)
  
  Exhibit
Index
 
 31.1
              Chief
      Executive Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              Chief
      Financial Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              Chief
      Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              Chief
      Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.