UNITED
STATES SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
  
 x
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Quarterly Period EndedJune
      30, 2008oro
                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 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 o
                    Accelerated
      filer oNon-accelerated
      filer o
                    Smaller
      reporting company x(Do
      not check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes £     No
R
 
 12,587,667
shares of Common Stock, par value $.0001,  were outstanding at August
14, 2008.
  RAND
LOGISTICS, INC.
  INDEX
  PARTI.FINANCIAL
      INFORMATION
                    1Item 1.
                    Financial Statements
                    1Item 2.
                    Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                    30Item 3.
                    Quantitative and Qualitative Disclosures About
      Market Risk
                    40Item 4.
                    Controls and Procedures
                    40PART II. OTHER INFORMATION
                    41Item 1.
                    Legal Proceedings
                    41Item 1A.
                    Risk Factors
                    41Item 2.
                    Unregistered Sales of Equity Securities and Use of
      Proceeds
                    41Item 3.
                    Defaults Upon Senior
    Securities
                    41Item 4.
                    Submission of Matters to a Vote of Security
      Holders
                    41Item 5.
                    Other Information
                    41Item
      6.
                    Exhibits
                    41
  
  PART I.
FINANCIAL INFORMATION
  Item 1.  Financial Statements.
 RAND
LOGISTICS, INC.


Consolidated
Balance Sheets (Unaudited)


(U.S. Dollars 000’sexcept for Earnings (Loss) Per Share
figures)


June
      30,
                    
                    
                    March
      31,ASSETS
                    
                    2008
                    
                    
                    2008CURRENTCash
      and cash equivalents
                    
                    $
                    7,354
                    
                    
                    $
                    5,626Accounts
      receivable, net (Note 3)
                    
                    
                    20,888
                    
                    
                    
                    3,468Prepaid
      expenses and other current assets (Note 4)
                    
                    
                    4,806
                    
                    
                    
                    3,122Income
      taxes receivable
                    
                    
                    193
                    
                    
                    
                    193Interest
      rate swap contract (Note 18)
                    
                    
                    335
                    
                    
                    
                    -Deferred
      income taxes
                    
                    
                    444
                    
                    
                    
                    1,355Total
      current assets
                    
                    
                    34,020
                    
                    
                    
                    13,764PROPERTY
      AND EQUIPMENT, NET (Note 5)
                    
                    
                    101,322
                    
                    
                    
                    96,349DEFERRED
      INCOME TAXES
                    
                    
                    19,317
                    
                    
                    
                    20,318DEFERRED
      DRYDOCK COSTS, NET (Note 6)
                    
                    
                    8,906
                    
                    
                    
                    9,082INTANGIBLE
      ASSETS, NET (Note 7)
                    
                    
                    17,542
                    
                    
                    
                    17,979GOODWILL
      (Note 7)
                    
                    
                    10,193
                    
                    
                    
                    10,193Total
      assets
                    
                    $
                    191,300
                    
                    
                    $
                    167,685LIABILITIESCURRENTBank
      indebtedness (Note 9)
                    
                    $
                    18,055
                    
                    
                    $
                    269Accounts
      payable
                    
                    
                    17,520
                    
                    
                    
                    14,985Accrued
      liabilities (Note 10)
                    
                    
                    7,748
                    
                    
                    
                    7,243Acquired
      Management Bonus Program (Note 20)
                    
                    
                    3,000
                    
                    
                    
                    3,000Interest
      rate swap contract (Note 18)
                    
                    
                    382
                    
                    
                    
                    1,274Income
      taxes payable
                    
                    
                    422
                    
                    
                    
                    422Deferred
      income taxes
                    
                    
                    1,416
                    
                    
                    
                    1,508Current
      portion of long-term debt  (Note 11)
                    
                    
                    4,716
                    
                    
                    
                    3,521Total
      current liabilities
                    
                    
                    53,259
                    
                    
                    
                    32,222LONG-TERM
      DEBT  (Note 11)
                    
                    
                    66,024
                    
                    
                    
                    66,896OTHER
      LIABILITES
                    
                    
                    232
                    
                    
                    
                    -DEFERRED
      INCOME TAXES
                    
                    
                    15,419
                    
                    
                    
                    14,703Total
      liabilities
                    
                    
                    134,934
                    
                    
                    
                    113,821COMMITMENTS
      AND CONTINGENCIES (Notes 12 and 13)STOCKHOLDERS'
      EQUITYPreferred
      stock, $.0001 par value,
                    
                    
                    14,900
                    
                    
                    
                    14,900Authorized
      1,000,000 shares, Issued and outstanding 300,000 shares (Note
      14)Common
      stock, $.0001 par value
                    
                    
                    1
                    
                    
                    
                    1Authorized
      50,000,000 shares, Issued and outstanding 12,105,051 shares (Note
      14)Additional
      paid-in capital
                    
                    
                    58,416
                    
                    
                    
                    58,350Accumulated
      deficit
                    
                    
                    (18,149
                    )
                    
                    
                    (20,465
                    )Accumulated
      other comprehensive income
                    
                    
                    1,198
                    
                    
                    
                    1,078Total
      stockholders’ equity
                    
                    
                    56,366
                    
                    
                    
                    53,864Total
      liabilities and stockholders’ equity
                    
                    $
                    191,300
                    
                    
                    $
                    167,685




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 Earnings (Loss) Per Share figures)


Three
      months ended
                June
      30, 2008
              
              
              Three
      months ended
                June
      30, 2007REVENUE
              
              $
              43,406
              
              
              $
              25,230EXPENSESOutside
      voyage charter fees (Note 15)
              
              
              6,246
              
              
              
              2,137Vessel
      operating expenses
              
              
              25,555
              
              
              
              17,317Repairs
      and maintenance
              
              
              888
              
              
              
              94General
      and administrative
              
              
              2,469
              
              
              
              1,941Depreciation
              
              
              1,618
              
              
              
              1,543Amortization
      of drydock costs
              
              
              567
              
              
              
              358Amortization
      of intangibles
              
              
              431
              
              
              
              358Amortization
      of chartering agreement costs
              
              
              -
              
              
              
              49Loss
      (gain) on foreign exchange
              
              
              2
              
              
              
              (173
              )37,776
              
              
              
              23,624INCOME
      BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES
              
              
              5,630
              
              
              
              1,606OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
              
              
              1,674
              
              
              
              1,012Interest
      income
              
              
              (5
              )
              
              
              (65
              )Gain
      on interest rate swap contracts
              
              
              (1,234
              )
              
              
              (79
              )435
              
              
              
              868INCOME  BEFORE
      INCOME TAXES
              
              
              5,195
              
              
              
              738PROVISION
      (RECOVERY) FOR INCOME TAXESCurrent
              
              
              -
              
              
              
              (43
              )Deferred
              
              
              2,516
              
              
              
              361NET
      INCOME BEFORE MINORITY INTEREST
              
              
              2,679
              
              
              
              420MINORITY
      INTEREST (Note 21)
              
              
              -
              
              
              
              321NET
      INCOME
              
              
              2,679
              
              
              
              99PREFERRED
      STOCK DIVIDENDS
              
              
              363
              
              
              
              296STOCK
      WARRANT INDUCEMENT DISCOUNT
              
              
              -
              
              
              
              957NET
      INCOME  (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
              
              $
              2,316
              
              
              $
              (1,154
              )Net
      earnings (loss) per share basic (Note 19)
              
              $
              0.19
              
              
              $
              (0.12
              )Net
      earnings (loss) per share diluted
              
              $
              0.18
              
              
              $
              (0.12
              )Weighted
      average shares basic
              
              
              12,105,051
              
              
              
              9,312,241Weighted
      average shares diluted
              
              
              14,796,536
              
              
              
              9,312,241




The
accompanying notes are an integral part of these consolidated financial
statements.
 2




RAND
LOGISTICS, INC.
 Consolidated
Statements of Stockholders’ Equity (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 
  Common
      Stock
                
                
                Preferred
      Stock
                
                
                Additional
      Paid-In
                
                
                Accumulated
      Surplus
                
                
                Minority
      Interest
                
                
                Other
      Comprehensive
                
                
                Total
      Stockholders'Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                (Deficit)
                
                
                VIE
                
                
                Income
      (Loss)
                
                
                EquityBalances,
      March 31, 2007
                
                
                8,127,177
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                38,407
                
                
                $
                (5,947
                )
                
                $
                176
                
                
                $
                (1,073
                )
                
                $
                46,464Net
      loss before minority interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (11,417
                )
                
                
                -
                
                
                
                -
                
                
                
                (11,417
                )Minority
      interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                176
                
                
                
                (176
                )
                
                
                -
                
                
                
                -Preferred
      dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,295
                )
                
                
                -
                
                
                
                -
                
                
                
                (1,295
                )Warrant  conversion,
      net of stock warrant
                  inducement
      discount (Note 14 (b))
                
                
                3,964,965
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                19,825
                
                
                
                (1,982
                )
                
                
                -
                
                
                
                -
                
                
                
                17,843Restricted stock issued (Note 14)
                
                
                12,909
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                75Stock options issued (Note 14)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                43
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                43Translation
      adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,151
                
                
                
                2,151Balances,
      March 31, 2008
                
                
                12,105,051
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                58,350
                
                
                $
                (20,465
                )
                
                $
                -
                
                
                $
                1,078
                
                
                $
                53,864Net
      income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,679
                
                
                
                -
                
                
                
                -
                
                
                
                2,679Preferred
      dividend
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (363
                )
                
                
                -
                
                
                
                -
                
                
                
                (363
                )Stock
      options issued (Note 14)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                66
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                66Translation
      adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                120
                
                
                
                120Balances,
      June 30, 2008
                
                
                12,105,051
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                58,416
                
                
                $
                (18,149
                )
                
                $
                -
                
                
                $
                1,198
                
                
                $
                56,366






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 Earnings (Loss) Per Share figures)


Three
      months
                ended
                June
      30, 2008
              
              
              Three
      months
                ended
                June
      30, 2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
              
              $
              2,679
              
              
              $
              420Adjustments
      to reconcile net income to net cash usedby
      operating activitiesDepreciation
      and amortization of drydock costs
              
              
              2,185
              
              
              
              1,901Amortization
      of intangibles and deferred financing costs
              
              
              536
              
              
              
              497Deferred
      income taxes
              
              
              2,536
              
              
              
              361Gain
      on interest rate swap contracts
              
              
              (1,234
              )
              
              
              (79
              )Equity
      compensation
              
              
              156
              
              
              
              -Other
      liabilities
              
              
              232
              
              
              
              -Changes
      in non cash operating working capital:Accounts
      receivable
              
              
              (17,420
              )
              
              
              (10,465
              )Prepaid
      expenses and other current assets
              
              
              (1,683
              )
              
              
              (199
              )Accounts
      payable and accrued liabilities
              
              
              (358
              )
              
              
              (1,454
              )Income
      taxes payable
              
              
              -
              
              
              
              (82
              )(12,371
              )
              
              
              (9,100
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
              
              
              (3,475
              )
              
              
              (166
              )Sale
      proceeds of retired vessel
              
              
              250
              
              
              
              -Deferred
      drydock costs
              
              
              (305
              )
              
              
              (743
              )(3,530
              )
              
              
              (909
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of warrants
              
              
              -
              
              
              
              8,614Long-term
      debt repayment
              
              
              -
              
              
              
              (863
              )Debt
      financing costs
              
              
              -
              
              
              
              (46
              )Proceeds
      from bank indebtedness
              
              
              17,865
              
              
              
              3,446Repayment
      of bank indebtedness
              
              
              -
              
              
              
              (6,181
              )17,865
              
              
              
              4,970EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
              
              
              (236
              )
              
              
              (601
              )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              1,728
              
              
              
              (5,640
              )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              5,626
              
              
              
              7,207CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
              
              $
              7,354
              
              
              
              1,567SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayments
      for interest
              
              $
              1,007
              
              
              $
              846Payment
      of income taxes
              
              $
              -
              
              
              $
              43Unpaid
      purchases of property and equipment
              
              $
              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’sexcept for Earnings
(Loss) Per Share figures)
 1.
                SIGNIFICANT
      ACCOUNTING POLICIES
  Basis
of presentation and consolidation
  The
unaudited consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America and
include the accounts of Rand Finance Corp. and Rand LL Holdings Corp., 100%
subsidiaries of the Company, and the accounts of Lower Lakes Towing Ltd., Lower
Lakes Transportation Company Limited and Grand River Navigation Company, Inc.,
each of which is a 100% subsidiary of Rand LL Holdings Corp. and Wisconsin &
Michigan Steamship Company (“WMS”), a variable interest entity (“VIE”) as
discussed in Note 21, through February 13, 2008.
  The
consolidated financial statements include the accounts of the Company and all of
its wholly-owned subsidiaries. All significant inter-company transactions and
balances have been eliminated. 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, 2008 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, 2008.
  Cash
and cash equivalents
  The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
  Accounts
receivable and concentration of credit risk
  The
majority of the Company’s accounts receivable are amounts due from customers
with other accounts receivable including insurance and Goods and Service Tax
refunds accounting for the balance. The majority of accounts receivable are due
within 30 to 60 days and are stated at amounts due from customers net of an
allowance for doubtful accounts. The Company extends credit to its customers
based upon its assessment of their credit worthiness and past payment history.
Accounts outstanding longer than the contractual payment terms are considered
past due. The Company has an allowance for doubtful accounts of $56 as of June
30, 2008 and $50 as of March 31, 2008. The Company has historically had no
significant bad debts. Interest is not accrued on outstanding
receivables.
  Revenue
recognition
  The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis. Voyage
charter revenue is recognized ratably over the period from the departure of a
vessel from its original shipping point to its destination, 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 voyage, while freight surcharges are recognized
when the associated costs are incurred. Freight surcharges are insignificant and
amount to less than 1% of total revenues for the periods presented.
  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. In addition, 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.”
Costs for subcontracted freight providers, presented as “Outside voyage charter
fees” on the statement of operations are recognized ratably over the
voyage.
  5
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
 
 Fuel
and lubricants inventories
 
 Raw
materials, fuel, and operating supplies, are accounted for on a first-in,
first-out cost method (based on monthly averages). Raw materials and fuel are
stated at the lower of actual cost (first-in, first-out method) or market.
Operating supplies are stated at actual cost or average cost.
  Intangible
assets and goodwill
 
 The
Company has adopted Statements of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations" 141 (“SFAS 141”) and SFAS No. 142, "Goodwill and other
Intangible Assets" (“SFAS 142”). The purchase price of  businesses
acquired  was allocated to tangible and identifiable intangible assets
acquired and liabilities assumed based on their respective estimated fair values
on the date of acquisition, with the remaining purchase price recorded as
goodwill. In accordance with SFAS No. 142, goodwill is not amortized
but instead measured for impairment at least annually in the fourth fiscal
quarter, and when events indicate that an impairment exists. As required by
FAS 142, our impairment tests for goodwill and other indefinite-lived intangible
assets compare the estimated fair value of goodwill and other intangible assets
to the carrying value.
 
 Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. In
accordance with SFAS 142, the Company reviews goodwill for impairment at least
annually using a two-step impairment test to first identify potential impairment
and then to measure the amount of the impairment, if any. Chartering agreement
costs are primarily legal costs of establishing the time chartering agreements
with the VIE, including loan and guaranty documentation. Through February 13,
2008 these costs were amortized over the term of the time chartering agreement,
and related debt (see note 21). Other intangibles are amortized as
follows:
  Trademarks
      and trade names
                
                10
      years straight-lineNon-competition
      agreements
                
                4 years
      straight-lineCustomer
      relationships and contracts
                
                15 years
      straight-lineChartering
      agreement costs
                
                Term of Chartering
      agreement
  Property
and equipment
 
 Property
      and equipment are recorded at cost and have been valued as of the date of
      acquisition.  Depreciationmethods for
      capital assets are as follows:
  Vessels
                  
                  4 -
      25 years straight-lineLeasehold
      improvements
                  
                  7 - 11 years
      straight-lineVehicles
                  
                  20%
      declining-balanceFurniture
      and equipment
                  
                  20%
      declining-balanceComputer
      equipment
                  
                  45%
      declining-balance
 Deferred
      charges
 
 Deferred
      charges include capitalized drydock expenditures and deferred financing
      costs.  Drydock costs incurred during statutory Canadian and
      United States certification processes are capitalized and amortized on a
      straight-line basis over the benefit period, which is 60 months. Drydock
      costs include costs of work performed by third party shipyards,
      subcontractors and other direct expenses to complete the mandatory
      certification process. Deferred financing costs are amortized on a
      straight-line basis over the term of the related debt, which approximates
      the effective interest method.
 
 Repairs
and maintenance
 
 The
Company’s vessels require repairs and maintenance each year to ensure the fleet
is operating efficiently during the shipping season.  The vast
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 hull 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.
  6
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
 
 Impairment of long-lived
assets
 
 Long-lived
assets include property, intangible assets subject to amortization, and certain
other assets.  The carrying values of these assets are periodically
reviewed for impairment or whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable.  The Company
evaluates impairment by comparing the fair value of the intangible assets with
indefinite lives and goodwill with their carrying values.  The Company
determines fair value of goodwill by evaluating the fair value of the acquired
business as well as using the sum of the undiscounted cash flows projected to be
generated by the acquired business giving rise to that goodwill.  This
requires the Company to make long-term forecasts of future revenues and costs
related to the assets subject to review.  These forecasts require
assumptions about demand for the Company’s services and future market
conditions.  Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to result from its use and eventual
disposition.  If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized for the amount by which
the carrying value of the asset exceeds its fair value.  If a readily
determinable market price does not exist, fair value is estimated using
undiscounted expected cash flows attributable to the assets.
 
 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 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 $nil of 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.
  7
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  The last
year examined by the IRS is unknown. 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)
                2004
      - 2008Michigan
                2004
      - 2008Ohio
                2004
      - 2008New
      York
                2004
      - 2008Federal
      (Canada)
                2003
      - 2008Ontario
                2003
      - 2008
 
 Foreign
currency translation
 
 The
Company uses the U.S. Dollar as its reporting currency.  The
functional currency of Lower Lakes Towing Ltd. is the Canadian
Dollar.  The functional currency of the Company’s U.S. subsidiaries is
the U.S. Dollar.  In accordance with Statement of Financial Accounting
Standards No. 52, “Foreign Currency Translation,” assets and liabilities
denominated in foreign currencies are translated into U.S. Dollars at the rate
of exchange at the balance sheet date, while revenue and expenses are translated
at the weighted average rates prevailing during the respective
periods.  Components of shareholders’ equity are translated at
historical rates.  Exchange gains and losses resulting from
translation are reflected in accumulated other comprehensive income or
loss.
 
 Advertising
costs
 
 The
Company expenses all advertising costs as incurred. These costs are included in
administration costs and were insignificant during the periods
presented.
 
 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," 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.
  8
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
 
 Variable
interest entities
 
 Effective
for the second fiscal quarter ended September 30, 2006, the Company implemented
FASB Interpretation (“FIN”) 46R, which requires that the Company consolidate
certain entities on the basis other than through ownership of a voting interest
of the entity (see Note 21). Two VIE’s have been identified and one has been
consolidated in accordance with FIN 46R.Though the Voyageur group
of companies (see Note 8) is a variable interest entity for Rand, it does not
meet the criteria for consolidation and hence is not consolidated.
  On
February 13, 2008, the Company entered into an asset purchase agreement with WMS
(a VIE until that date) to buy the entire remaining assets of the VIE. Based on
this reconsideration event, the Company is no longer the primary beneficiary
under FIN 46R and is no longer required to consolidate WMS financial statements.
However, the statement of operations as of June 30, 2007 includes the results of
WMS, as it was a VIE at that time.
  2.
                  RECENTLY ISSUED
      PRONOUNCEMENTS
 Non-controlling
interests in consolidated financial statements
 
 On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements,” an amendment of ARB No. 51. SFAS 160 applies
to all fiscal years beginning on or after December 15, 2008. The Company will be
required to adopt this standard for the fiscal year ending March 31, 2010 and is
presently evaluating the impact of adopting this standard on its consolidated
financial statements.
 
 Business
Combinations
 
 On
December 4, 2007, the FASB also issued SFAS No. 141(R), “Business Combinations”.
This statement also applies to fiscal years beginning on or after December 15,
2008. The Company will be required to adopt this standard for the fiscal year
ending March 31, 2010. The Company is presently evaluating the impact of
adopting this standard on its consolidated financial statements.
 
 Derivative
Instruments and Hedging Activities
 
 In March 2008, the FASBissuedSFASNo.161, “Disclosures
about Derivative Instruments and Hedging Activities” (“FAS 161”).SFAS 161 amendsSFAS 133 to provide enhanced
disclosure requirements surrounding how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for underSFAS 133 and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows.SFAS 161 is effective for the
Company as of the beginning of Fiscal 2010, including interim periods
thereafter. The implementation ofSFAS 161 is not expected to have a
material impact on the Company’s consolidated financial
statements.
  The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (“GAAP”) for nongovernmental entities. SFAS 162 is effective 60 days following SEC approval of the Public
Company Accounting Oversight Board Auditing amendments to AU Section 411,
The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.The adoption of SFAS 162 is not anticipated
to have an effect on the Company’s consolidated financial
statements.
 
 IFRS
 
 International
Financial Reporting Standards (IFRS) are a set of standards and interpretations
adopted by the International Accounting Standards Board. The SEC is currently
considering a potential IFRS adoption process in the U.S., which would, in the
near term, provide domestic issuers with an alternative accounting method and
ultimately could replace U.S. GAAP reporting requirements with IFRS reporting
requirements. It is anticipated that the SEC will issue some guidance on this
potential adoption by December 31, 2008. We are currently investigating the
implications to the Company should we be required to adopt.
  9
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  3.
                  ACCOUNTS
      RECEIVABLE
 Trade
receivables are presented net of an allowance for doubtful
accounts.  The allowance was $56 as of June 30, 2008 and $50 as of
March 31, 2008. The allowance for doubtful accounts reflects estimates of
probable losses in trade receivables.  The Company manages and
evaluates the collectability of its trade receivables as
follows:  Management reviews aged accounts receivable listings and
contact is made with customers that have extended beyond agreed upon credit
terms. Senior management and operations are notified such that when they are
contacted by such customers for a future delivery the customer can be requested
to pay any past amounts, before any future cargo is booked for shipment.
Customer credit risk is also managed by reviewing the history of payments of the
customer, the size of the customer, the period of time within the shipping
season and demand for future cargos.
  4.
                    PREPAID
      EXPENSES AND OTHER CURRENT
ASSETS
 Prepaid
expenses and other current assets are comprised of the
following:
 
 June
      30, 2008
                
                
                March
      31, 2008Prepaid
      insurance
                
                $
                851
                
                
                $
                605Fuel
      and lubricants
                
                
                3,526
                
                
                
                1,966Deposits
      and other prepaid
                
                
                429
                
                
                
                551$
                4,806
                
                
                $
                3,122
  
 5.
                PROPERTY
      AND EQUIPMENT
 
 Property
      and equipment are comprised of the
following:
 
 June
      30, 2008
                
                
                March
      31, 2008CostVessels
                
                $
                106,901
                
                
                $
                100,628Leasehold
      improvements
                
                
                1,988
                
                
                
                1,865Furniture
      and equipment
                
                
                1,015
                
                
                
                1,013Vehicles
                
                
                19
                
                
                
                -Computer
      equipment and purchased software
                
                
                1,788
                
                
                
                1,592$
                111,711
                
                
                $
                105,098Accumulated
      depreciationVessels
                
                $
                9,826
                
                
                $
                8,301Leasehold
      improvements
                
                
                291
                
                
                
                250Furniture
      and equipment
                
                
                85
                
                
                
                35Vehicles
                
                
                -
                
                
                
                -Computer
      equipment and purchased software
                
                
                187
                
                
                
                16310,389
                
                
                
                8,749$
                101,322
                
                
                $
                96,349
 10
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  6.
                  DEFERRED
      DRYDOCK
COSTS
 Deferred
drydock costs are comprised of the following:
 
 June
      30, 2008
                
                
                March
      31, 2008Drydock
      expenditures
                
                $
                11,390
                
                
                $
                10,991Accumulated
      amortization
                
                
                2,484
                
                
                
                1,909$
                8,906
                
                
                $
                9,082
 
 
 7.
                INTANGIBLE
      ASSETS AND GOODWILL
 
 Intangibles
are comprised of the following:
 
 June
      30, 2008
                
                
                March
      31, 2008Intangible
      assetsDeferred
      financing costs
                
                $
                2,143
                
                
                $
                2,134Trademarks
      and trade names
                
                
                1,007
                
                
                
                1,003Non-competition
      agreements
                
                
                2,309
                
                
                
                2,298Customer
      relationships and contracts
                
                
                16,044
                
                
                
                15,959Total
      identifiable intangibles
                
                $
                21,503
                
                
                $
                21,394Accumulated
      amortizationDeferred
      financing costs
                
                $
                178
                
                
                $
                71Trademarks
      and trade names
                
                
                234
                
                
                
                208Non-competition
      agreements
                
                
                1,492
                
                
                
                1,326Customer
      relationships and contracts
                
                
                2,057
                
                
                
                1,8103,961
                
                
                
                3,415Total
      intangible assets, net
                
                $
                17,542
                
                
                $
                17,979Goodwill
                
                $
                10,193
                
                
                $
                10,193
 
 
 Intangible
asset amortization over the next five years ending June 30, is estimated as
follows:
 
 2009
                
                $
                2,2402010
                
                
                1,7742011
                
                
                1,5992012
                
                
                1,5992013
                
                
                1,424$
                8,636
  11
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 
 8.
                ACQUISITION
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited (“Voyageur”) and
Voyageur Pioneer Marine Inc. (collectively, the “Sellers”) pursuant to which
Lower Lakes purchased the assets of the bulk freight shipping business related
to the VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER (collectively, the
“Vessels”) from the Sellers for an aggregate purchase price of CDN $25,000 plus
certain adjustments. The acquisition was partially financedunder the Fifth Amendment
to the Credit Agreement with General Electric Capital Corporation, as Agent and
a lender, and GE Canada Finance Holding Company, as a lender, and certain of
each such party’s affiliates.   Pursuant to the Fifth Amendment,
among other things, (i) the outstanding balance of the Canadian term loan
facility has been increased by CDN $18,000 to CDN $36,868. The estimated
purchase price allocation to the fair values of assets and liabilities acquired
is as follows:
  
 CDN
      $
                US
      $Purchase
      price
                
                25,774
                24,520Current
      assets
                
                374
                356Property
      and equipment
                
                16,576
                15,762Goodwill
                
                4,027
                3,831Other
      identifiable intangible assets
                
                4,797
                4,57125,774
                24,520
  Certain
customer contracts were also assigned to the Company under the Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management practices. Under
the Crew Manning Agreement, Voyageur is responsible for selecting and training
the Vessels’ crews, payroll, tax and pension administration, union negotiations
and disputes and ensuring compliance with applicable requirements of Canadian
maritime law. Under the Crew Manning Agreement, Lower Lakes is obligated to pay
Voyageur an annual fee of $175 and pay or reimburse Voyageur for its reasonable
crew payroll expenses.The
Company terminated the Crew Manning Agreement in March 2008.
  Also on
August 27, 2007, Lower Lakes entered into a Contract of
Affreightment  (“COA”) with Voyageur and Voyageur Maritime Trading
Inc. (“VMT”) pursuant to which Voyageur and VMT made a Canadian flagged vessel
owned by VMT, the MARITIME TRADER (the “Trader”), available exclusively to Lower
Lakes for its use in providing transportation and storage services for its
customers.Lower
Lakes does not realize any significant margin from this vessel.
  In
connection with the COA, on August 27, 2007, Lower Lakes entered into an
Option Agreement (the "Option Agreement") with VMT pursuant to which
Lower Lakes obtained the option to acquire the Trader for CDN $5,000
subject to certain adjustments. The option is exercisable between January 1,
2012 and December 31, 2017, subject to certain early exercise provisions. If, at
any time prior to expiration of the option, VMT receives a bona fide offer from
a third party to purchase the Trader which VMT wishes to accept,
Lower Lakes shall have the right to acquire the Trader at the option
price.
 
 On
February 13, 2008, Grand River and Rand LL Holdings entered into and consummated
a Vessel Purchase Agreement with WMS providing for the purchase by Grand River
of three United States flagged vessels, the DAVID Z. NORTON, the EARL W. OGLEBAY
and the WOLVERINE, for an aggregate purchase price of $20,019 plus purchase
expenses.  Lower Lakes Transportation, had time chartered the acquired
vessels since August 1, 2006 pursuant to the terms of a Time Charter Agreement
between Lower Lakes Transportation and WMS, which also provided for an option to
purchase the vessels.
 
 Prior to
commencement of the 2008 sailing season, the Company transferred one of the
vessels acquired from WMS to Canadian registry for deployment as part of the
Company’s Canadian fleet.
  12
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  8.
                ACQUISITIONS
      (continued)
 
 In
connection with the sale of vessels under the Vessel Purchase
Agreement:
 
 - WMS
repaid all amounts owed to Rand Finance Corp., a wholly owned subsidiary of Rand
Logistics Inc., under that certain Note Purchase Agreement, dated as of August
1, 2006 as well as a subordinated note payable to a third party.
 
 - WMS
repaid all of its obligations due to National City Commercial Capital Company,
LLC under WMS’ financing arrangements with National City, the principal and
interest amounts of which were included in the hire payable by Lower Lakes
Transportation under the Time Charter Agreement and in parts guaranteed by Rand
LL Holdings and
 
 - Grand
River and Rand LL Holdings agreed to bear certain wind-down costs of the sale
transaction and time charter agreement.
  As
discussed in Note 11, the credit agreement was also amended and restated. The
estimated purchase price allocation to the fair values of assets acquired is as
follows:
  US
      $Purchase
      price
                
                20,602Vessels
                
                20,602
  As
discussed in Note 21, WMS was identified as a VIE and WMS financial statements
were consolidated for the period from August 1, 2006 to February 13, 2008. After
this deconsolidation event, the Company is not a primary beneficiary of WMS. The
WMS financials were deconsolidated on February 13, 2008.
 
 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, 2008 and
March 31, 2008, the Company had authorized operating lines of credit under this
restated credit agreement in the amounts of CDN $13,500 and US $13,500 with its
senior lender, and was utilizing $18,055 at June 30, 2008 ($269 at March 31,
2008), and maintained letters of credit of CDN $1,325.  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, 2008 were 6.90% and
March 31, 2008 were 8.11% on the Canadian line of credit and 6.27% and 8%
respectively on the U.S. operating line of credit.
  13
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  10.
                ACCRUED
      LIABILITIES
 
 Accrued
liabilities are comprised of the following:
 
 June
      30, 2008
                
                
                March
      31, 2008Transaction
      costs
                
                $
                192
                
                
                $
                244Payroll
                
                
                2,746
                
                
                
                1,832Preferred
      stock dividends
                
                
                1,955
                
                
                
                1,592Professional
      fees
                
                
                608
                
                
                
                522Interest
                
                
                464
                
                
                
                428Winter
      work accrual
                
                
                115
                
                
                
                1,330Other
                
                
                1,668
                
                
                
                1,295$
                7,748
                
                
                $
                7,243
  11.
                  LONG-TERM
      DEBT
 On
February 13, 2008, Lower Lakes Towing Ltd., Lower Lakes Transportation and Grand
River, as borrowers, Rand LL Holdings, Rand Finance and Rand Logistics, Inc., as
guarantors, General Electric Capital Corporation, as agent and lender, and
certain other lenders, entered into an Amended and Restated Credit Agreement
which (i) amends and restates the Credit Agreement to which the borrowers are a
party, dated as of March 3, 2006, in its entirety, (ii) restructures the
tranches of loans provided for under the 2006 Credit Agreement and advances
certain new loans, (iii) finances, in part, the acquisition of the three vessels
by Grand River from WMS, and (iv) provides working capital financing, funds for
other general corporate purposes and funds for other permitted
purposes.  The Amended and Restated Credit Agreement provides 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 over advance facility
of US $8,000 (US $10,000 for calendar year 2008 only), and a swing line facility
of US $4,000 subject to limitations, (iii) a Canadian dollar denominated term
loan facility under which Lower Lakes Towing may borrow CDN $41,700 (iv) a US
dollar denominated term loan facility under which Grand River may borrow US
$22,000 (v) a Canadian dollar denominated “Engine” term loan facility under
which Lower Lakes Towing may borrow CDN $8,000.
  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.
  14
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  11.
                LONG-TERM
      DEBT (continued)
 
 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 shall be adjusted quarterly commencing on the second quarter of fiscal
year 2009 based upon the borrowers’ senior debt to EBITDA ratio as calculated in
accordance with the Amended and Restated Credit Agreement.
  Obligations
under the Amended and Restated Credit Agreement are secured by (i) a first
priority lien and security interest on all of the borrowers’ and guarantors’
assets, tangible or intangible, real, personal or mixed, existing and newly
acquired, (ii) a pledge by Rand LL Holdings of all of the outstanding capital
stock of the borrowers; (iii) a pledge the Registrant of all of the outstanding
capital stock of Rand LL Holdings and Rand Finance. The indebtedness of each
borrower under the Amended and Restated Credit Agreement is unconditionally
guarantied by each other borrower and by the guarantors, and such guaranty is
secured by a lien on substantially all of the assets of each borrower and each
guarantor.
  Under the
Amended and Restated Credit Agreement, the borrowers will be required to make
mandatory prepayments of principal on term loan borrowings (i) if the
outstanding balance of the term loans plus the outstanding balance of the
seasonal facilities exceeds the sum of 75% of the fair market value of the
vessels owned by the borrowers, less the amount of outstanding liens against the
vessels with priority over the lenders’ liens, in an amount equal to such
excess, (ii) in the event of certain dispositions of assets and insurance
proceeds (all subject to certain exceptions), in an amount equal to 100% of the
net proceeds received by the borrowers there from, and (iii) in an amount equal
to 100% of the net proceeds to a borrower from any issuance of a Borrower’s debt
or equity securities.
  The
Amended and Restated Credit Agreement contains certain covenants, including
those limiting the guarantors, the borrowers, and their subsidiaries’ ability to
incur indebtedness, incur liens, sell or acquire assets or businesses, change
the nature of their businesses, engage in transactions with related parties,
make certain investments or pay dividends.  In addition, the Amended
and Restated Credit Agreement requires the borrowers to maintain certain
financial ratios.  Failure of the borrowers or the guarantors to
comply with any of these covenants or financial ratios could result in the loans
under the Amended and Restated Credit Agreement being accelerated. The Company
is in compliance with those covenants as of June 30, 2008.
 
 On June
24, 2008, the Company entered into a First Amendment to the Amended and Restated
Credit Agreement, dated February 13, 2008, with the lenders signatory thereto
and General Electric Capital Corporation, as Agent.  Under the
Amendment, the borrowers amended the definition of “Fixed Charge Coverage
Ratio”, modified the formula for the maximum amounts outstanding under the
Canadian and US Revolving Credit Facilities and modified the measurement dates
of the Maximum Capital Expenditures (as defined therein).
 
 The
effective interest rates on the term loans at June 30, 2008 and March 31, 2008
including the effect from interest rate swap contracts were 7.84% on the
Canadian term loan, 9.09% on the Canadian engine loan and 7.40%  on
the US term loan.
  15
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  11.
                LONG-TERM
      DEBT (continued)
  June
      30, 2008
                
                
                March
      31, 2008a
                )
                Canadian
      term loan bearing interest at Canadian Prime rate plus 2.75% or Canadian
      BA rate plus 3.75% at the Company’s option.  The loan is
      repayable over a six 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.
                
                $
                40,894
                
                
                $
                40,624b
                )
                Canadian
      engine term loan bearing interest at Canadian Prime rate plus 4% or
      Canadian BA rate plus 5% at the Company’s option.  The loan is
      repayable over a six 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.
                
                
                7,846
                
                
                
                7,793c
                )
                US
      term loan bearing interest at LIBOR rate plus 3.75% or US base rate plus
      2.75% at the Company’s option. The loan is repayable over a six 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.
                
                
                22,000
                
                
                
                22,000$
                70,740
                
                
                $
                70,417Less
      amounts due within 12 months
                
                
                4,716
                
                
                
                3,521$
                66,024
                
                
                $
                66,896
 
 Principal
payments are due as follows:
 
 2009
                
                $
                4,7162010
                
                
                4,7162011
                
                
                4,7162012
                
                
                4,7162013
                
                
                51,876$
                70,740
  16
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  12.
                  COMMITMENTS
 The
Company entered into a bareboat charter agreement for the McKee Sons barge which
expires in 2018.  The lease was amended on February 18, 2008 to
provide a lease payment deferment in return for leasehold improvements. Total
charter commitments for the McKee vessel by year ending June 30 and thereafter
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%.
 
 2009
                
                $
                6952010
                
                
                6952011
                
                
                6952012
                
                
                6962013
                
                
                695Thereafter
                
                
                3,949$
                7,425
 The
Company has not entered into any other significant operating
leases.
   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
these claims would be covered by insurance if they involve liabilities such as
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 $339 as of June 30, 2008 and $363 as
of  March 31, 2008 has been recorded for various
claims.  Management does not anticipate material variations in actual
losses from the amounts accrued related to these claims.
  On August
27, 2007, in connection with the COA and Option Agreement (see Note 11) 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.
  In the
event GE Canada makes a demand against Lower Lakes pursuant to the terms of the
Guarantee, through a Letter of Credit Agreement, dated August 27, 2007, an
affiliate of Voyageur has agreed to contribute half of any amounts drawn under
the Guarantee through a CDN $625 letter of credit provided to Lower
Lakes.
  In
addition, Lower Lakes has guaranteed Voyageur’s account with The St. Lawrence
Seaway Management Corporation, up to CDN $120, which is offset by a set-off
agreement under the Contract of Affreightment.
  The
Company has determined that there is no carrying amount of the liability, for
the guarantor’s obligations under the guarantees under FIN 45.
  17
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  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 underwriters’ unit purchase option.
    Each warrant allows its holder to purchase one fully paid and
non-assessable share of the Company’s common stock at the price of $5.00 per
share. The warrants expire on October 26, 2008. The Company may call the
warrants for redemption, in whole and not in part, at a price of $.01 per
warrant at any time after the warrants become exercisable, upon not less than 30
days prior written notice of redemption to each warrant holder, and if, and only
if, the reported last sale price of the Company’s common stock equals or exceeds
$8.50 per share, for any 20 trading days within a 30 trading day period ending
on the third business day prior to the notice of redemption to warrant
holders.
 
 Options
and warrants issued in conjunction with the Company’s initial public offering
are equity linked derivatives and accordingly represent off-balance sheet
arrangements.  The options and warrants meet the scope exception in
paragraph 11(a) of SFAS 133 and are accordingly not accounted for as derivatives
for purposes of SFAS 133, but instead are accounted for as equity.
 
 The
exercise price and number of shares of common stock issuable on exercise of the
warrants may be adjusted in certain circumstances including in the event of a
stock dividend, or the Company’s recapitalization, reorganization, merger or
consolidation. However, the warrants will not be adjusted for issuances of
common stock at a price below their respective exercise prices.
 
 No
fractional shares will be issued upon exercise of the warrants. However, if a
warrant holder exercises all warrants then owned on record by him, the Company
will pay to the warrant holder, in lieu of the issuance of any fractional share
which is otherwise issuable to the warrant holder, an amount in cash based on
the market value of the common stock on the last trading day prior to the
exercise date.
 
 On April
30, 2007, the Company entered into a Warrant Exercise Agreement with Knott
Partners, LP; Knott Partners Offshore Master Fund, LP; CommonFund Hedged Equity
Company; Shoshone Partners, LP; Finderne, LLC; Good Steward Trading Company SPC;
and Leonard & Margaret Frierman (the "Knott Entities"), pursuant to which
the Knott Entities agreed to exercise 1,504,000 of the Company's publicly traded
warrants and the Company agreed to accept $4.50, rather than the $5.00 exercise
price provided in the warrant, as the exercise price for each such warrant. On
the same date, the Company received $6,768, net of stock warrant inducement
discount, of proceeds from the exercise of the subject warrants and the Company
authorized the issuance of the 1,504,000 shares of its common stock issuable
upon exercise of such warrants.
 
 On
      May 4, 2007, the Company reduced the exercise price of its outstanding,
      publicly traded warrants to $4.50 (from the $5.00 exercise price provided
      by the original terms of the warrants) until July 13, 2007 (the extended
      “Expiration Time"). Any and all warrants properly exercised in accordance
      with the terms of the warrants prior to the Expiration Time were accepted
      by the Company at the reduced exercise price, and one share of registered
      common stock per warrant was issued to the exercising warrant holder.
      After the Expiration Time, the $5.00 exercise price included in the
      original terms of the warrants was reinstituted. Except for the reduced
      exercise price of the warrants prior to the Expiration Time, the terms of
      the warrants remain unchanged. The reduced exercise price applied to all
      of the Company’s then outstanding publicly traded warrants, including
      those warrants still included as part of the units issued in the Company’s
      initial public offering. Each officer, director, employee and consultant
      of the Company had agreed not to exercise their warrants prior to the
      Expiration Time. As of July 13, 2007, 2,460,965 warrants were exercised,
      pursuant to the program, generating proceeds of $11,075, net of stock
      warrant inducement discount.
  18
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  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, 2008 was
$1,955 and at March 31, 2008 was $1,592.
 
 On August
1, 2006, pursuant to the terms of a Stock Purchase Agreement, effective as of
the same date (the “Stock Purchase Agreement”), the Company issued to a group of
accredited investors 2,402,957 shares of common stock for $5.41 per share for an
aggregate purchase price of $13,000 with issuance costs of $50.
 
 Through
June 30, 2008, 3,964,965 warrants were converted to shares at a rate of $4.50
per warrant for total gross proceeds of $17,843 net of stock warrant inducement
discount.
 
 On
January 17, 2007, the Company awarded 215,000 shares of its common stock, par
value $.0001 per share, 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 $90 for three months ended June 30, 2008 and 2007. 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
will vest 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, 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.
  19
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  14.
                  STOCKHOLDERS’
      EQUITY (continued)
 If
      the recipient's employment with the Company is terminated for "cause" as
      defined in the Award Agreements, or the recipient terminates his
      employment with the Company without "good reason" as defined in the Award
      Agreements, any Restricted Shares not vested prior to the date of any such
      termination shall immediately be canceled, with any rights or interests
      in and with respect to such Restricted Shares forfeited. The Company may,
      at its sole discretion, determine, prior to or within ninety days after
      the date of any such termination, that all or a portion of such unvested
      Restricted Shares shall not be so canceled and
      forfeited.
  
 If the
recipient's employment with the Company is terminated by the Company without
cause, by the recipient for good reason, or as a result of death or permanent
disability, 100% of the Restricted Shares awarded pursuant to the applicable
Award Agreement shall become fully vested as of the date of such
termination.
 
 In the
event of a "change of control" of the Company as defined in the Award
Agreements, all restrictions, terms and conditions applicable to the Restricted
Shares shall be deemed lapsed and satisfied as of the date of such change of
control.
 
 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 in Note 20. The Company has reserved
2,500,000 shares for grants to management and directors under the 2007 Long
Term Incentive Plan (“LTIP”) for Employees, Officers, Directors and
Consultants.  At June 30, 2008, a total of 2,243,892 shares were
available under the Plans 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, 2008 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 15, 2008 for
services through March 31, 2008.
  Stock Options — Stock
options granted to management employees vest over three years in equal annual
installments. All options issued through March 31, 2008, 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 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. Options
outstanding (243,199) at June 30, 2008, had a remaining weighted average
contractual life of approximately nine years and seven months. The Company
has recorded compensation expenses of $66 for three months ended June 30, 2008
and $ Nil for three months ended June 30, 2007.
  20
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  14.
                  STOCKHOLDERS’
      EQUITY (continued)
  The
following continuity schedule summarizes outstanding share purchase
warrants:
 
 Outstanding
      warrants
                
                
                Exercise
      Price
                
                
                Cumulative
      proceeds from exercise of warrantsBalance
      March 31, 2007
                
                
                9,196,180
                
                
                
                
                
                $
                19Issued
                
                
                -
                
                
                
                
                
                
                -Exercised
                
                
                (3,964,965
                )
                
                $
                4.50
                
                
                
                17,843Balance
      March 31, 2008
                
                
                5,231,215
                
                
                
                
                
                
                $
                17,862Issued
                
                
                -
                
                
                
                
                
                
                
                -Exercised
                
                
                -
                
                
                
                
                
                
                
                -Balance
      June 30, 2008
                
                
                5,231,215
                
                
                
                
                
                
                $
                17,862
 
 Exercise
price of $4.50 is net of $0.50 stock warrant inducement discount per stock
warrant. The total stock warrant inducement discount was $Nil for the three
months period ended June 30, 2008 ($957 for the three months period ended June
30, 2007).
 
 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, 2008
                  (unaudited)
                
                
                Three
      months ended
                  June
      30, 2007
                  (unaudited)Bank
      indebtedness
                
                $
                180
                
                
                $
                93Amortization
      of deferred finance costs
                
                
                108
                
                
                
                89Long-term
      debt – senior
                
                
                1,316
                
                
                
                771Long-term
      debt – subordinated
                
                
                -
                
                
                
                59Interest
      rate swap
                
                
                70
                
                
                
                -$
                1,674
                
                
                $
                1,012
  21
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 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, 2008
                
                
                Three
      months
                  ended
                  June
      30, 2007Revenue
      by countryCanada
                
                $
                27,370
                
                
                $
                13,453United
      States
                
                
                16,036
                
                
                
                11,777$
                43,406
                
                
                $
                25,230Net
      income (loss) applicable to common stockholders by countryCanada
                
                $
                1,125
                
                
                $
                1,125United
      States
                
                $
                1,191
                
                
                
                (2,279
                )$
                2,316
                
                
                $
                (1,154
                )
 
 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,
      2008
                
                
                March 31,
      2008Property
      and equipment by countryCanada
                
                $
                71,143
                
                
                $
                66,214United
      States
                
                
                30,179
                
                
                
                30,135$
                101,322
                
                
                $
                96,349Intangible assets by
      countryCanada
                
                $
                13,662
                
                
                
                13,954United
      States
                
                
                3,880
                
                
                
                4,025$
                17,542
                
                
                
                17,979Goodwill
      by countryCanada
                
                $
                8,284
                
                
                
                8,284United
      States
                
                
                1,909
                
                
                
                1,909$
                10,193
                
                
                
                10,193Total
      assets by countryCanada
                
                $
                130,019
                
                
                $
                114,023United
      States
                
                
                61,281
                
                
                
                53,662$
                191,300
                
                
                $
                167,685
  22
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  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 has recorded a liability of
$382 and an asset of $335 as of June 30, 2008 (liability of $1,274 as of March
31, 2008) for two interest rate swap contracts on the Company’s term
debt.
 
 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.
  Credit
risk
 Accounts
receivable credit risk is mitigated by the dispersion of the Company’s customers
among industries and the short shipping season.
  23
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  19.
                EARNINGS
      PER SHARE
  The
Company has a total of 12,105,051 common shares issued and outstanding, out of
an authorized total of 50,000,000 shares. The fully diluted calculation utilizes
a total of 14,796,536 shares for the quarter ended June 30, 2008 and 9,312,241
shares for the quarter ended June 30, 2007 based on the following calculations.
Since the calculation for June 30, 2007 is anti-dilutive, the basic and fully
diluted weighted average shares outstanding are 9,312,241. Warrants issued
from the initial prospectus and over allotment converts to 272,130 based on the
average quarterly price of $5.27 as of June 30, 2008 and  2,233,417
based on the average quarterly share price as of June 30, 2007  and
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, 2008
                
                
                Three
      Months ended,
                  June
      30, 2007Numerator:Net
      income before minority interest and preferred stock
    dividend
                
                $
                2,679
                
                
                $
                420Preferred
      stock dividends
                
                
                (363
                )
                
                
                (296
                )Minority
      interest
                
                
                -
                
                
                
                (321
                )Stock
      warrant inducement discount
                
                
                -
                
                
                
                (957
                )Net
      Income (loss) available to common stockholders
                
                $
                2,316
                
                
                $
                (1,154
                )Denominator:Weighted
      average common shares for basic EPS
                
                
                12,105,051
                
                
                
                9,312,241Effect
      of dilutive securities:Total  outstanding
      warrants
                
                
                5,231,215
                
                
                
                7,281,979Average
      exercise price
                
                $
                5.00
                
                
                $
                4.86Average
      price during period
                
                $
                5.27
                
                
                $
                7.01Shares
      that could be acquired with the proceeds of warrants
                
                
                4,959,085
                
                
                
                5,048,562Dilutive
      shares due to warrants
                
                
                272,130
                
                
                
                2,233,417Long
      term incentive stock option plan
                
                
                243,199
                
                
                
                -Average
      exercise price of stock options
                
                
                5.81
                
                
                
                -Shares
      that could be acquired with the proceeds of options
                
                
                -
                
                
                
                -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
                
                
                14,796,536
                
                
                
                9,312,241Basic
      EPS
                
                $
                0.19
                
                
                $
                (0.12
                )Diluted
      EPS
                
                $
                0.18
                
                
                $
                (0.12
                )
  24
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  20.
                  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 are employed by Lower Lakes or its affiliates.  Participants are
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. Awards will be
settled on July 31, 2008 and may be settled in cash and/or shares of the
Company's common stock, or any combination thereof, all at the discretion of the
plan administrator, and shall be subject to a cap which limits appreciation of
the initial plan account balance to the percentage increase in the market price
of the Company's common stock between the closing date and the award settlement
date. Subject to a participant's separation from service of the Company, on each
of March 31, 2006, 2007 and 2008, each participant then employed by the Company
or one of its affiliates vested one-third of such participant's plan account
balance. The Company shall grant registration rights to any participant that is
issued shares of the Company's common stock in settlement of an award under the
management bonus program.
 
 If a
participant's service with the Company or its affiliates was terminated by the
Company for cause (as defined in the Program) or by the participant voluntarily
without notice (other than for good reason, as defined in the participant's
employment agreement, if applicable), then such participant's rights to his plan
account balance, including any vested amounts, was forfeited, and such
participant no longer had any rights in or to its plan account balance or under
the Management Bonus Program.
 
 If a
participant incurred a voluntary separation from service with the Company or its
affiliate (other than for good reason) and who provide appropriate notice to the
Company of such separation, the participant retained his rights in his plan
account balance to the extent such has vested as of the effective date of
separation, but shall, as of such effective date, ceased to further vest in such
participant's plan account balance. Any unvested portion of a participant's plan
account balance resulting from such a separation from service was added to the
plan account balances of each then remaining participant in proportion to the
respective plan account balance of each such remaining participant, and with
respect to each such remaining participant, in proportion to each such
participant's vested and unvested plan account balance.
 
 If a
participant's service with the Company or its affiliate was terminated by the
Company without cause (as defined in the Program) or by the participant for good
reason or for death or disability, then the participant was entitled to be
considered fully vested with respect to the participant's plan account balance;
and have the option to elect to freeze the amount of such participant's award as
of the date of such separation from service, but with payment of such amount not
being made until July 31, 2008. The company has recorded additional liabilities
of $462 through June 30, 2008 for this program.
  25
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  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.
WMS was determined to be a type of VIE, which must be consolidated in accordance
with FIN46R from August 1, 2006 to February 13, 2008.
  On August
1, 2006, Lower Lakes Transportation Company ("LLTC"), an indirect wholly-owned
subsidiary of the Company, entered into a Time Charter Agreement (the "Time
Charter Agreement") with WMS, an unaffiliated third party.  Under the
Time Charter Agreement, WMS made three United States flag vessels owned by WMS,
the DAVID Z. NORTON, the EARL W. OGLEBAY and the WOLVERINE (the "Vessels"),
available exclusively to LLTC for LLTC's use in providing transportation and
storage services for its customers.  The basic charter period under
the Time Charter Agreement would have expired on December 31, 2008, and LLTC had
the option to extend the charter period through December 31,
2013.  The Time Charter Agreement also provided LLTC the option of
purchasing the Vessels at any time during the charter period at a price based,
in part, generally on the amount of WMS indebtedness outstanding at the time of
purchase relating to WMS's acquisition and maintenance of the
Vessels.  Rand and its subsidiary, Rand LL Holdings Corp. ("Rand LL
Holdings"), each executed separate guaranties in favor of WMS with respect to
separate financial obligations of LLTC under the Time Charter Agreement. On June
27, 2007, Rand LL Holdings Corp. and Wisconsin & Michigan Steamship Company
entered into a First Amendment Agreement to the Time Charter Guaranty, dated
June 27, 2007, pursuant to which the parties amended certain definitions
relating to its financial covenants to remain in compliance with such financial
covenants.
 
  On
February 13, 2008, the Company exercised its purchase option and entered into an
asset purchase agreement with WMS (a VIE until that date) to buy the vessel
assets of the VIE. Based on this reconsideration event, the Company is no longer
the primary beneficiary under FIN46R and is no longer required to consolidate
WMS financial statements. However, the statement of operations as of June 30,
2007 includes the results of WMS.
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited (“Voyageur”) and
Voyageur Pioneer Marine Inc. (collectively, the “Sellers”) pursuant to which
Lower Lakes purchased VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER
(collectively, the “Vessels”) from the Sellers.
  Certain
customer contracts were also assigned to the Company under a Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management practices. Under
the Crew Manning Agreement, Voyageur’s responsible for selecting and training
the Vessels’ crews, payroll, tax and pension administration, union negotiations
and disputes and ensuring compliance with applicable requirements of Canadian
maritime law. Under the Crew Manning Agreement, Lower Lakes was obligated to pay
Voyageur an annual fee of $175 and pay or reimburse Voyageur for its reasonable
crew payroll expenses.The
Company terminated the Crew Manning Agreement in March 2008.
  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.
  26
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  21.
                  VARIABLE
      INTEREST ENTITIES (continued)
 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.
Through a Letter of Credit Agreement, dated August 27, 2007, an affiliate of
Voyageur has agreed to contribute half of any amounts drawn under the Guarantee.
Under the Guarantee, Lower Lakes has several options available to it in the
event that GE Canada intends to draw under the Guarantee, including (i) the
right to exercise its option for the Trader under an Option Agreement and (ii)
the right to make a subordinated secured loan to Voyageur in an amount at least
equal to the amount intended to be drawn by GE Canada on terms as are reasonably
satisfactory to GE Canada and Voyageur.
 
 In
addition, Lower Lakes has guaranteed Voyageur’s account with The St. Lawrence
Seaway Management Corporation, up to CDN $120, which is offset by a set-off
agreement under the Contract of Affreightment.
  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 and therefore 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 maximum exposure of the Company in the event
the Voyageur default is CDN $845, which represents (1) Half of the CDN $1,250
guarantee of Voyageur’s indebtedness to GE Canada, unless the Company exercises
its purchase option and (2) A guarantee of Voyageur’s account with The St.
Lawrence Seaway Management Corporation, which is offset by a set-off agreement
under the Contract of Affreightment.
  The
impact of the WMS VIE on the statement of operations for the period ending June
30, 2007 is shown below.
  27
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  21.
                  VARIABLE
      INTEREST ENTITIES (continued)
 Three
      months ended June 30, 2007Rand
      Logistics, Inc.
                
                
                Impact
      of Fin 46R
                
                
                ConsolidatedREVENUE
                
                $
                25,230
                
                
                $
                -
                
                
                $
                25,230EXPENSESOutside
      voyage charter fees (Note 15)
                
                
                2,137
                
                
                
                
                
                
                
                2,137Charter
      hire
                
                
                3,141
                
                
                
                (3,141
                )
                
                
                -Vessel
      operating expenses
                
                
                15,229
                
                
                
                2,088
                
                
                
                17,317Repairs
      and maintenance
                
                
                87
                
                
                
                7
                
                
                
                94General
      and administrative
                
                
                1,692
                
                
                
                249
                
                
                
                1,941Depreciation
                
                
                1,229
                
                
                
                314
                
                
                
                1,543Amortization
      of drydock costs
                
                
                358
                
                
                
                -
                
                
                
                358Amortization
      of intangibles
                
                
                358
                
                
                
                -
                
                
                
                358Amortization
      of deferred chartering agreement costs
                
                
                49
                
                
                
                -
                
                
                
                49Write-off
      of retired vessel to salvage value
                
                
                -
                
                
                
                -
                
                
                
                -Gain
      on foreign exchange
                
                
                (173
                )
                
                
                -
                
                
                
                (173
                )24,107
                
                
                
                (483
                )
                
                
                23,624INCOME
      BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES
                
                
                1,123
                
                
                
                483
                
                
                
                1,606OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                
                
                572
                
                
                
                440
                
                
                
                1,012Interest
      income
                
                
                (123
                )
                
                
                58
                
                
                
                (65
                )Loss
      on interest rate swap contract
                
                
                -
                
                
                
                (79
                )
                
                
                (79
                )449
                
                
                
                419
                
                
                
                868INCOME
      BEFORE INCOME TAXES
                
                
                674
                
                
                
                64
                
                
                
                738PROVISION
      (RECOVERY) FOR INCOME TAXES
                
                
                660
                
                
                
                (342
                )
                
                
                318NET
      INCOME BEFORE MINORITY INTEREST
                
                
                14
                
                
                
                406
                
                
                
                420MINORITY
      INTEREST
                
                
                -
                
                
                
                321
                
                
                
                321NET
      INCOME
                
                
                14
                
                
                
                85
                
                
                
                99PREFERRED
      STOCK DIVIDENDS
                
                
                296
                
                
                
                -
                
                
                
                296STOCK
      WARRANT INDUCEMENT DISCOUNT (Note 14)
                
                
                957
                
                
                
                -
                
                
                
                957NET
      INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
                
                $
                (1,239
                )
                
                $
                85
                
                
                $
                (1,154
                )Net
      earnings (loss) per share basic (Note 19)
                
                $
                (0.13
                )
                
                $
                0.01
                
                
                $
                (0.12
                )Net
      earnings (loss) per share diluted (Note 19)
                
                $
                (0.13
                )
                
                $
                0.01
                
                
                $
                (0.12
                )
  28
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  22.
                  SUBSEQUENT
      EVENTS
 
 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 (Note 20) dated as of March 3, 2006. Pursuant to the terms of the
management bonus program, Rand issued 478,232 shares of common stock to the
employee participants. In addition, $430 is expected to be paid in cash to
former employee participants and for payments of certain participants’
withholding taxes.
 29
  Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
  Dollar amounts below $500,000 presented herein
are in thousandsand values greater than
$500,000 are presented in millions except share and per share
amounts.
  Cautionary
Note Regarding Forward-Looking Statements
  This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements involve certain
risks and uncertainties, including statements regarding our strategic direction,
prospects and future results. Certain factors, including factors outside of our
control, may cause actual results to differ materially from those contained in
the forward-looking statements. All forward looking statements included in this
report are based on information available to us as of the date hereof, and we
assume no obligation to update or revise such forward-looking statements to
reflect events or circumstances that occur after such statements are
made.
  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 and us 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.
  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.
  30
  Results
of Operations
  Three
months ended June 30, 2008.
  The
quarter ended June 30, 2008 was highlighted by several significant
events:
  (1)
                  We
      operated the three former Wisconsin &
      Michigan Steamship Company (WMS) time chartered vessels, which we
      acquired on February 13, 2008, with our own crews for a total of 273 Sailing Days, defined as “days a vessel iscrewed and available for sailing,” during
      the three month period ended June 30, 2008. During the three month period
      endingJune 30, 2007, these three vessels sailed
      only 118 days due to a strike by WMS’
      licensed officers.
  (2)
                  We
      operated the two former Voyageur vessels acquired in August 2007 for a total of 160 Sailing Days during the three month period
      ended June 30, 2008.
  (3)
                  We
      operated our Saginaw vessel only 19 Sailing Days during the three month
      period ended June 30, 2008 compared to 91 Sailing Days during the three month period ended June 30, 2007, due
      to the repowering and other upgrading of that
  vessel.
  (4)
                  We
      retired and scrapped our oldest and smallest vessel at the end of last
      season and accordingly did not operate such vessel during the three month
      period ended June 30, 2008. We operated this vessel 91 Sailing Days during
      the three month periodended June 30,
  2007.
  (5)
                  During
      the three month period ended June 30, 2008, we operated the remaining
      Canadian and U.S. vessels(owned or operated
      at the time of our March 2006 acquisition) for eleven fewer days
      thanduring the three month period ended June 30, 2007. We did, however,benefit from improved vessel utilization
      realized from greater scheduling flexibility, and increased backhaul opportunities
      available to our larger
fleet.
  (6)
                  We
      benefited from improving freight
      rates on renewed and new contracts, as well as contractual rate increases
      from existing contracts.  The increases are due to demand
      exceeding supply in our markets.
  (7)
                  We
      had significant improvements in boat operating metrics which allowed us to
      move significantly more cargo during the three month period ended June 30,
      2008 compared to the three month period ended June 30,
    2007.
  (8)
                  All
      of our customer contracts have fuel surcharge provisions whereby increases
      in our fuel costs were passed on to customers. Such increases in fuel
      surcharges impact our margin percentages, but do not reduce our margin
      dollars.
  (9)
                  We
      incurred $0.9 million in winterwork
      expense during the three month period ended June 30, 2008
      compared to only $94 during the three month period ended June 30,
      2007.
  
 31
  The
following table summarizes our Results of Operations during the three months
ended June 30, 2008 and June 30, 2007.
  Reconciliation
      of GAAP to Non-GAAP Measures($
      in 000’s)Three
      months ended June 30, 2008
                    
                    
                    Three
      months ended June 30, 2007Rand
      Logistics, Inc.
                    
                    
                    Impact
      of FIN46R*
                    
                    
                    Consolidated
                    
                    
                    Rand
      Logistics, Inc.
                    
                    
                    Impact
      of FIN46R*
                    
                    
                    ConsolidatedRevenue
                    
                    
                    43,406
                    
                    
                    
                    -
                    
                    
                    
                    43,406
                    
                    
                    
                    25,230
                    
                    
                    
                    -
                    
                    
                    
                    25,230ExpensesOutside
      voyage charter fees
                    
                    
                    6,246
                    
                    
                    
                    -
                    
                    
                    
                    6,246
                    
                    
                    
                    2,137
                    
                    
                    
                    -
                    
                    
                    
                    2,137Charter
      Hire
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,141
                    
                    
                    
                    (3,141
                    )
                    
                    
                    -Vessel
      operating expenses
                    
                    
                    25,555
                    
                    
                    
                    -
                    
                    
                    
                    25,555
                    
                    
                    
                    15,229
                    
                    
                    
                    2,088
                    
                    
                    
                    17,317Repairs
      and maintenance
                    
                    
                    888
                    
                    
                    
                    -
                    
                    
                    
                    888
                    
                    
                    
                    87
                    
                    
                    
                    7
                    
                    
                    
                    9432,689
                    
                    
                    
                    -
                    
                    
                    
                    32,689
                    
                    
                    
                    20,594
                    
                    
                    
                    (1,046
                    )
                    
                    
                    19,548Income
      before general and administrative, depreciation, amortization of drydock
      costs and intangibles, other income and expenses and income taxes (“Vessel
      Margin”)
                    
                    
                    10,717
                    
                    
                    
                    -
                    
                    
                    
                    10,717
                    
                    
                    
                    4,636
                    
                    
                    
                    1,046
                    
                    
                    
                    5,682General
      and administrative
                    
                    
                    2,469
                    
                    
                    
                    -
                    
                    
                    
                    2,469
                    
                    
                    
                    1,692
                    
                    
                    
                    249
                    
                    
                    
                    1,941EBITDA
      (Vessel Margin less General and administrative)
                    
                    
                    8,248
                    
                    
                    
                    -
                    
                    
                    
                    8,248
                    
                    
                    
                    2,944
                    
                    
                    
                    797
                    
                    
                    
                    3,741Depreciation
      and amortization of drydock costs, intangibles and charter
      hire
                    
                    
                    2,616
                    
                    
                    
                    -
                    
                    
                    
                    2,616
                    
                    
                    
                    1,994
                    
                    
                    
                    314
                    
                    
                    
                    2,308Loss
      (gain) on foreign exchange
                    
                    
                    2
                    
                    
                    
                    -
                    
                    
                    
                    2
                    
                    
                    
                    (173
                    )
                    
                    
                    -
                    
                    
                    
                    (173
                    )Income
      before other income and expenses and income taxes
                    
                    
                    5,630
                    
                    
                    
                    -
                    
                    
                    
                    5,630
                    
                    
                    
                    1,123
                    
                    
                    
                    483
                    
                    
                    
                    1,606
 * On February 13, 2008, the
Company acquired three vessels from WMS (a Variable Interest Entity (VIE) until
that date). Based on this reconsideration event, the Company is no longer the
primary beneficiary under FIN 46R and is no longer required to consolidate WMS
financial statements. However, the statement of operations for the three month
period ended June 30, 2007 includes the results of WMS, as it was a VIE at that
time. For a discussion of FIN 46R, see Notes 1 and 21 to our Consolidated
Financial Statements for the three month period ended June 30,
2008.
  Revenues
during the three month period ended June 30, 2008 were $43.4 million, an
increase of 72.2%, from $25.2 million
during the three month period ended June 30, 2007. This increase was primarily
attributable to increased Sailing Days,
higher fuel surcharges, improved vessel utilization and improved trade
patterns.
  32
  Management
believes that each of our vessels should achieve approximately 91 Sailing Days
in an average first fiscal quarter, assuming average winter weather and ice,
average winterwork,
average capital expenditures, no major
repairs, and dry-docking cycle times performed during the winter lay-up
period. During the three month period ended June 30, 2008, Sailing Days
increased 140 days to 955 days from 815 Sailing Days during the three month
period ended June 30, 2007. The table below sets forth a reconciliation of the
difference in Sailing Days between the three months ended June 30, 2007 and the
three months ended June 30, 2008.
  Sailing
      Days during the three months ended June 30, 2007
                  815Sailing
      Days gained attributable to the WMS Vessels
                  155Sailing
      Days gained  attributable to the acquired Voyageur
      Vessels
                  160Sailing
      Days lost attributable to the retirement of our oldest and smallest
      vessel
                  (91)Sailing
      Days lost attributable to our remaining U.S. vessels owned or operated at
      the time of our March 2006 acquisition
                  (1)Sailing
      Days lost attributable to our remaining Canadian vessels owned or operated
      at the time of our March 2006 acquisition
                  (83)Sailing
      days during the three months ended June 30, 2008
                  955
 
  Our
Vessel Margins, which we define as revenues minus the sum of outside voyage
charters fees, charter hire, vessel operating expenses, and repairs and
maintenance, increased $5.0 million to $10.7 million during the three month
period ended June 30, 2008, from $5.7
million during the three month period ended June 30, 2007. Excluding the VIE,
Vessel Margins increased $6.1 million to $10.7 million during the three month
period ended June 30, 2008, from $4.6 million during the three month period
ended June 30, 2007. This increase was achieved despite a $0.8 million increase
in expensed winterwork.  Management believes that Vessel
Margins are an important measure of the cash flow generated by individual
vessels to evaluate performance and to make investment decisions.
  Repairs
and maintenance expenses, which consist of expensed winterwork,
are a component of vessel operating cost and increased $0.8 million to $0.9
million during the three month period ended June 30, 2008, from $94 during the three month period
ended June 30, 2007.  The increase was primarily due to five of our
vessels not commencing sailing for the 2008
season until after the beginning of the fiscal year.
  Our
general and administrative expenses increased $0.5 million to $2.4 million
during the three month period ended June 30, 2008, from $1.9 million during the three month
period ended June 30, 2007. Excluding the VIE, our general and administrative
expenses increased $0.7 million to $2.4 million during the three month period
ended June 30, 2008 from $1.7 million during the three month period ended June
30, 2007. The increase included $0.6 million of higher cash expenses from increased infrastructure staffing and
expenses, $62 related to the increase in the Canadian dollarand $118 attributable to higher non-cash equity
compensation. Our general and
administrative expense represented 5.7% of revenues during the three month
period ended June 30, 2008, a decrease from
7.7% of revenues during the three month period ended June 30, 2007.
  Depreciation
expense rose $75 to $1.6 million during the three month period ended June 30,
2008 from $1.5 during the three month period ended June 30, 2007 due to the
acquisition of the two Voyageur vessels. The increase in depreciation expense
was partially offset by the retirement of our oldest and smallest
vessel.
  Amortization
of dry-dock costs increased $209 to $0.6 million during the three month period
ended June 30, 2008 from $358 during the three month period ended June 30, 2007,
due to the drydocking of our two largest vessels during the winterlayup
period.    Amortization of intangibles increased $73
to $431 during the three month period ended June 30, 2008 from $358 during the
three month period ended June 30, 2007, which was primarily attributable to the
acquisition of the two Voyageur vessels in August 2007.
  As a
result of the items listed above, during the three month period ended June 30,
2008, income before other income and
expenses and income taxes increased $4.0 million to  $5.6 million, compared to $1.6 million for the three month
period ended June 30, 2007.
  33
  Interest
expense increased $0.7 million to $1.7 million during the three month period
ended June 30, 2008 from $1.0 million during the three month period ended June
30, 2007.
Theincrease in interest expense was
a result of the additional indebtedness incurred in connection with our
acquisitions of the Voyager and WMS vessels.
 We
recorded a gain on interest rate swap contracts of $1.2 million
during the three month period ended June
30, 2008 as a result of adjusting our swap contracts to fair value as of the end of such period.The swap contracts were entered into on February 13, 2008.
  Our Income before income taxes was $5.2 million
during the three month period ended June 30, 2008 compared to  $0.7
million during the three month period ended June 30, 2007.
  Our
provision for income tax expense increased $2.2 million to $2.5 million during
the three month period ended June 30, 2008 from $318 during the three month
period ended June 30, 2007.  However, such U.S. and Canadian federal
tax expense will not be paid until our applicable net operating losses are
utilized.
  Our Net
Income increased $2.6 million to $2.7 million during the three month period
ended June 30, 2008 from $99 during the three month period ended June 30,
2007.
  We
accrued $363 for cash dividends on our preferred stock during the three month
period ended June 30, 2008 compared to $296 during the three month period ended
June 30, 2007.  During the three month
period ended June 30, 2007, we also recorded $1.0 million of Stock
Warrant Inducement Discountexpense in
connection with the $0.50 per warrant discount on the 1.9 million warrants which
were exercised during that period.
  As a
result of the items above, our Net Income Applicable to Common stockholders
increased $3.5 million to $2.3 million during the three month period ended June
30, 2008 compared to a loss of $1.2 million
during the three month period ended June 30, 2007.
  34
  Impact
of Inflation and Changing Prices
  During
the three month period ended June 30, 2008, there were major increases in our
fuel costs. However, our contracts with our customers provide for recovery of
these costs through fuel surcharges.
  Liquidity
and Capital Resources
  Our
primary sources of liquidity are cash from operations, the proceeds of our
credit facility, proceeds from warrant exercises 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,
financing and investing activities) which is included in our consolidated
financial statements for the three month periods ended June 30, 2007 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.
  Investments
in Capital Expenditures and Dry-Dockings
  We
recorded $6.4 million in capital expenditures duringthe
three month period ended June 30, 2008, which included $2.9 million not yet paid
as of June 30, 2008. Our primary capital expenditures during such period were
the repowering of one vessel and winter work on four other
vessels.  Total vessel capital expenditures related to the winter 2008
season (which ended during the three month period ended June 30, 2008) were
$20.7 million.  We also invested $305 in dry-docking expenses during
the three month period ended June 30, 2008.  Total vessel dry-docking
expenditures for thewinter 2008
season(which ended during the three month
period ended June 30, 2008) were
$4.0 million. Drydocking expenditure included substantial one-time steel work on
one of the acquired Voyageur vessels which was exposed to salt
water.
  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, 2008, our liability for financial instruments with exposure to foreign
currency risk was approximately CDN $49.7 million of term borrowings in Canada
and CDN $11.6 million of revolving borrowings in Canada.  Although we
have tried to match our indebtedness and cash flows by country, the sudden
change in exchange rates can increase the indebtedness converted to US dollars
before the operating cash flows can make up for such a currency conversion
change.
  From a
cash flow perspective, our operations are insulated against changes in currency
rates as operations in Canada and the United States have revenues and
expenditures denominated in local currencies and our operations are cash flow positive. However,
as stated above, the majority of our financial liabilities are denominated in
Canadian dollars which exposes us to currency risks related to principal
payments and interest payments on such financial liability
instruments.
  Interest
Rate Risk
  We are
exposed to changes in interest rates associated with revolving our indebtedness
under our credit facility. Our credit facility 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 all of our term loans for the full 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.
  35
  Off-Balance
Sheet Arrangements
  Options
and warrants issued in conjunction with our initial public offering are equity
linked derivatives and accordingly represent off-balance sheet arrangements. The
options and warrants meet the scope exception in paragraph 11(a) of FAS 133 and
are accordingly not accounted for as derivatives for purposes of FAS 133, but
instead are accounted for as equity. See the notes to the June 30, 2008
financial statements for a discussion of outstanding options and
warrants.
  On August
27, 2007, in connection with the acquisition of the Voyageur vessels, Lower
Lakes entered into a guarantee with GE Canada Finance Holding Company pursuant
to which Lower Lakes agreed to guarantee up to CDN $1.25 million of Voyageur’s
indebtedness to GE Canada. Lower Lakes’ maximum future payments under the
guarantee are limited to CDN $1.25 million 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 its contract of affreightment
with Lower Lakes.  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 to acquire the vessel owned by Voyageur and
securing Voyageur’s GE Canada indebtedness 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.
  In the
event GE Canada makes a demand against Lower Lakes pursuant to the terms of
the guarantee, an affiliate of Voyageur has agreed to contribute half of any
amounts drawn under the guarantee through a CDN $0.6 million letter of credit
provided to Lower Lakes.
  Voyageur
has been determined to be a variable interest entity under United States
generally accepted accounting principles. We have determined that we are not a
“Primary Beneficiary” of Voyageur’s remaining business and therefore not
required to consolidate Voyageur’s financial statements. For a discussion of
Variable Interest Entities, see Note 21 to our financial
statements.
  Critical
Accounting Policies
  Our
significant accounting policies are presented in Note 1 to our consolidated
financial statements included in this quarterly report on Form 10-Q, and the
following summaries should be read in conjunction with the financial statements
and the related notes included in this quarterly report.  While all
accounting policies affect the financial statements, certain policies may be
viewed as critical.
  The
following critical accounting policies are those that are most important to the
portrayal of our financial statements and results of operations and that require
management’s most subjective or complex judgments and estimates.
  Revenue
recognition
  We
generate revenues from freight billings under contracts of affreightment (voyage
charters) generally on a rate per ton basis.  Voyage charter revenue
is recognized ratably over the period from the departure of a vessel from its
original shipping point to its destination, when the following conditions are
met: we have 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 voyage, while freight surcharges are recognized when
the associated costs are incurred. Freight surcharges are insignificant and
amount to less than 1% of total revenues for the periods
presented.  We subcontract 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.  In addition, 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.”  Costs for subcontracted freight providers, presented as
“Outside voyage charter fees” on the statement of operations are recognized
ratably over the voyage.
  36
  Intangible
assets and goodwill
  We
adopted Statements of Financial Accounting Standards (SFAS) No. 141, “Business
Combinations” (“SFAS 141”) and SFAS No. 142, “Goodwill and other Intangible
Assets” (“SFAS 142”). SFAS No. 141 requires all business combinations to be
accounted for using the purchase method of accounting and that certain
intangible assets acquired in a business combination must be recognized as
assets separate from goodwill. SFAS No. 142 provides that intangible assets with
indefinite lives and goodwill will not be amortized, but will be tested at least
annually for impairment, and whenever events or changes in circumstances
indicate that the carrying value of the asset may not be recovered. If the asset
is impaired, it will be written down to its fair value.  Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. In
accordance with SFAS 142, we review goodwill for impairment at least annually
using a two-step impairment test to first identify potential impairment and then
to measure the amount of the impairment, if any. Chartering agreement costs are
primarily legal costs of establishing the time chartering agreements with the
VIE, including loan and guaranty documentation.  These costs were
amortized over the term of the time chartering agreement, and related debt.
Other intangibles are amortized as follows:
  Trademarks
      and trade names
                    10
      years straight-lineNon-competition
      agreements
                    4
      years straight-lineCustomer
      relationships and contracts
                    15
      years straight-lineChartering
      agreement costs
                    Term
      of Chartering agreement
  Property
and equipment
  Property
and equipment are recorded at cost and have been valued as of the date of
acquisition. Depreciation methods for capital assets are as
follows:
  Vessels
                    4 -
      25 years straight-lineLeasehold
      improvements
                    7 -
      11 years straight-lineFurniture
      and equipment
                    20%
      declining-balanceVehicles
                    20%
      declining-balanceComputer
      equipment
                    45%
      declining-balance
  Deferred
charges
  Deferred
charges include capitalized drydock expenditures and deferred financing costs.
Drydock costs incurred during statutory Canadian and United States certification
processes are capitalized and amortized on a straight-line basis over the
benefit period, which is 60 months.  Drydock costs include costs of
work performed by third party shipyards, subcontractors and other direct
expenses to complete the mandatory certification process.  Deferred
financing costs are amortized on a straight-line basis over the term of the
related debt, which approximates the effective interest method.
  Repairs
and maintenance
  Our
vessels require repairs and maintenance each year to ensure the fleet is
operating efficiently during the shipping season.  The vast majority
of repairs and maintenance are completed in January, February and March of each
year when the vessels are inactive. We expense such routine repairs and
maintenance costs. Significant repairs to our vessels, whether owned or
available to us under a time charter, such as major engine overhauls and hull
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.
  37
  Impairment
of long-lived assets
  Long-lived
assets include property, intangible assets subject to amortization, and certain
other assets. The carrying values of these assets are periodically reviewed for
impairment or whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable.  We evaluate impairment by
comparing the fair value of the intangible assets with indefinite lives and
goodwill with their carrying values.  We determine fair value of
goodwill by evaluating the fair value of the acquired business as well as using
the sum of the undiscounted cash flows projected to be generated by the acquired
business giving rise to that goodwill.  This requires us to make
long-term forecasts of future revenues and costs related to the assets subject
to review. These forecasts require assumptions about demand for our services and
future market conditions. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to result from its use and eventual
disposition.  If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized for the amount by which
the carrying value of the asset exceeds its fair value. If a readily
determinable market price does not exist, fair value is estimated using
undiscounted expected cash flows attributable to the assets.
  Income
taxes
  We
account for income taxes in accordance with SFAS No. 109, “Accounting for Income
Taxes” (“SFAS 109”). SFAS 109 requires the determination of deferred tax assets
and liabilities based on the differences between the financial statement and
income tax bases of tax assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse. A
valuation allowance is recognized, if necessary, to measure tax benefits to the
extent that, based on available evidence, it is more likely than not that they
will be realized. We believe that such tax benefits will be
realized.
  Accounting
for uncertainty in income taxes
  The
Company has adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”
(“FIN 48”) effective April 1, 2007. FIN 48 addresses the determination of how
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based
on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution. The impact of the Company’s reassessment of
its tax positions in accordance with FIN 48 did not have a material effect on
the results of operations, financial condition or liquidity.
 
 The
adoption of FIN 48 did not result in a cumulative effect adjustment to
accumulated deficit. At April 1, 2007, the Company had $nil of 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.
  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.
  38
  Variable
interest entities
  Effective
for the second fiscal quarter ended September 30, 2006, the Company implemented
FASB Interpretation (“FIN”) 46R, which requires that the Company consolidate
certain entities on the basis other than through ownership of a voting interest
of the entity (see Note 21 to the consolidated financial statements for the
three month period ended June 30, 2008). Two VIE’s have been identified and one
has been consolidated in accordance with FIN 46R.Though the Voyageur group
of companies (see Note 8 to the consolidated financial statements for the three
month period ended June 30, 2008) is a variable interest entity for Rand, it
does not meet the criteria for consolidation and hence is not
consolidated.
  On
February 13, 2008, the Company entered into an asset purchase agreement with WMS
(a VIE until that date) to buy the entire remaining assets of the VIE. Based on
this reconsideration event, the Company is no longer the primary beneficiary
under FIN 46R and is no longer required to consolidate WMS financial statements.
However, the statement of operations as of June 30, 2007 includes the results of
WMS, as it was a VIE at that time.
  Recently
Issued Pronouncements
  Non-controlling interests
in consolidated financial statements
  On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements,” an amendment of ARB No. 51. SFAS 160 applies
to all fiscal years beginning on or after December 15, 2008. The Company will be
required to adopt this standard for the fiscal year ending March 31, 2010 and is
presently evaluating the impact of adopting this standard on its consolidated
financial statements.
 
 Business
Combinations
  On
December 4, 2007, the FASB also issued SFAS No. 141(R), “Business Combinations”.
This statement also applies to fiscal years beginning on or after December 15,
2008. The Company will be required to adopt this standard for the fiscal year
ending March 31, 2010. The Company is presently evaluating the impact of
adopting this standard on its consolidated financial statements.
 
 Derivative
Instruments and Hedging Activities
 In March
2008, the FASB issued SFASNo.161, “Disclosures about Derivative Instruments and Hedging
Activities” (“SFAS 161”). SFAS 161 amends SFAS 133 to provide enhanced
disclosure requirements surrounding how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under SFAS 133 and how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash flows.
SFAS 161 is effective for the Company as of the beginning of Fiscal 2010,
including interim periods thereafter. The implementation of SFAS 161 is not
expected to have a material impact on the Company’s consolidated financial
statements.
  The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). The new standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (“GAAP”) for nongovernmental entities. SFAS 162 is
effective 60 days following SEC approval of the Public Company Accounting
Oversight Board Auditing amendments to AU Section 411, The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles.The adoption of SFAS 162 is not anticipated to have an effect on
the Company’s consolidated financial statements.
 
 IFRS
  International
Financial Reporting Standards (IFRS) are a set of standards and interpretations
adopted by the International Accounting Standards Board. The SEC is
currently considering a potential IFRS adoption process in the U.S., which
would, in the near term, provide domestic issuers with an alternative accounting
method and ultimately could replace U.S. GAAP reporting requirements with IFRS
reporting requirements. It is anticipated that the SEC will issue some guidance
on this potential adoption by December 31, 2008. We are currently investigating
the implications to the Company should we be required to adopt.
 39
 
 Item
3.  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.
  Item
4.  Controls
and Procedures.
  As of
June 30, 2008, 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
quarter ended June 30, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial
reporting.
  40
 
 PART II. 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.
  Item
1A.  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, 2008.
  
 Item 2.  Unregistered Sales of Equity
Securities and Use of Proceeds.
  None.
  Item 3.  Defaults Upon Senior
Securities.
  None.
  Item 4.  Submission of Matters to a Vote
of Security Holders.
  None.
  Item 5.  Other Information.
  None.
  Item 6.  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.
 
 
 41
  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 14, 2008
                  
                  /s/
      Laurence S. LevyLaurence
      S. LevyChairman
      of the Board and ChiefExecutive
      Officer (Principal Executive Officer)Date:
      August 14, 2008
                  
                  /s/
      Joseph W. McHugh, Jr.Joseph
      W. McHugh, Jr.Chief
      Financial Officer (Principal Financial and Accounting
    Officer)
   42
 
  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.