UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q





R
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the Quarterly Period Ended December 31, 2008or£
            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 þ


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes £ No R





12,890,927
shares of Common Stock, par value $.0001, were outstanding at February 10,
2009.









RAND
      LOGISTICS, INC.INDEXPART
      I. FINANCIAL INFORMATION
                                    1Item
      1.  Financial Statements.
                                    1Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations.
                                    31Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                                    48Item
      4T.  Controls and Procedures.
                                    48PART
      II. OTHER INFORMATION
                                    49Item
      1.  Legal Proceedings.
                                    49Item
      1A.  Risk Factors.
                                    49Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds.
                                    49Item
      3.  Defaults Upon Senior Securities.
                                    49Item
      4.  Submission of Matters to a Vote of Security
      Holders.
                                    49Item
      5.  Other Information.
                                    49Item
      6.  Exhibits.
                                    49
 
 i




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)
 December
      31,
                                                  
                                                  
                                                  March
      31,ASSETS
                                                  
                                                  2008
                                                  
                                                  
                                                  2008CURRENTCash
      and cash equivalents
                                                  
                                                  $
                                                  11,449
                                                  
                                                  
                                                  $
                                                  5,626Accounts
      receivable, net (Note 3)
                                                  
                                                  
                                                  14,193
                                                  
                                                  
                                                  
                                                  3,468Prepaid
      expenses and other current assets (Note 4)
                                                  
                                                  
                                                  2,349
                                                  
                                                  
                                                  
                                                  3,122Income
      taxes receivable
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  193Deferred
      income taxes
                                                  
                                                  
                                                  1,109
                                                  
                                                  
                                                  
                                                  1,355Total
      current assets
                                                  
                                                  
                                                  29,100
                                                  
                                                  
                                                  
                                                  13,764PROPERTY
      AND EQUIPMENT, NET (Note 5)
                                                  
                                                  
                                                  86,987
                                                  
                                                  
                                                  
                                                  96,349DEFERRED
      INCOME TAXES
                                                  
                                                  
                                                  10,574
                                                  
                                                  
                                                  
                                                  20,318DEFERRED
      DRYDOCK COSTS, NET (Note 6)
                                                  
                                                  
                                                  8,088
                                                  
                                                  
                                                  
                                                  9,082INTANGIBLE
      ASSETS, NET (Note 7)
                                                  
                                                  
                                                  14,333
                                                  
                                                  
                                                  
                                                  17,979GOODWILL
      (Note 7)
                                                  
                                                  
                                                  10,193
                                                  
                                                  
                                                  
                                                  10,193Total
      assets
                                                  
                                                  $
                                                  159,275
                                                  
                                                  
                                                  $
                                                  167,685LIABILITIESCURRENTBank
      indebtedness (Note 9)
                                                  
                                                  $
                                                  10,929
                                                  
                                                  
                                                  $
                                                  269Accounts
      payable
                                                  
                                                  
                                                  6,131
                                                  
                                                  
                                                  
                                                  14,985Accrued
      liabilities (Note 10)
                                                  
                                                  
                                                  10,785
                                                  
                                                  
                                                  
                                                  7,243Acquired
      Management Bonus Program (Note 20)
                                                  
                                                  
                                                  271
                                                  
                                                  
                                                  
                                                  3,000Interest
      rate swap contracts (Note 18)
                                                  
                                                  
                                                  4,047
                                                  
                                                  
                                                  
                                                  1,274Income
      taxes payable
                                                  
                                                  
                                                  76
                                                  
                                                  
                                                  
                                                  422Deferred
      income taxes
                                                  
                                                  
                                                  690
                                                  
                                                  
                                                  
                                                  1,508Current
      portion of long-term debt  (Note 11)
                                                  
                                                  
                                                  4,187
                                                  
                                                  
                                                  
                                                  3,521Total
      current liabilities
                                                  
                                                  
                                                  37,116
                                                  
                                                  
                                                  
                                                  32,222LONG-TERM
      DEBT  (Note 11)
                                                  
                                                  
                                                  56,524
                                                  
                                                  
                                                  
                                                  66,896OTHER
      LIABILITIES
                                                  
                                                  
                                                  232
                                                  
                                                  
                                                  
                                                  -DEFERRED
      INCOME TAXES
                                                  
                                                  
                                                  13,391
                                                  
                                                  
                                                  
                                                  14,703Total
      liabilities
                                                  
                                                  
                                                  107,263
                                                  
                                                  
                                                  
                                                  113,821COMMITMENTS
      AND CONTINGENCIES (Notes 12 and 13)STOCKHOLDERS'
      EQUITYPreferred
      stock, $.0001 par value, Authorized
      1,000,000 shares, Issued and outstanding 300,000 shares (Note
14)
                                                  
                                                  
                                                  14,900
                                                  
                                                  
                                                  
                                                  14,900Common
      stock, $.0001 par value, Authorized
      50,000,000 shares, Issued and outstanding 12,884,339 shares (Note
      14)
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  
                                                  1Additional
      paid-in capital
                                                  
                                                  
                                                  61,555
                                                  
                                                  
                                                  
                                                  58,350Accumulated
      deficit
                                                  
                                                  
                                                  (19,744
                                                  )
                                                  
                                                  
                                                  (20,465
                                                  )Accumulated
      other comprehensive income (loss)
                                                  
                                                  
                                                  (4,700
                                                  )
                                                  
                                                  
                                                  1,078Total
      stockholders’ equity
                                                  
                                                  
                                                  52,012
                                                  
                                                  
                                                  
                                                  53,864Total
      liabilities and stockholders’ equity
                                                  
                                                  $
                                                  159,275
                                                  
                                                  
                                                  $
                                                  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 December 31, 2008
                                                        
                                                        
                                                        Three
      months ended December 31, 2007
                                                        
                                                        
                                                        Nine
      months ended December 31, 2008
                                                        
                                                        
                                                        Nine
      months ended December 31, 2007REVENUE
                                                        
                                                        $
                                                        36,158
                                                        
                                                        
                                                        $
                                                        35,917
                                                        
                                                        
                                                        $
                                                        131,853
                                                        
                                                        
                                                        $
                                                        90,024EXPENSESOutside
      voyage charter fees (Note 15)
                                                        
                                                        
                                                        5,310
                                                        
                                                        
                                                        
                                                        4,034
                                                        
                                                        
                                                        
                                                        17,618
                                                        
                                                        
                                                        
                                                        8,605Vessel
      operating expenses
                                                        
                                                        
                                                        24,025
                                                        
                                                        
                                                        
                                                        26,281
                                                        
                                                        
                                                        
                                                        79,936
                                                        
                                                        
                                                        
                                                        63,381Repairs
      and maintenance
                                                        
                                                        
                                                        73
                                                        
                                                        
                                                        
                                                        7
                                                        
                                                        
                                                        
                                                        961
                                                        
                                                        
                                                        
                                                        101General
      and administrative
                                                        
                                                        
                                                        2,326
                                                        
                                                        
                                                        
                                                        2,648
                                                        
                                                        
                                                        
                                                        7,457
                                                        
                                                        
                                                        
                                                        7,391Depreciation
                                                        
                                                        
                                                        1,683
                                                        
                                                        
                                                        
                                                        1,719
                                                        
                                                        
                                                        
                                                        5,086
                                                        
                                                        
                                                        
                                                        4,882Amortization
      of drydock costs
                                                        
                                                        
                                                        507
                                                        
                                                        
                                                        
                                                        376
                                                        
                                                        
                                                        
                                                        1,641
                                                        
                                                        
                                                        
                                                        1,149Amortization
      of intangibles
                                                        
                                                        
                                                        398
                                                        
                                                        
                                                        
                                                        633
                                                        
                                                        
                                                        
                                                        1,269
                                                        
                                                        
                                                        
                                                        1,392Amortization
      of chartering agreement costs
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        16
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        112Write-off
      of retired vessel to salvage value
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,687
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,687Loss
      (gain) on foreign exchange
                                                        
                                                        
                                                        22
                                                        
                                                        
                                                        
                                                        11
                                                        
                                                        
                                                        
                                                        (19
                                                        )
                                                        
                                                        
                                                        (208
                                                        )34,344
                                                        
                                                        
                                                        
                                                        37,412
                                                        
                                                        
                                                        
                                                        113,949
                                                        
                                                        
                                                        
                                                        88,492INCOME
      (LOSS) BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES
                                                        
                                                        
                                                        1,814
                                                        
                                                        
                                                        
                                                        (1,495
                                                        )
                                                        
                                                        
                                                        17,904
                                                        
                                                        
                                                        
                                                        1,532OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                                                        
                                                        
                                                        1,538
                                                        
                                                        
                                                        
                                                        1,369
                                                        
                                                        
                                                        
                                                        5,011
                                                        
                                                        
                                                        
                                                        3,486Interest
      income
                                                        
                                                        
                                                        (19
                                                        )
                                                        
                                                        
                                                        (53
                                                        )
                                                        
                                                        
                                                        (25
                                                        )
                                                        
                                                        
                                                        (195
                                                        )Interest
      rate swap contracts (Note 18)
                                                        
                                                        
                                                        3,437
                                                        
                                                        
                                                        
                                                        35
                                                        
                                                        
                                                        
                                                        2,865
                                                        
                                                        
                                                        
                                                        434,956
                                                        
                                                        
                                                        
                                                        1,351
                                                        
                                                        
                                                        
                                                        7,851
                                                        
                                                        
                                                        
                                                        3,334INCOME  (LOSS)
      BEFORE INCOME TAXES
                                                        
                                                        
                                                        (3,142
                                                        )
                                                        
                                                        
                                                        (2,846
                                                        )
                                                        
                                                        
                                                        10,053
                                                        
                                                        
                                                        
                                                        (1,802
                                                        )PROVISION
      (RECOVERY) FOR INCOME TAXESCurrent
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        76
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        43Deferred
                                                        
                                                        
                                                        2,853
                                                        
                                                        
                                                        
                                                        (833
                                                        )
                                                        
                                                        
                                                        8,176
                                                        
                                                        
                                                        
                                                        (462
                                                        )NET
      INCOME (LOSS) BEFORE MINORITY INTEREST
                                                        
                                                        
                                                        (5,995
                                                        )
                                                        
                                                        
                                                        (2,089
                                                        )
                                                        
                                                        
                                                        1,877
                                                        
                                                        
                                                        
                                                        (1,383
                                                        )MINORITY
      INTEREST (Note 21)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (228
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (259
                                                        )NET
      INCOME (LOSS)
                                                        
                                                        
                                                        (5,995
                                                        )
                                                        
                                                        
                                                        (1,861
                                                        )
                                                        
                                                        
                                                        1,877
                                                        
                                                        
                                                        
                                                        (1,124
                                                        )PREFERRED
      STOCK DIVIDENDS
                                                        
                                                        
                                                        382
                                                        
                                                        
                                                        
                                                        317
                                                        
                                                        
                                                        
                                                        1,156
                                                        
                                                        
                                                        
                                                        909STOCK
      WARRANT INDUCEMENT DISCOUNT
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,982NET
      INCOME  (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
                                                        
                                                        $
                                                        (6,377
                                                        )
                                                        
                                                        $
                                                        (2,178
                                                        )
                                                        
                                                        $
                                                        721
                                                        
                                                        
                                                        $
                                                        (4,015
                                                        )Net
      earnings (loss) per share basic (Note 19)
                                                        
                                                        $
                                                        (0.50
                                                        )
                                                        
                                                        $
                                                        (0.18
                                                        )
                                                        
                                                        $
                                                        0.06
                                                        
                                                        
                                                        $
                                                        (0.36
                                                        )Net
      earnings (loss) per share diluted
                                                        
                                                        $
                                                        (0.50
                                                        )
                                                        
                                                        $
                                                        (0.18
                                                        )
                                                        
                                                        $
                                                        0.06
                                                        
                                                        
                                                        $
                                                        (0.36
                                                        )Weighted
      average shares basic
                                                        
                                                        
                                                        12,804,050
                                                        
                                                        
                                                        
                                                        12,092,142
                                                        
                                                        
                                                        
                                                        12,450,630
                                                        
                                                        
                                                        
                                                        11,109,942Weighted
      average shares diluted
                                                        
                                                        
                                                        12,804,050
                                                        
                                                        
                                                        
                                                        12,092,142
                                                        
                                                        
                                                        
                                                        12,450,630
                                                        
                                                        
                                                        
                                                        11,109,942
  
 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 warrantinducement
      discount (Note 14)
                                              
                                              
                                              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
                                              
                                              
                                              $
                                              56,366Net
      income
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              5,193
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              5,193Preferred
      dividend
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (411
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (411
                                              )Unrestricted
      shares issued under management
      bonus program
                                              
                                              
                                              478,232
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,644
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,644Warrant
      conversion (Note 14)
                                              
                                              
                                              15,226
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              76
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              76Warrant
      extinguishment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (9
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (9
                                              )Unrestricted
      stock issued (Note 14)
                                              
                                              
                                              4,384
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              25
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              25Stock
      options issued (Note 14)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              131
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              131Translation
      adjustment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (1,426
                                              )
                                              
                                              
                                              (1,426
                                              )Balances,
      September 30, 2008
                                              
                                              
                                              12,602,893
                                              
                                              
                                              $
                                              1
                                              
                                              
                                              
                                              300,000
                                              
                                              
                                              $
                                              14,900
                                              
                                              
                                              $
                                              61,283
                                              
                                              
                                              $
                                              (13,367
                                              )
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              (228
                                              )
                                              
                                              $
                                              62,589Net
      loss
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (5,995
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (5,995
                                              )Preferred
      dividend
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (382
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (382
                                              )Warrant
      conversion, net of expenses (Note 14)
                                              
                                              
                                              276,470
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              116
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              116Unrestricted
      stock issued (Note 14)
                                              
                                              
                                              4,976
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              25
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              25Stock
      options issued (Note 14)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              131
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              131Translation
      adjustment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (4,472
                                              )
                                              
                                              
                                              (4,472
                                              )Balances,
      December 31, 2008
                                              
                                              
                                              12,884,339
                                              
                                              
                                              $
                                              1
                                              
                                              
                                              
                                              300,000
                                              
                                              
                                              $
                                              14,900
                                              
                                              
                                              $
                                              61,555
                                              
                                              
                                              $
                                              (19,744
                                              )
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              (4,700
                                              )
                                              
                                              $
                                              52,012
  Note:
Comprehensive loss for the three months ended December 31, 2008 was
$(10,467), for the nine months ended December 31, 2008 was $(3,901) and $(9,266)
for the year ended March 31, 2008.
    3
 
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Cash Flows (Unaudited)
 (U.S.
Dollars 000’s except for Earnings (Loss) Per Share
figures)
 Nine
      months ended
                                                                                                                                                                                            December
      31, 2008
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          Nine
      months
                                                                                                                                                                                            ended
                                                                                                                                                                                            December
      31, 2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          1,877
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          (1,383
                                                                                                                                                                                          )Adjustments
      to reconcile net income (loss) to net cash usedby
      operating activitiesDepreciation
      and amortization of drydock costs
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          6,727
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          6,031Amortization
      of intangibles and deferred financing costs
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          1,579
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          1,805Deferred
      income taxes
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          8,176
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          299Interest
      rate swap contracts
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          2,865
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          43Equity
      compensation
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          647
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          271Write-off
      of retired vessel to salvage value
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          1,687Other
      liabilities
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          232
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -Changes
      in non cash operating working capital:Accounts
      receivable
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (10,725
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (14,241
                                                                                                                                                                                          )Prepaid
      expenses and other current assets
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          773
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (642
                                                                                                                                                                                          )Accounts
      payable and accrued liabilities
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (8,158
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          2,687Income
      taxes payable
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (153
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (48
                                                                                                                                                                                          )3,840
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (3,491
                                                                                                                                                                                          )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (6,726
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (2,028
                                                                                                                                                                                          )Acquisition
      of business
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (24,520
                                                                                                                                                                                          )Sale
      proceeds of retired vessel
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          250
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -Deferred
      drydock costs
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (451
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (2,232
                                                                                                                                                                                          )(6,927
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (28,780
                                                                                                                                                                                          )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of warrants, net of expenses
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          192
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          17,843Warrant
      extinguishment
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (9
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -Proceeds
      from long-term debt
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          17,117Long-term
      debt repayment
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (2,192
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (3,523
                                                                                                                                                                                          )Debt
      financing costs
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          -
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (330
                                                                                                                                                                                          )Proceeds
      from bank indebtedness
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          21,863
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          3,885Repayment
      of bank indebtedness
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (9,835
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (6,181
                                                                                                                                                                                          )10,019
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          28,811EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (1,109
                                                                                                                                                                                          )
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (597
                                                                                                                                                                                          )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          5,823
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          (4,057
                                                                                                                                                                                          )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          5,626
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          7,207CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          11,449
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          3,150SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayment
      of interest
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          4,576
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          2,864Payment
      of income taxes
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          -
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          132Unpaid
      purchase of property and equipment
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          1,336
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          -Shares
      issued under management bonus program
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          2,645
                                                                                                                                                                                          
                                                                                                                                                                                          
                                                                                                                                                                                          $
                                                                                                                                                                                          -
    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 intercompany transactions and
balances have been eliminated. In the opinion of management, the interim
financial statements contain all adjustments necessary (consisting of normal
recurring accruals) to present fairly the financial information contained
herein. Operating results for the interim period presented are not necessarily
indicative of the results to be expected for a full year, in part due to the
seasonal nature of the business. The comparative balance sheet amounts are
derived from the March 31, 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 $151 as of December 31, 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.
 
 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 lubricant inventories
 
 Raw
materials, fuel, and operating supplies, are accounted for on a first-in,
first-out cost method (based on monthly averages). Raw materials and fuel are
stated at the lower of actual cost (first-in, first-out method) or market.
Operating supplies are stated at actual cost or average cost.
  Intangible
assets and goodwill
 
 The
Company has adopted Statements of Financial Accounting Standards (SFAS) No.141,
"Business Combinations" (“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-line
 Non-competition
      agreements
              4
      years straight-line
 Customer
      relationships and contracts
              15
      years straight-line
 Chartering
      agreement costs
              Term
      of Chartering agreement
 
 Property
and equipment
 
 Property
and equipment are recorded at cost.  Depreciationmethods for capital
assets are as follows:
 
 Vessels
              4 -
      25 years straight-line
 Leasehold
      improvements
              7 -
      11 years straight-line
 Vehicles
              20%
      declining-balance
 Furniture
      and equipment
              20%
      declining-balance
 Computer
      equipment
              45%
      declining-balance
 Communication
      equipment
              20%
      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 such tax benefits, net of valuation allowance, more likely
than not 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
administrative 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.
  Interest
rate swap contracts
 The
Company accounts for its two interest rate swap contracts on its term debt
utilizing Statement of Financial Accounting Standards No. 133 (SFAS 133),
“Accounting for Derivative Instruments and Hedging Activities,” as amended. All
changes in the fair value of the swap contracts are recorded in earnings and the
fair value of the contracts is included in current liabilities on the
Consolidated Balance Sheet.
  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
 
 In 2006,
the Company implemented FASB Interpretation (“FIN”) 46R, which requires that the
Company consolidate certain entities on the basis other than through ownership
of a voting interest of the entity (see Note 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 December 31, 2007 includes the
results of WMS, as it was a VIE at that time.
  2.         RECENTLY ISSUED
PRONOUNCEMENTS
 
 Determination
of the Useful Life of Intangible Assets
 
 In April
2008, the FASB issued FASB Staff Position No. 142-3,Determination of the
Useful Life of Intangible Assets, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement
No. 142,“Goodwill and Other
Intangible Assets”. The intent of FASB Staff Position No. 142-3 is to
improve the consistency between the useful life of a recognized intangible asset
under FASB Statement No. 142 and the period of expected cash flows used to
measure the fair value of the asset under FASB Statement No. 141(R) and
other U.S. generally accepted accounting principles. FASB Staff Position No.
142-3 is effective for fiscal years beginning after December 15, 2008 and
interim periods within those fiscal years and early adoption is prohibited. The
Company will be required to adopt this standard for the fiscal year ending March
31, 2010. The Company is presently evaluating the impact of adopting this
standard on its consolidated financial statements.
 
 Non-controlling
interests in consolidated financial statements
 
 On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, (“SFAS 160”) an amendment of ARB No. 51. SFAS
160 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.
  9
 
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
  2.
              RECENTLY ISSUED PRONOUNCEMENTS
      (continued)
 
 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
 
 In
November of 2008, the SEC released a proposed roadmap regarding the potential
use by U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive
series of accounting standards published by the International Accounting
Standards Board (“IASB”). Under the proposed roadmap, the Company may be
required in fiscal 2015 to prepare financial statements in accordance with IFRS.
However, the SEC will make a determination in 2011 regarding the mandatory
adoption of IFRS. The Company is currently assessing the impact that this
potential change would have on its consolidated financial statements, and it
will continue to monitor the development of the potential implementation of
IFRS.
 
 Fair
Value Measurement
 
 In
September 2006, the FASB issued “SFAS” No. 157, Fair Value Measurements
(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. Specifically, this
Statement sets forth a definition of fair value, and establishes a hierarchy
prioritizing the inputs to valuation techniques, giving the highest priority to
quoted prices in active markets for identical assets and liabilities and the
lowest priority to unobservable inputs. The provisions of SFAS No. 157 are
generally required to be applied on a prospective basis, except to certain
financial instruments accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, for which the provisions of SFAS
No. 157 should be applied retrospectively. In February 2008, the FASB
issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement
No. 157, which defers the implementation for the non-recurring
nonfinancial assets and liabilities from fiscal years beginning after
November 15, 2007 to fiscal years beginning after November 15,
2008.  The disclosure requirements of SFAS No. 157 which took effect
on January 1, 2008 are presented in Note 18. On April 1, 2009,
the Company will implement the previously-deferred provisions of SFAS
No. 157 for our nonfinancial assets and liabilities which include goodwill
and intangible assets. The Company does not anticipate that the remaining
provisions will have a material effect on the Company’s consolidated financial
position or results of operations when they become effective.
 Statement
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and establishes a hierarchy that
categorizes and prioritizes the inputs to be used to estimate fair value. The
three levels of inputs used are as follows:
 Level 1 –
Quoted prices in active markets for identical assets or
liabilities.
 Level 2 –
Inputs other than Level 1 that are observable for the asset or liability, either
directly or indirectly, such as quoted
prices for similar assets and liabilities in active markets; quoted prices for
identical or similar assets or liabilities in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data by correlation
or other means.
 Level 3 –
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or
liabilities.
  In
February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities (“Statement 159”). Statement 159 permits
companies to choose to measure certain financial instruments at fair value that
are not currently required to be measured at fair value. Statement 159 was
effective for the Company on April 1, 2008. The Company has selected the
option not to measure eligible financial assets and liabilities at fair value.
Accordingly, the adoption of Statement 159 had no impact on the Company’s
consolidated financial statements.
  10
  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 $151 as of December 31, 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:
 
 December
      31, 2008
                                  
                                  
                                  March
      31, 2008Prepaid
      insurance
                                  
                                  $
                                  297
                                  
                                  
                                  $
                                  605Fuel
      and lubricants
                                  
                                  
                                  1,674
                                  
                                  
                                  
                                  1,966Deposits
      and other prepaids
                                  
                                  
                                  378
                                  
                                  
                                  
                                  551$
                                  2,349
                                  
                                  
                                  $
                                  3,122
 
 
 5.
              PROPERTY
      AND EQUIPMENT
 
 Property
      and equipment are comprised of the
following:
 
 December
      31, 2008
                                      
                                      
                                      March
      31, 2008CostVessels
                                      
                                      $
                                      95,582
                                      
                                      
                                      $
                                      101,519Leasehold
      improvements
                                      
                                      
                                      2,091
                                      
                                      
                                      
                                      1,865Furniture
      and equipment
                                      
                                      
                                      161
                                      
                                      
                                      
                                      122Vehicles
                                      
                                      
                                      19
                                      
                                      
                                      
                                      -Computer
      equipment and purchased software
                                      
                                      
                                      1,964
                                      
                                      
                                      
                                      1,592$
                                      99,817
                                      
                                      
                                      $
                                      105,098Accumulated
      depreciationVessels
                                      
                                      $
                                      12,184
                                      
                                      
                                      $
                                      8,301Leasehold
      improvements
                                      
                                      
                                      379
                                      
                                      
                                      
                                      250Furniture
      and equipment
                                      
                                      
                                      43
                                      
                                      
                                      
                                      35Vehicles
                                      
                                      
                                      2
                                      
                                      
                                      
                                      -Computer
      equipment and purchased software
                                      
                                      
                                      222
                                      
                                      
                                      
                                      16312,830
                                      
                                      
                                      
                                      8,749Total
      Net Property and Equipment
                                      
                                      $
                                      86,987
                                      
                                      
                                      $
                                      96,349
 
 11
  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:
 
 December
      31, 2008
                            
                            
                            March
      31, 2008Drydock
      expenditures
                            
                            $
                            11,322
                            
                            
                            $
                            10,991Accumulated
      amortization
                            
                            
                            3,234
                            
                            
                            
                            1,909$
                            8,088
                            
                            
                            $
                            9,082
 
 
 7.
              INTANGIBLE
      ASSETS AND GOODWILL
 
 Intangibles
are comprised of the following:
 
 December
      31, 2008
                                              
                                              
                                              March
      31, 2008Intangible
      assetsDeferred
      financing costs
                                              
                                              $
                                              1,925
                                              
                                              
                                              $
                                              2,134Trademarks
      and trade names
                                              
                                              
                                              889
                                              
                                              
                                              
                                              1,003Non-competition
      agreements
                                              
                                              
                                              2,037
                                              
                                              
                                              
                                              2,298Customer
      relationships and contracts
                                              
                                              
                                              13,954
                                              
                                              
                                              
                                              15,959Total
      identifiable intangibles
                                              
                                              $
                                              18,805
                                              
                                              
                                              $
                                              21,394Accumulated
      amortizationDeferred
      financing costs
                                              
                                              $
                                              353
                                              
                                              
                                              $
                                              71Trademarks
      and trade names
                                              
                                              
                                              251
                                              
                                              
                                              
                                              208Non-competition
      agreements
                                              
                                              
                                              1,600
                                              
                                              
                                              
                                              1,326Customer
      relationships and contracts
                                              
                                              
                                              2,268
                                              
                                              
                                              
                                              1,8104,472
                                              
                                              
                                              
                                              3,415Total
      intangible assets, net
                                              
                                              $
                                              14,333
                                              
                                              
                                              $
                                              17,979Goodwill
                                              
                                              $
                                              10,193
                                              
                                              
                                              $
                                              10,193
  Intangible
asset amortization over the next five years ending December 31, is estimated as
follows:
 
 2009
                          
                          $
                          1,8422010
                          
                          
                          1,4042011
                          
                          
                          1,4042012
                          
                          
                          1,4042013
                          
                          
                          1,051$
                          7,105
  12
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 8.
              ACQUISITIONS
  On August
27, 2007, Lower Lakes Towing Ltd.(“LLTL”) 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 Towing Ltd. 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 had 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, LLTL 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, LLTL 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 LLTL.
for its use in providing transportation and storage services for its
customers.LLTL does
not realize any significant margin from this vessel.
  In
connection with the COA, on August 27, 2007, LLTL 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, LLTL 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
Lower Lakes Towing Ltd.
  13
  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 December 31, 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 $10,929 at December 31, 2008 ($269 at March 31,
2008), and maintained letters of credit of CDN $1,407.  The line of
credit bears interest at Canadian Prime Rate plus 2.75% or Canadian 30 day BA
rate plus 3.75% on Canadian dollar borrowings and U.S. Base rate plus 2.75% or
LIBOR plus 3.75% on U.S. Dollar borrowings and is secured under the same terms
and has the same financial covenants as described in Note 11. The effective
interest rates on the operating lines of credit at December 31, 2008 were 5.42%
and March 31, 2008 were 8.11% on the Canadian line of credit and 4.35% and 8%
respectively on the U.S. operating line of credit. Available collateral for
borrowings and letters of credit are based on eligible accounts receivable,
which are limited to 85% of those receivables that are not over 90 days old, not
in excess of 20% for one customer in each line and certain other standard
limitations. As of December 31, 2008, the Company was fully drawn on its two
lines of credit. The Company has adopted a borrowing strategy to fully draw down
its lines of credit in order to maintain available cash and liquidity rather
than pay off the lines of credit with excess cash, due to current economic
conditions.
  14
 
  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:
 
 December
      31, 2008
                
                
                March
      31, 2008Transaction
      costs
                
                $
                48
                
                
                $
                244Payroll
      compensation and benefits
                
                
                3,072
                
                
                
                1,832Preferred
      stock dividends
                
                
                2,748
                
                
                
                1,592Professional
      fees
                
                
                508
                
                
                
                522Interest
                
                
                435
                
                
                
                428Winter
      work and capital expenditures
                
                
                1,361
                
                
                
                1,330Capital
      and franchise taxes
                
                
                226
                
                
                
                178Other
                
                
                2,387
                
                
                
                1,117$
                10,785
                
                
                $
                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 less the principal
amount outstanding under the US seasonal facility (US $10,000 for calendar year
2008 only), and a swing line facility of CDN $4,000 subject to limitations, (ii)
a revolving credit facility under which Lower Lakes Transportation may borrow up
to US $13,500 with a seasonal overadvance facility of US $8,000 less the
principal amount outstanding under the Canadian seasonal facility (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 has borrowed CDN $41,700 (iv) a US dollar denominated term
loan facility under which Grand River has borrowed US $22,000 (v) a Canadian
dollar denominated “Engine” term loan facility under which Lower Lakes Towing
has borrowed 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.
  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)
 
 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 2010 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 December 31, 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 December 31, 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. The actual interest rate charged without the effect of
interest rate swap contracts were 6.02% on the Canadian term loan, 7.27% on
Canadian engine loan 5.93% on the US term loan.
  16
 
  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)
  December
      31, 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 five year term until April 1, 2013 with current quarterly
      payments of CDN $695 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the Company.
                
                $
                33,095
                
                
                $
                40,624b)
                
                Canadian
      engine term loan bearing interest at Canadian Prime rate plus 4% or
      Canadian BA rate plus 5% at the Company’s option.  The loan is
      repayable over a five year term until April 1, 2013 with current quarterly
      payments of CDN $133 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the Company.
                
                
                6,349
                
                
                
                7,793c)
                
                US
      term loan bearing interest at LIBOR rate plus 3.75% or US base rate plus
      2.75% at the Company’s option. The loan is repayable over a five year term
      until April 1, 2013 with current quarterly payments of US $367 commencing
      September 1, 2008 until March 1, 2013 and the balance due April 1,
      2013.  The term loan is collateralized by the existing and newly
      acquired assets of the Company.
                
                
                21,267
                
                
                
                22,000$
                60,711
                
                
                $
                70,417Less
      amounts due within 12 months
                
                
                4,187
                
                
                
                3,521$
                56,524
                
                
                $
                66,896
  Principal
payments are due as follows:
 
 2009
                          
                          $
                          4,1872010
                          
                          
                          4,1872011
                          
                          
                          4,1872012
                          
                          
                          4,1872013
                          
                          
                          43,963$
                          60,711
  17
  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 on March 3, 2006 for the McKee
Sons barge which expires in 2018.  The lease was amended on February
22, 2008 to provide a lease payment deferment in return for leasehold
improvements. Total charter commitments for the McKee vessel by year ending
December 31 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
                        
                        
                        3,485$
                        6,961
 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 $171 as of December 31, 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 8) 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
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.
  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
 At
December 31, 2005, 10,100,000 shares of common stock were reserved for issuance
upon exercise of redeemable warrants and the underwriters’ unit purchase option.
    Each warrant allowed its holder to purchase one fully paid
and non-assessable share of the Company’s common stock at the price of $5.00 per
share. The warrants expired on October 26, 2008. Options and warrants issued in
conjunction with the Company’s initial public offering are equity linked
derivatives and accordingly represent off-balance sheet
arrangements.  The options and warrants meet the scope exception in
paragraph 11(a) of SFAS 133 and are accordingly not accounted for as derivatives
for purposes of SFAS 133, but instead are accounted for as equity.
  On April
30, 2007, the Company entered into a Warrant Exercise Agreement with Knott
Partners, LP; Knott Partners Offshore Master Fund, LP; CommonFund Hedged Equity
Company; Shoshone Partners, LP; Finderne, LLC; Good Steward Trading Company SPC;
and Leonard & Margaret Frierman (the "Knott Entities"), pursuant to which
the Knott Entities agreed to exercise 1,504,000 of the Company's publicly traded
warrants and the Company agreed to accept $4.50, rather than the $5.00 exercise
price provided in the warrant, as the exercise price for each such warrant. On
the same date, the Company received $6,768, net of stock warrant inducement
discount, of proceeds from the exercise of the subject warrants and the Company
authorized the issuance of the 1,504,000 shares of its common stock issuable
upon exercise of such warrants.
 
 On May 4,
2007, the Company reduced the exercise price of its outstanding, publicly traded
warrants to $4.50 (from the $5.00 exercise price provided by the original terms
of the warrants) until July 13, 2007 (the extended “Expiration Time"). Any and
all warrants properly exercised in accordance with the terms of the warrants
prior to the Expiration Time were accepted by the Company at the reduced
exercise price, and one share of registered common stock per warrant was issued
to the exercising warrant holder. After the Expiration Time, the $5.00 exercise
price included in the original terms of the warrants was reinstituted. Except
for the reduced exercise price of the warrants prior to the Expiration Time, the
terms of the warrants remain unchanged. The reduced exercise price applied to
all of the Company’s 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.
 
 During
fiscal year 2009, 89,885 warrants were exercised for cash ($449 gross proceeds),
including 74,659 warrants during the three month period ended December 31, 2008
($373 gross proceeds).
 
 On
September 23, 2008, the Company announced an offer to holders of all
5,194,489 outstanding, publicly-traded warrants that would permit the exercise
of the warrants on amended terms, for a limited time.  The offer modified
the terms of the warrants to allow holders to receive one share of common stock
for every 25 warrants surrendered, without paying a cash exercise price. Prior
to the expiration of the offer on October 26, 2008, 5,045,275 warrants were
converted into common stock under this offer. The remaining 74,555 publicly
traded warrants expired on October 26, 2008.
 
 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)
 
 The
following continuity schedule summarizes outstanding share purchase
warrants:
 
 Outstanding
      warrants
                            Exercise
      Price
                            Cumulative
      proceeds from exercise of warrantsBalance
      March 31, 2007
                            9,196,180
                            
                            $            19Issued
                            -
                            
                            -Exercised
                            (3,964,965)
                            $4.50
                            17,843Balance
      March 31, 2008
                            5,231,215
                            
                            $     17,862Exercised
                            -
                            
                            -Balance
      June 30, 2008
                            5,231,215
                            
                            $     17,862Exercised
                            (15,226)
                            5.00
                            76Extinguished
                            (21,500)
                            
                            (9)Balance
      September 30, 2008
                            5,194,489
                            
                            $     17,929Exercised
                            (74,659)
                            5.00
                            373Exercised
      under cashless offer
                            (5,045,275)
                            
                            -Expired
                            (74,555)
                            
                            -Balance
      December 31, 2008
                            -
                            
                            $     18,302
 
 
 Exercise
price of $4.50 is net of $0.50 stock warrant inducement discount per stock
warrant until July 13, 2007 and $5.00 thereafter.
 
 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.
  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
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 December 31,
2008 was $2,748 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.
  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, 2007 of $6.72 per share. The Company has recorded
expense of $90 for three months ended December 31, 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.
 
 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 December 31, 2008, a total of 1,532,623 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.
  21
 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
general characteristics of issued types of share-based awards granted under the
Plans through December 31, 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. The second award in the amount of 4,384 shares
for the services through June 30, 2008 was made on August 7, 2008. The third
award in the amount of 4,976 shares for the services through September 30, 2008
was made on October 21, 2008.
  On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus
program as discussed in detail in Note 20. Pursuant to the terms of the
management bonus program, Rand issued 478,232 shares of common stock to the
employee participants.
 
 Stock Options — Stock
options granted to management employees vest over three years in equal annual
installments. All options issued through December 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 fiscal 2008 (February 2008) grants and 4.14% for the fiscal 2009
(July 2008) grants. The expected term represents the period of time the grants
are expected to be outstanding, generally six years and has been computed using
the “simplified method” per the Securities and Exchange Commission Staff
Accounting Bulletin 107. This method was allowed until December 31, 2007.
 However, on December 21, 2007, the SEC’s Staff issued Accounting Bulletin
No. 110 “SAB 110”, which will allow a company to continue to use the “simplified
method” under certain circumstances. We will continue to use the simplified
method as we do not have sufficient historical data to estimate the expected
term of share based award.Expected volatility for
grants is based on implied volatility of the Company’s closing stock price in
the period of time from the registration and listing of the stock until the time
of each grant since that period is currently shorter than the expected life of
the options. Expected volatility was 36.99% for the 2008 grants and 39.49% for
the 2009 grants. Options outstanding (479,785) at December 31, 2008, had a
remaining weighted average contractual life of approximately nine years and
four months. The Company has recorded compensation expenses of $131 for three
months ended December 31, 2008 and $Nil for three months ended December 31,
2007. None of the stock options granted in February 2008 (243,199) and July 2008
(236,586), have vested as of December 31, 2008.
  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
                                                                                                                        December
      31, 2008
                                                                                                                      
                                                                                                                      
                                                                                                                      Three
      months ended
                                                                                                                        December
      31, 2007
                                                                                                                      
                                                                                                                      
                                                                                                                      Nine
      months ended
                                                                                                                        December
      31, 2008
                                                                                                                      
                                                                                                                      
                                                                                                                      Nine
      months ended
                                                                                                                        December
      31, 2007Bank
      indebtedness
                                                                                                                      
                                                                                                                      $
                                                                                                                      215
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      108
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      658
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      266Amortization
      of deferred finance costs
                                                                                                                      
                                                                                                                      
                                                                                                                      97
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      112
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      310
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      300Long-term
      debt – senior
                                                                                                                      
                                                                                                                      
                                                                                                                      1,046
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1,086
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      3,580
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      2,736Long-term
      debt – subordinated
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      63
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      184Interest
      rate swap
                                                                                                                      
                                                                                                                      
                                                                                                                      180
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      463
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -$
                                                                                                                      1,538
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      1,369
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      5,011
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      3,486
  22
  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
      monthsended
                                                                                                      December
      31, 2008
                                                                                                    
                                                                                                    
                                                                                                    Three
      monthsended
                                                                                                      December
      31, 2007
                                                                                                    
                                                                                                    
                                                                                                    Nine
      monthsended
                                                                                                      December
      31, 2008
                                                                                                    
                                                                                                    
                                                                                                    Nine
      monthsended
                                                                                                      December
      31, 2007Revenues
      by countryCanada
                                                                                                    
                                                                                                    $
                                                                                                    23,544
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    20,907
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    86,077
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    50,865United
      States
                                                                                                    
                                                                                                    
                                                                                                    12,614
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    15,010
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    45,776
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    39,159$
                                                                                                    36,158
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    35,917
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    131,853
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    90,024Net
      income (loss) applicable to common
                                                                                                      stockholders
      by countryCanada
                                                                                                    
                                                                                                    $
                                                                                                    (326
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    545
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    5,251
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    3,513United
      States
                                                                                                    
                                                                                                    
                                                                                                    (6,051
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (2,723
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (4,530
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (7,528
                                                                                                    )$
                                                                                                    (6,377
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    (2,178
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    721
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    (4,015
                                                                                                    )
   
 Revenues
from external customers are allocated based on the country of the legal entity
of the Company in which the revenues were recognized.
 
 December
      31, 2008
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        March
      31, 2008Property
      and equipment by countryCanada
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        58,357
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        66,214United
      States
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        28,630
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        30,135$
                                                                                                                                                                                                        86,987
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        96,349Intangible
      assets by countryCanada
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        10,743
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        13,954United
      States
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        3,590
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        4,025$
                                                                                                                                                                                                        14,333
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        17,979Goodwill
      by countryCanada
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        8,284
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        8,284United
      States
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        1,909
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        1,909$
                                                                                                                                                                                                        10,193
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        10,193Total
      assets by countryCanada
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        109,496
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        114,023United
      States
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        49,779
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        53,662$
                                                                                                                                                                                                        159,275
                                                                                                                                                                                                        
                                                                                                                                                                                                        
                                                                                                                                                                                                        $
                                                                                                                                                                                                        167,685
 
 
 23
 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 adopted SFAS No. 157, “Fair Value Measurements”, (SFAS 157) as of
April 1, 2008, with the exception of the application of the statement to
non-recurring non-financial assets and non-financial liabilities. Non-recurring
non-financial assets and non-financial liabilities for which we have not applied
the provisions of SFAS 157 include those measured at fair value in goodwill
impairment testing, indefinite lived intangible assets measured at fair value
for impairment testing and those initially measured at fair value in a business
combination.
  SFAS 157
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value. This hierarchy prioritizes the inputs into three broad
levels as follows. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs are quoted prices
for similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial
instrument. Level 3 inputs are unobservable inputs based on our own assumptions
used to measure assets and liabilities at fair value. A financial asset or
liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.
  The
following table provides the liabilities carried at fair value measured on a
recurring basis as of December 31, 2008:
  Carrying
      value at
                        December
      31, 2008
                      Fair
      Value Measurements at December 31, 2008Quoted prices in
                        active
      markets
                        (Level
      1)
                      Significant other
                        observable
                        inputs
                        (Level
      2)Interest
      rate swap contracts liability
                      $       4,047
                      $         -
                      $       4,047
 
  Interest
rate swap contracts are measured at fair value using available rates on the
similar instruments and are classified within Level 2 of the valuation
hierarchy.
  The
Company has recorded a liability of $4,047 as of December 31, 2008 (liability of
$1,274 as of March 31, 2008) for two interest rate swap contracts on the
Company’s term debt. For the three months period ended December 31, 2008 the
fair value of the interest rate swap contracts has resulted in a loss of $3,437
($35 for the three months period ended December 31, 2007). This loss is included
in the earnings and the fair value of the contracts is included in current
liabilities on the Consolidated Balance Sheet.
  24
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 18.       FINANCIAL
INSTRUMENTS (continued)
  Liquidity
risk
  The
current tightening of credit in financial markets and the general economic
downturn may adversely affect the ability of our customers and suppliers to
obtain financing for significant operations and purchases and to perform their
obligations under agreements with us. The tightening could result in a decrease
in, or cancellation of, existing business, could limit new business, could
negatively impact our ability to collect our accounts
receivable on a timely basis, and could affect the eligible receivables that are
collateral for our lines of credit.
 Foreign
exchange risk
 
 Foreign
currency exchange risk to the Company results primarily from changes in exchange
rates between the Company’s reporting currency, the U.S. Dollar and the Canadian
dollar.  The Company is exposed to fluctuations in foreign exchange as
a significant portion of revenue and operating expenses are denominated in
Canadian dollars.
 
 Interest
rate risk
  The
Company is exposed to fluctuations in interest rates as a result of its banking
facilities and senior debt bearing variable interest rates.
  The
Company is exposed to interest rate risk due to its long-term debt agreement,
which requires that 50% of the outstanding term debt is hedged with interest
rate swaps. Effective February 15, 2008, the Company entered into a CDN $49,700
interest rate swap derivative to pay interest at a fixed rate of approximately
4.09% on its CDN $49,700 term debt and receive 3-month BA variable rate interest
payments quarterly through April 1, 2013. The notional amount of the Canadian
debt swap decreases with each scheduled principal payment, except that the
hedged amount decreased an additional CDN $15,000 on December 1, 2009.
Additionally, effective February 15, 2008, the Company entered into a US $22,000
interest rate swap derivative to pay interest at a fixed rate of approximately
3.65% on its US $22,000 term debt and receive 3-month LIBOR variable rate
interest payments quarterly through April 1, 2013. The notional amount of the US
debt swap decreases with each scheduled principle payment.
 Credit
risk
  Accounts
receivable credit risk is mitigated by the dispersion of the Company’s customers
among different markets.
  25
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 19.       EARNINGS
(LOSS) PER SHARE
 
 The
Company has a total of 12,884,339 common shares issued and outstanding, out of
an authorized total of 50,000,000 shares. The fully diluted calculation utilizes
a total of 15,223,405 shares for the quarter ended December 30, 2008 and
15,482,765 shares for the quarter ended December 31, 2007 based on the following
calculations. Since the calculation for December 31, 2008 and 2007 are
anti-dilutive, the basic and fully diluted weighted average shares outstanding
are 12,804,050 and 12,092,142 respectively. Warrants issued from the initial
prospectus and over allotment converts to 971,268 shares based on the average
quarterly price of $6.14 for the three month period ended December 31, 2007.
There are no warrants outstanding as of December 31, 2008. 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,
                                        December
      31, 2008
                                      
                                      
                                      Three
      Months ended,
                                        December
      31, 2007
                                      
                                      
                                      Nine
      Months ended,
                                        December
      31, 2008
                                      
                                      
                                      Nine
      Months ended,
                                        December
      31, 2007Numerator:Net
      income (loss) before minority interest and preferred stock
      dividend
                                      
                                      $
                                      (5,995
                                      )
                                      
                                      $
                                      (2,089
                                      )
                                      
                                      $
                                      1,877
                                      
                                      
                                      $
                                      (1,383
                                      )Preferred
      stock dividends
                                      
                                      
                                      (382
                                      )
                                      
                                      
                                      (317
                                      )
                                      
                                      
                                      (1,156
                                      )
                                      
                                      
                                      (909
                                      )Minority
      interest
                                      
                                      
                                      -
                                      
                                      
                                      
                                      228
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      259Stock
      warrant inducement discount
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,982
                                      )Net
      income (loss) available to common stockholders
                                      
                                      $
                                      (6,377
                                      )
                                      
                                      $
                                      (2,178
                                      )
                                      
                                      $
                                      721
                                      
                                      
                                      $
                                      (4,015
                                      )Denominator:Weighted
      average common shares for basic EPS
                                      
                                      
                                      12,804,050
                                      
                                      
                                      
                                      12,092,142
                                      
                                      
                                      
                                      12,450,630
                                      
                                      
                                      
                                      11,109,942Effect
      of dilutive securities:Total  outstanding
      warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5,231,215
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5,231,215Average
      exercise price
                                      
                                      
                                      -
                                      
                                      
                                      $
                                      5.00
                                      
                                      
                                      
                                      -
                                      
                                      
                                      $
                                      5.00Average
      price during period
                                      
                                      $
                                      4.53
                                      
                                      
                                      $
                                      6.14
                                      
                                      
                                      $
                                      5.36
                                      
                                      
                                      $
                                      6.36Shares
      that could be acquired with the proceeds of warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,259,947
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,112,590Dilutive
      shares due to warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      971,268
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,118,625Long
      term incentive stock option plan
                                      
                                      
                                      479,785
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      383,430
                                      
                                      
                                      
                                      -Average
      exercise price of stock options
                                      
                                      $
                                      5.66
                                      
                                      
                                      
                                      -
                                      
                                      
                                      $
                                      5.66
                                      
                                      
                                      
                                      -Shares
      that could be acquired with the proceeds of options
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Weighted
      average convertible preferred shares at $6.20
                                      
                                      
                                      2,419,355
                                      
                                      
                                      
                                      2,419,355
                                      
                                      
                                      
                                      2,419,355
                                      
                                      
                                      
                                      2,419,355Weighted
      average common shares for diluted EPS
                                      
                                      
                                      12,804,050
                                      
                                      
                                      
                                      12,092,142
                                      
                                      
                                      
                                      12,450,630
                                      
                                      
                                      
                                      11,109,942Basic
      EPS
                                      
                                      $
                                      (0.50
                                      )
                                      
                                      $
                                      (0.18
                                      )
                                      
                                      $
                                      0.06
                                      
                                      
                                      $
                                      (0.36
                                      )Diluted
      EPS
                                      
                                      $
                                      (0.50
                                      )
                                      
                                      $
                                      (0.18
                                      )
                                      
                                      $
                                      0.06
                                      
                                      
                                      $
                                      (0.36
                                      )
 
 26
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’sexcept for Earnings
(Loss) Per Share figures)
 20.      ACQUIRED MANAGEMENT BONUS
PROGRAM
 
 On March
3, 2006, in connection with the closing of the acquisition of Lower Lakes, the
Company adopted a management bonus program (the “Program”), the participants of
which were employed by Lower Lakes or its affiliates.  Participants
were eligible to receive awards based on a formula that adjusts an aggregate
initial plan account balance of $3,000 by audited earnings before interest,
taxes, depreciation and amortization for fiscal years 2007 and 2008. Awards
would be settled on July 31, 2008 and could 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 would 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 would grant registration rights
to any participant that were 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.
 
 On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus
program. Pursuant to the terms of the management bonus program, Rand issued
478,232 shares of common stock to the employee participants for $2,645. In
addition, $309 was paid in cash to former employee participants and for
payments of certain participants’ withholding taxes. The company has remaining
liabilities of $271 for this program.
  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
 
 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 December
31, 2007 includes the results of WMS.
  On August
27, 2007, Lower Lakes Towing Ltd. (“LLTL”) 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 LLTL 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, LLTL 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, LLTL 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, LLTL 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 LLTL for its use in providing transportation and storage services
for its customers.
  In
connection with the COA, on August 27, 2007, LLTL entered into an Option
Agreement (the "Option Agreement") with VMT pursuant to which LLTL 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, LLTL shall
have the right to acquire the Trader at the option price.
  28
 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, LLTL entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which LLTL agreed to guarantee up to CDN $1,250 (the “Guaranteed
Obligations”) of Voyageur’s  indebtedness to GE Canada. Under the
Guarantee, LLTL 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, LLTL has guaranteed Voyageur’s account with The St. Lawrence Seaway
Management Corporation, up to CDN $120, which is subject to a 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 $1,370 which represents (1) 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
December 31, 2007 is shown below.
  29
 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 December 31,
      2007
                      
                      
                      Nine months ended December 31,
      2007Rand
      Logistics, Inc.
                      
                      
                      Impact
      of Fin 46R
                      
                      
                      Consolidated
                      
                      
                      Rand
      Logistics, Inc.
                      
                      
                      Impact
      of Fin 46R
                      
                      
                      ConsolidatedREVENUE
                      
                      $
                      35,917
                      
                      
                      $
                      -
                      
                      
                      $
                      35,917
                      
                      
                      $
                      90,024
                      
                      
                      $
                      -
                      
                      
                      $
                      90,024EXPENSESOutside
      voyage charter fees (Note 15)
                      
                      
                      4,034
                      
                      
                      
                      -
                      
                      
                      
                      4,034
                      
                      
                      
                      8,605
                      
                      
                      
                      -
                      
                      
                      
                      8,605Charter
      hire
                      
                      
                      4,943
                      
                      
                      
                      (4,943
                      )
                      
                      
                      -
                      
                      
                      
                      10,733
                      
                      
                      
                      (10,733
                      )
                      
                      
                      -Vessel
      operating expenses
                      
                      
                      22,560
                      
                      
                      
                      3,721
                      
                      
                      
                      26,281
                      
                      
                      
                      55,993
                      
                      
                      
                      7,388
                      
                      
                      
                      63,381Repairs
      and maintenance
                      
                      
                      7
                      
                      
                      
                      -
                      
                      
                      
                      7
                      
                      
                      
                      94
                      
                      
                      
                      7
                      
                      
                      
                      101General
      and administrative
                      
                      
                      2,495
                      
                      
                      
                      153
                      
                      
                      
                      2,648
                      
                      
                      
                      6,823
                      
                      
                      
                      568
                      
                      
                      
                      7,391Depreciation
                      
                      
                      1,403
                      
                      
                      
                      316
                      
                      
                      
                      1,719
                      
                      
                      
                      3,937
                      
                      
                      
                      945
                      
                      
                      
                      4,882Amortization
      of drydock costs
                      
                      
                      415
                      
                      
                      
                      (39
                      )
                      
                      
                      376
                      
                      
                      
                      1,149
                      
                      
                      
                      -
                      
                      
                      
                      1,149Amortization
      of intangibles
                      
                      
                      401
                      
                      
                      
                      232
                      
                      
                      
                      633
                      
                      
                      
                      1,392
                      
                      
                      
                      -
                      
                      
                      
                      1,392Amortization
      of chartering agreement costs
                      
                      
                      16
                      
                      
                      
                      -
                      
                      
                      
                      16
                      
                      
                      
                      112
                      
                      
                      
                      -
                      
                      
                      
                      112Write-off
      of retired vessel to salvage value
                      
                      
                      1,687
                      
                      
                      
                      -
                      
                      
                      
                      1,687
                      
                      
                      
                      1,687
                      
                      
                      
                      -
                      
                      
                      
                      1,687Loss
      (gain) on foreign exchange
                      
                      
                      11
                      
                      
                      
                      -
                      
                      
                      
                      11
                      
                      
                      
                      (208
                      )
                      
                      
                      -
                      
                      
                      
                      (208
                      )37,972
                      
                      
                      
                      (560
                      )
                      
                      
                      37,412
                      
                      
                      
                      90,317
                      
                      
                      
                      (1,825
                      )
                      
                      
                      88,492INCOME
      (LOSS) BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES
                      
                      
                      (2,055
                      )
                      
                      
                      560
                      
                      
                      
                      (1,495
                      )
                      
                      
                      (293
                      )
                      
                      
                      1,825
                      
                      
                      
                      1,532OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                      
                      
                      938
                      
                      
                      
                      431
                      
                      
                      
                      1,369
                      
                      
                      
                      2,177
                      
                      
                      
                      1,309
                      
                      
                      
                      3,486Interest
      income
                      
                      
                      (115
                      )
                      
                      
                      62
                      
                      
                      
                      (53
                      )
                      
                      
                      (375
                      )
                      
                      
                      180
                      
                      
                      
                      (195
                      )Interest
      rate swap contract
                      
                      
                      -
                      
                      
                      
                      35
                      
                      
                      
                      35
                      
                      
                      
                      -
                      
                      
                      
                      43
                      
                      
                      
                      43823
                      
                      
                      
                      528
                      
                      
                      
                      1,351
                      
                      
                      
                      1,802
                      
                      
                      
                      1,532
                      
                      
                      
                      3,334INCOME
      (LOSS) BEFORE INCOME TAXES
                      
                      
                      (2,878
                      )
                      
                      
                      32
                      
                      
                      
                      (2,846
                      )
                      
                      
                      (2,095
                      )
                      
                      
                      293
                      
                      
                      
                      (1,802
                      )PROVISION
      (RECOVERY) FOR INCOME TAXES
                      
                      
                      (1,173
                      )
                      
                      
                      416
                      
                      
                      
                      (757
                      )
                      
                      
                      (800
                      )
                      
                      
                      381
                      
                      
                      
                      (419
                      )NET
      LOSS BEFORE MINORITY INTEREST
                      
                      
                      (1,705
                      )
                      
                      
                      (384
                      )
                      
                      
                      (2,089
                      )
                      
                      
                      (1,295
                      )
                      
                      
                      (88
                      )
                      
                      
                      (1,383
                      )MINORITY
      INTEREST
                      
                      
                      -
                      
                      
                      
                      (228
                      )
                      
                      
                      (228
                      )
                      
                      
                      -
                      
                      
                      
                      (259
                      )
                      
                      
                      (259
                      )NET
      INCOME (LOSS)
                      
                      
                      (1,705
                      )
                      
                      
                      (156
                      )
                      
                      
                      (1,861
                      )
                      
                      
                      (1,295
                      )
                      
                      
                      171
                      
                      
                      
                      (1,124
                      )PREFERRED
      STOCK DIVIDENDS
                      
                      
                      317
                      
                      
                      
                      -
                      
                      
                      
                      317
                      
                      
                      
                      909
                      
                      
                      
                      -
                      
                      
                      
                      909STOCK
      WARRANT INDUCEMENT DISCOUNT
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,982
                      
                      
                      
                      -
                      
                      
                      
                      1,982NET
      INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
                      
                      $
                      (2,022
                      )
                      
                      $
                      (156
                      )
                      
                      $
                      (2,178
                      )
                      
                      $
                      (4,186
                      )
                      
                      $
                      171
                      
                      
                      $
                      (4,015
                      )Net
      earnings (loss) per share basic (Note 19)
                      
                      $
                      (0.16
                      )
                      
                      $
                      (0.02
                      )
                      
                      $
                      (0.18
                      )
                      
                      $
                      (0.38
                      )
                      
                      $
                      0.02
                      
                      
                      $
                      (0.36
                      )Net
      earnings (loss) per share diluted (Note 19)
                      
                      $
                      (0.16
                      )
                      
                      $
                      (0.02
                      )
                      
                      $
                      (0.18
                      )
                      
                      $
                      (0.38
                      )
                      
                      $
                      0.02
                      
                      
                      $
                      (0.36
                      )


30




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, us and the Company include Rand and its direct
and indirect subsidiaries, and references to Lower Lakes’ business or the
business of Lower Lakes mean the combined businesses of Lower Lakes Towing,
Lower Lakes Transportation and Grand River.




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.




31




Recent
Events





Warrant
Tender Offer and Expiration




On
September 23, 2008, we announced an offer to holders of our 5,194,489
outstanding publicly-traded warrants that would permit the cashless exercise of
the warrants for a limited time. The shares underlying such warrants, if
issued upon exercise, would have represented approximately 41.2% of our
outstanding shares at commencement of the offer.  The offer modified
the terms of the warrants to allow holders to receive one share of common stock
for every 25 warrants surrendered, without paying a cash exercise
price.




The offer
commenced on September 26, 2008, and ended on October 26, 2008.  5,045,275
warrants, or approximately 97.1% of the 5,194,489 publicly traded warrants then
outstanding, were tendered for cashless exercise in exchange for 201,811 shares
of our common stock, or 1.6% of common shares outstanding at the commencement of
the offer.  An additional 74,659 warrants were exercised during the
offer period generating $373 of proceeds.  The Company’s expenses in
connection with the warrant tender offer were approximately $257.  Pursuant
to their terms, the Company’s remaining 74,555 warrants expired on October 26,
2008.




Global
Economic Conditions
 
 During
recent months, financial markets throughout the world have been experiencing
extreme disruption, including, among other things, extreme volatility in
security prices and severely diminished liquidity and credit availability. These
developments and the related general economic downturn may adversely impact our
business and financial condition in a number of ways, including impacts beyond
those typically associated with other recent downturns in the U.S. and foreign
economies. The current tightening of credit in financial markets and the general
economic downturn may adversely affect the ability of our customers and
suppliers to obtain financing for significant operations and purchases and to
perform their obligations under agreements with us. The tightening could result
in a decrease in, or cancellation of, existing business, could limit new
business, could negatively impact our ability to collect our accounts
receivable on a timely basis, and could affect the eligible receivables that are
collateral for our lines of credit. We are unable to predict the duration and
severity of the current economic downturn and disruption in financial markets or
their effects on our business and results of operations, but the consequences
may be materially adverse and more severe than other recent economic
slowdowns.
  If our
assumptions regarding projected revenues and margins are not achieved, we
may be required to record tangible and/or intangible asset impairment
charges in future periods, if any such change or other factor constitutes a
triggering event, such as a sustained decrease in our revenue, margins, and
stock price.  It is not possible at this time to determine if any such
future impairment charge would result or, if it does, whether such charge would
be material.  The valuation of goodwill and intangible assets is subject to
a high degree of judgment and complexity.




Results
of Operations




Three
months ended December 31, 2008 compared to the three months ended December 31,
2007




The three
month period ended December 31, 2008 was highlighted by several significant
events:




(1)
            During
      the three month period ended December 31, 2008, Vessel Margin, which we
      define as revenues minus the sum of outside voyage charter fees, charter
      hire, vessel operating expenses, and repairs and maintenance, for our
      Canadian Operations, including acquired vessels,  increased by
      CDN $1.7 million, or 42%.  However, the Canadian dollar weakened
      by more than 18% versus the US dollar compared to the three month period
      ended December 31, 2007.  As a result of this decline, the
      increase in vessel margin in the Canadian operation was reduced by $1.1
      million, to an increase of $0.6 million when translated to US
      dollars.




(2)
            In
      December, 2008, we lost 85 Sailing Days, which we define as days a vessel is crewed and
      available for sailing, or 23% of 372 possible Sailing Days. Our
      aggregate customers shut down their stone quarries 10-14 days earlier
      compared to prior years, and our only steel manufacturing customer ceased
      receiving iron ore shipments in December, 2008, which resulted in
      eliminating the appropriate cargo patterns necessary to operate at maximum
      profitability for that month.  Much of our aggregate customers’
      tonnage is hauled on north to south trips; however, we were required to
      meet contractual commitments to our backhaul customers (usually south to
      north) who continued operations prior to the winter freeze and scheduled
      lock closures.  While we lost no sailing days in December due to
      the challenging weather conditions, our remaining operating vessels were
      unable to achieve scheduling and operating
  efficiencies.




(3)
            We
      operated the three former Wisconsin &
      Michigan Steamship Company (“WMS”) time chartered vessels, which we
      acquired on February 13, 2008,  for a total of 260 Sailing Days during the three month period
      ended December 31, 2008. During the three month period endedDecember 31, 2007, these three vessels sailed 243
      Sailing Days after they returned to service following a strike by WMS’s licensed
  officers.




(4)
            We
      operated the two former Voyageur vessels, which we acquired on August 27,
      2007, for a total of 166 Sailing Days during the three month period
      ended December 31, 2008, compared to 184 Sailing Days during the three
      month period endedDecember 31, 2007. The
      reduced Sailing Days were primarily due to our utilization of another of
      Lower Lakes’ available self-unloading vessels to service the grain market
      in December, 2008.




(5)
            We
      retired and scrapped our oldest and smallest vessel in December 2007 and
      accordingly did not operate such vessel during the three month period
      ended December 31, 2008. We operated this vessel 50 Sailing Days during
      the three month periodended December 31,
  2007.




32




(6)
            We
      operated the Canadian and U.S. vesselsLower
      Lakes owned or operated at the time of our March, 2006 acquisition
      for four fewer Sailing Days during the three month period ended December 31, 2008 than during the three month period ended December 31,
      2007.




(7)
            We
      benefited from improving freight
      rates on new and renewed contracts, as well as contractual rate increases
      from existing contracts.




(8)
            We
      incurred $73 of winterwork expense on vessels layed-up during the three
      month period ended December 31, 2008 compared to only $7 during the three
      month period ended December 31,
2007.




(9)
            We
      had significant overall improvements in vessel operating margin during the
      three month period ended December 31,
      2008 compared to the three month period ended December 31, 2007 due to substantial
      performance improvements in the former WMS
  vessels.




(10)
            Each
      of our customer contracts have fuel surcharge provisions whereby increases
      in our overall fuel costs are passed on to our
      customers.  However, decreases in fuel prices during the three
      month period ended December 31, 2008 compared to the three month period
      ended December 31, 2007 reduced these
    surcharges.




33




The
following table summarizes our Results of Operations during the three month
periods ended December 31, 2008 and December 31, 2007.




Reconciliation
      of GAAP to Non-GAAP Measures($
      in 000’s)Three
      months ended December 31,
                                                                                                            2008
                                                                                                          
                                                                                                          
                                                                                                          Three
      months ended December 31,
                                                                                                            2007Rand
                                                                                                            Logistics,
                                                                                                            Inc.
                                                                                                          
                                                                                                          
                                                                                                          Impact
      of
                                                                                                            FIN46R*
                                                                                                          
                                                                                                          
                                                                                                          Consolidated
                                                                                                          
                                                                                                          
                                                                                                          Rand
                                                                                                            Logistics,
                                                                                                            Inc.
                                                                                                          
                                                                                                          
                                                                                                          Impact
      of
                                                                                                            FIN46R*
                                                                                                          
                                                                                                          
                                                                                                          ConsolidatedRevenue
                                                                                                          
                                                                                                          
                                                                                                          36,158
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          36,158
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          35,917
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          35,917ExpensesOutside
      voyage charter fees
                                                                                                          
                                                                                                          
                                                                                                          5,310
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          5,310
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          4,034
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          4,034Charter
      Hire
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          4,943
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (4,943
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -Vessel
      operating expenses
                                                                                                          
                                                                                                          
                                                                                                          24,025
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          24,025
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          22,560
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          3,721
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          26,281Repairs
      and maintenance
                                                                                                          
                                                                                                          
                                                                                                          73
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          73
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          7
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          729,408
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          29,408
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          31,544
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (1,222
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          30,322Income
      before general and administrative, depreciation, amortization of drydock
      costs and intangibles, other income and expenses and income taxes (“Vessel
      Margin”)
                                                                                                          
                                                                                                          
                                                                                                          6,750
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          6,750
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          4,373
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,222
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          5,595General
      and administrative
                                                                                                          
                                                                                                          
                                                                                                          2,326
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,326
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,495
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          153
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,648EBITDA
      (Vessel Margin less General and administrative)
                                                                                                          
                                                                                                          
                                                                                                          4,424
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          4,424
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,878
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,069
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,947Depreciation
      and amortization of drydock costs, intangibles and charter
      hire
                                                                                                          
                                                                                                          
                                                                                                          2,588
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,588
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,235
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          509
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          2,744Write-off
      of retired vessel to salvage value
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,687
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,687Loss
      (gain) on foreign exchange
                                                                                                          
                                                                                                          
                                                                                                          22
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          22
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          11
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          11Income
      (loss) before other income and expenses and income taxes
                                                                                                          
                                                                                                          
                                                                                                          1,814
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,814
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (2,055
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          560
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (1,495
                                                                                                          )


* 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 December 31, 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 December 31,
2008.




Management
believes that our financial results which exclude the VIE are the most precise
means of making an informed comparison of our results of operations versus the
prior year period.  EBITDA represents earnings
before interest, income tax expense, depreciation and amortization, loss on
asset disposal, and loss (gain) on foreign exchange.  EBITDA is not a
measure of performance or liquidity calculated in accordance with generally
accepted accounting principles (“GAAP”), is unaudited and should not be
considered an alternative to, or more meaningful than, net income or income from
operations as an indicator of our operating performance, or cash flows from
operating activities, as measures of liquidity.  EBITDA has been
presented as a supplemental disclosure because it is a widely used measure of
performance and basis for valuation.  A reconciliation of GAAP income
before other income and expenses and income taxes to EBITDA is included in the
financial tables above.  Vessel Margin represents EBITDA plus general
and administrative expenses.  Vessel Margin is not a measure of
performance calculated in accordance with GAAP, is unaudited and should not be
considered an alternative to, or more meaningful than, net income or income from
operations as an indicator of our operating performance, or cash flows from
operating activities, as measures of liquidity.  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.  A reconciliation of GAAP income before other income and
expenses and income taxes to Vessel Margin is included in the financial tables
above.




Revenues
during the three month period ended December 31, 2008 were $36.2 million, an
increase of 0.7% from $35.9 million during the three month period ended December
31, 2007.  Freight revenue generated from the Company’s own vessels
decreased $1.8 million, but was offset by higher fuel surcharges and outside
charter revenue.  Revenue was reduced by $3.3 million upon
translation to US dollars and would have represented a $1.5 million increase at
the currency translation rates of the three month period ended December 31,
2007, despite the decrease in Sailing Days in December, 2008.




34




Management
believes that each of our vessels should achieve approximately 87 Sailing Days
in an average third fiscal quarter, assuming no
major repairs or incidents, and normal dry-docking cycle times performed
during the winter lay-up period. During the three month period ended December
31, 2008, Sailing Days decreased 55 days to 1,019 days from 1,074 Sailing Days
during the three month period ended December 31, 2007, which was due to the
early shutdown of customer quarries and cessation of iron ore shipments in
December, 2008. The table below sets forth a reconciliation of the difference in
Sailing Days between the three month period ended December 31, 2007 and the
three month period ended December 31, 2008.




Sailing
      Days during the three months ended December 31, 2007
                                                                1,074Sailing
      Days gained attributable to the WMS Vessels
                                                                17Sailing
      Days lost attributable to the Voyageur Vessels
                                                                (18)Sailing
      Days lost attributable to the retirement of our oldest and smallest
      vessel
                                                                (50)Sailing
      Days lost attributable to our U.S. vessels owned or operated by Lower
      Lakes at the time of our March 2006 acquisition
                                                                (9)Sailing
      Days gained attributable to our Canadian vessels owned or operated by
      Lower Lakes at the time of our March 2006 acquisition
                                                                5Sailing
      Days during the three months ended December 31, 2008
                                                                1,019




Our
Vessel Margins increased $1.2 million to $6.8 million during the three month
period ended December 31, 2008 from $5.6
million during the three month period ended December 31, 2007, despite a $1.1
million reduction due to lower currency translation rates compared to the three
month period ended December 31, 2007. Excluding the VIE, Vessel Margins
increased $2.4 million to $6.8 million during the three month period ended
December 31, 2008 from $4.4 million during the three month period ended December
31, 2007. This increase was attributable to improved freight rates and operating
metrics of the WMS vessels.




Our
general and administrative expenses decreased $322 to $2.3 million during the
three month period ended December 31, 2008
from $2.6 million during the three month period ended December 31, 2007.
Excluding the VIE, our general and administrative expenses decreased $169 to
$2.3 million during the three month period ended December 31, 2008 from $2.5
million for the three month period ended December 31, 2007. The decrease was
attributable to a lower currency translation rate, but was partially offset by
higher stock option expenses, a $100 provision for receivable allowance and
higher capital taxes due to state tax changes. Our general and administrative
expenses represented 6.4% of revenues during the three month period ended
December 31, 2008 compared to 7.3% of revenues during the three month period
ended December 31, 2007.




Depreciation
expense was flat at $1.7 million during the three month period ended December
31, 2008 compared to the three month period ended December 31,
2007.




Amortization
of dry-dock costs increased $131 to $0.5 million during the three month period
ended December 31, 2008 from $376 during the three month period ended December
31, 2007, due to the drydocking of our two largest vessels during  the
2008 winterlayup period. Amortization of
intangibles decreased $235 to $398 during the three month period ended December
31, 2008 from $0.6 million during the three month period ended December 31,
2007, which was primarily attributable to the reduced amortization related to
the acquisition of the two Voyageur vessels in August 2007 and the translation
of the Canadian dollar compared to the prior year period.




35




As a
result of the items listed above, during the three month period ended December
31, 2008, income before other income and
expenses and income taxes increased $3.3 million to $1.8 million, compared to a loss of $1.5 million for the
three month period ended December 31, 2007.




Interest
expense increased $169 to $1.5 million during the three month period ended
December 31, 2008 from $1.4 million during the three month period ended December
31, 2007. Theincrease in interest expense wasprimarily a result of the additional
indebtedness incurred in connection with our acquisition of the WMS vessels, the
repowering upgrade to the Saginaw and increased borrowings under our senior
credit facility to maintain higher cash balances.




We
recorded a loss on interest rate swap contracts of $3.4 million during the three month period endedDecember 31, 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
senior credit facility requires us to enter into a specified level of interest
rate swap contracts. Such expense represents the change in fair value of the
underlying contracts and is a non-cash charge that will reverse to income if we
hold the contracts to the end of the term.




Our loss before income taxes was $3.1 million
during the three month period ended December 31, 2008 compared to $2.8 during
the three month period ended December 31, 2007.




Our
provision for income tax expense was $2.9 million during the three month period
ended December 31, 2008 compared to a benefit of $0.8 million during the three
month period ended December 31, 2007.  However, such U.S. and Canadian
federal tax expense will not be paid until we utilize our applicable net
operating losses.




Our net
loss increased $4.1 million to a loss of $6.0 million during the three month
period ended December 31, 2008 from a loss of $1.9 million during the three
month period ended December 31, 2007.




We
accrued $382 for cash dividends on our preferred stock during the three month
period ended December 31, 2008 compared to $317 during the three month period
ended December 31, 2007.




As a
result of the items above, our net loss applicable to common stockholders
increased $4.2 million to a loss of $6.4 million during the three month period
ended December 31, 2008, compared to a loss
of $2.2 million during the three month period ended December 31,
2007.




Impact
of Inflation and Changing Prices




During
the three month period ended December 31, 2008, there were significant decreases
in our fuel costs compared to the immediate prior three month period ended
September 30, 2008. Our contracts with our customers provide for recovery of
increases of fuel costs over specified rates through fuel
surcharges.




Nine
months ended December 31, 2008 compared to the nine months ended December 31,
2007




The nine
months ended December 31, 2008 were highlighted by several significant
events:




(1)
            We
      operated the three former WMS time
      chartered vessels for a total of 797 Sailing
      Daysduring the nine month period ended December 31, 2008. During
      the nine month period endedDecember 31,
      2007, these three vessels sailed only 421 days due to a strike
      by WMS’s licensed
      officers.




(2)
            We
      operated the two former Voyageur vessels for a total of 510 Sailing Days during the nine month period
      ended December 31, 2008, compared to only 252 Sailing Days during the nine
      month period ended December 31,
2007.




(3)
            Due
      to the repowering and other upgrading of the Saginaw, we operated this
      vessel only 203 Sailing Days during the nine month period ended December
      31, 2008, compared to 275 Sailing Days during the nine month period ended
      December 31,
  2007.




(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 nine month
      period ended December 31, 2008. We operated this vessel 233 Sailing Days
      during the nine month period ended December 31, 2007.




36




(5)
            Excluding
      the Saginaw, we operated the Canadian and U.S. vesselsthat Lower Lakes owned or operated at the time of
      our March, 2006 acquisition for one less Sailing Day during the
      nine month period ended December 31, 2008 thanduring the nine month period ended
      December 31, 2007. Until December, 2008, we
      also benefited from improved vessel utilization realized from
      greater scheduling flexibility and increased backhaul opportunities available to our larger
fleet.




(6)
            We
      benefited from improved freight rates
      on new and renewed contracts, as well as contractual rate increases from
      existing contracts.




(7)
            We
      had significant improvements in boat operating metrics, which allowed us
      to increase the percentage of time that the Company’s vessels were
      loaded.  Consequently, we moved significantly more cargo during
      the nine month period ended December 31, 2008 compared to the nine month
      period ended December 31, 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 $1.0 million in winter work
      expense during the nine month period ended December 31, 2008
      compared to only $101 during the nine month period ended December 31,
      2007.




37




The
following table summarizes our Results of Operations during the nine month
periods ended December 31, 2008 and December 31, 2007.




Reconciliation
      of GAAP to Non-GAAP Measures($
      in 000’s)Nine
      months ended December 31, 2008
                                              
                                              
                                              Nine
      months ended December 31, 2007Rand
                                                Logistics,
                                                Inc.
                                              
                                              
                                              Impact
      of
                                                FIN46R*
                                              
                                              
                                              Consolidated
                                              
                                              
                                              Rand
                                                Logistics,
                                                Inc.
                                              
                                              
                                              Impact
      of
                                                FIN46R*
                                              
                                              
                                              ConsolidatedRevenue
                                              
                                              
                                              131,853
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              131,853
                                              
                                              
                                              
                                              90,024
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              90,024ExpensesOutside
      voyage charter fees
                                              
                                              
                                              17,618
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              17,618
                                              
                                              
                                              
                                              8,605
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              8,605Charter
      Hire
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              10,733
                                              
                                              
                                              
                                              (10.733
                                              )
                                              
                                              
                                              -Vessel
      operating expenses
                                              
                                              
                                              79,936
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              79.936
                                              
                                              
                                              
                                              55,993
                                              
                                              
                                              
                                              7388
                                              
                                              
                                              
                                              63,381Repairs
      and maintenance
                                              
                                              
                                              961
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              961
                                              
                                              
                                              
                                              94
                                              
                                              
                                              
                                              7
                                              
                                              
                                              
                                              10198,515
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              98,515
                                              
                                              
                                              
                                              75,425
                                              
                                              
                                              
                                              (3,338
                                              )
                                              
                                              
                                              72,087Income
      before general and administrative, depreciation, amortization of drydock
      costs and intangibles, other income and expenses and income taxes (“Vessel
      Margin”)
                                              
                                              
                                              33,338
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              33,338
                                              
                                              
                                              
                                              14,599
                                              
                                              
                                              
                                              3,338
                                              
                                              
                                              
                                              17,937General
      and administrative
                                              
                                              
                                              7,457
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              7,457
                                              
                                              
                                              
                                              6,823
                                              
                                              
                                              
                                              568
                                              
                                              
                                              
                                              7,391EBITDA
      (Vessel Margin less General and administrative)
                                              
                                              
                                              25,881
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              25,881
                                              
                                              
                                              
                                              7,776
                                              
                                              
                                              
                                              2,770
                                              
                                              
                                              
                                              10,546Depreciation
      and amortization of drydock costs, intangibles and charter
      hire
                                              
                                              
                                              7,996
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              7,996
                                              
                                              
                                              
                                              6,590
                                              
                                              
                                              
                                              945
                                              
                                              
                                              
                                              7,535Write-off
      of retired vessel to salvage value
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,687
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,687Gain
      on foreign exchange
                                              
                                              
                                              (19
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (19
                                              )
                                              
                                              
                                              (208
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (208
                                              )Income
      (loss) before other income and expenses and income taxes
                                              
                                              
                                              17,904
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              17,904
                                              
                                              
                                              
                                              (293
                                              )
                                              
                                              
                                              1,825
                                              
                                              
                                              
                                              1,532


* 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 nine month
period ended December 31, 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 nine month period ended December 31,
2008.




Management
believes that our financial results which exclude the VIE are the most precise
means of making an informed comparison of our results of operations versus the
prior year period.




Revenues
during the nine month period ended December 31, 2008 were $131.9 million, an
increase of 46.5% from $90.0 million during the nine month period ended December
31, 2007. This increase was primarily attributable to increased Sailing Days, higher fuel surcharges, improved
vessel utilization and improved trade patterns.




38




Management
believes that each of our vessels should achieve approximately 270 Sailing Days
in our first three fiscal quarters, assuming average winter weather and ice,
average winter work, average capital
expenditures, no major repairs or
incidents, and dry-docking cycle times performed during the winter lay-up
period. During the nine month period ended December 31, 2008, Sailing Days
increased 328 days to 3,066 Sailing Days, compared to 2,738 Sailing Days during
the nine month period ended December 31, 2007. The table below sets forth a
reconciliation of the difference in Sailing Days between the nine month period
ended December 31, 2007 and the nine month period ended December 31,
2008.




Sailing
      Days during the nine month period ended December 31, 2007
                                2,738Sailing
      Days gained attributable to the WMS Vessels
                                376Sailing
      Days gained attributable to the acquired Voyageur Vessels
                                258Sailing
      Days lost attributable to the retirement of our oldest and smallest
      vessel
                                (233)Sailing
      Days lost attributable to our U.S. vessels owned or operated by Lower
      Lakes at the time of our March 2006 acquisition
                                (10)Sailing
      Days lost attributable to our Canadian vessels owned or operated by Lower
      Lakes at the time of our March 2006 acquisition
                                (63)Sailing
      Days during the nine month period ended December 31, 2008
                                3,066




Our
Vessel Margins increased $15.4 million to $33.3 million during the nine month
period ended December 31, 2008 from $17.9
million during the nine month period ended December 31,
2007.  Excluding the VIE, Vessel Margins increased $18.7 million to
$33.3 million during the nine month period ended December 31, 2008 compared to
$14.6 million during the nine month period ended December 31, 2007.




Repairs
and maintenance expenses, which consist of expensed winter work, are a component of vessel operating
cost and increased $0.9 million to $1.0 million during the nine month period
ended December 31, 2008 from $101 during
the nine month period ended December 31, 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, which was a result of the completion of
winterwork and capital expenditures on such vessels.




Our
general and administrative expenses increased $66 to $7.5 million during the
nine month period ended December 31, 2008
from $7.4 million during the nine month period ended December 31, 2007.
Excluding the VIE, our general and administrative expenses increased $0.7
million to $7.5 million during the nine month period ended December 31, 2008
from $6.8 million during the nine month period ended December 31, 2007. The
increase included $233 of higher cash expenses from increased infrastructure staffing and
expensesand $403 attributable to higher
non-cash equity compensation. Our
general and administrative expenses represented 5.7% of revenues during the nine
month period ended December 31, 2008, a
decrease from 8.2% of revenues during the nine month period ended December 31,
2007.




Due to
the acquisition of the two Voyageur vessels, depreciation expense rose $204 to
$5.1 million during the nine month period ended December 31, 2008 from $4.9
during the nine month period ended December 31, 2007.  The increase in
depreciation expense was partially offset by the retirement of our oldest and
smallest vessel.




Amortization
of drydock costs increased $0.5 million to $1.6 million during the nine month
period ended December 31, 2008 from $1.1 million during the nine month period
ended December 31, 2007, which was due to the drydocking of our two largest
vessels during the winterlayup
period.   Amortization of intangibles decreased $123 to
$1.3 million during the nine month period ended December 31, 2008 from $1.4
million during the nine month period ended December 31, 2007, which was
primarily attributable to reduced amortization arising from the acquisition of
the two Voyageur vessels in August, 2007.




39




As a
result of the items listed above, during the nine month period ended December
31, 2008, income before other income and
expenses and income taxes increased $16.4 million to $17.9 million compared to
$1.5 million for the nine month period ended December 31, 2007.




Interest
expense increased $1.5 million to $5.0 million during the nine month period
ended December 31, 2008 from $3.5 million during the nine month period ended
December 31, 2007. This increase in interest
expense was a result of the additional indebtedness incurred in
connection with our acquisitions of the Voyager and WMS vessels and the
repowering upgrade to the Saginaw.




We
recorded a loss on interest rate swap contracts of $2.9 million during thenine month period ended December 31, 2008 as a result of adjusting our swap contracts to fair value as of the end of such period.




Our income before income taxes was $10.1 million
during the nine month period ended December 31, 2008 compared to a loss of $1.8
million during the nine month period ended December 31, 2007.




Our
provision for income tax expense was $8.2 million during the nine month period
ended December 31, 2008 from a benefit of $462 during the nine month period
ended December 31, 2007.  However, such U.S. and Canadian federal tax
expense will not be paid until we utilize our applicable net operating
losses.




Our net
income increased $3.0 million to $1.9 million during the nine month period ended
December 31, 2008 from a loss of $1.1 million during the nine month period ended
December 31, 2007.




We
accrued $1.2 million for cash dividends on our preferred stock during the nine
month period ended December 31, 2008, compared to $0.9 million during the nine
month period ended December 31, 2007.  During the nine month period
ended December 31, 2007, we also recorded $2.0 million of Stock Warrant
Inducement Discountexpense in connection
with the $0.50 per warrant discount on the 4.0 million warrants which were
exercised during that period.




As a
result of the items above, our net income applicable to common stockholders
increased $4.7 million to $0.7 million during the nine month period ended
December 31, 2008, compared to a loss of
$4.0 million during the nine month period ended December 31, 2007.




Impact
of Inflation and Changing Prices




During
the nine month period ended December 31, 2008, there were major
fluctuations in our fuel costs. However, our contracts with our customers
provide for recovery of these costs over specified rates through fuel
surcharges.




Liquidity
and Capital Resources




Our
primary sources of liquidity are cash from operations, the proceeds of our
credit facility and proceeds from sales of our common stock. Our principal uses
of cash are vessel acquisitions, capital expenditures, drydock expenditures,
operations and interest and principal payments under our credit facility.
Information on our consolidated cash flow is presented in the consolidated
statement of cash flows (categorized by operating, financing and investing
activities) which is included in our consolidated financial statements for the
nine month periods ended December 31, 2008 and December 31, 2007.  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.




Net cash
provided by operating activities for the nine month period ended December 31,
2008 was $3.8 million, an increase in cash flow of $7.3 million compared to net
cash used of $3.5 million during the nine month period ended December 31, 2007.
This increase was primarily due to higher pretax income, but was offset by
increases in net working capital.




40




Cash used
in investing activities decreased by $21.9 million to $6.9 million during the
nine month period ended December 31, 2008 from $28.8 million during the nine
month period ended December 31, 2007.  This decrease was due to the
acquisition of the Voyageur assets in the nine month period ended December 31,
2007, but was offset by increased capital expenditures in the nine month period
ended December 31, 2008.




Cash
flows from financing activities decreased $18.7 to $10.1 million during the nine
month period ended December 31, 2008 from $28.8 million during the nine month
period ended December 31, 2007.  This decrease was attributable to the
cash received from the warrant exercise program during the nine month period
ended December 31, 2007, but was offset by lower long term debt repayments and
borrowings under the line of credit in the nine month period ended December 31,
2008.




During
the nine months ended December 31, 2008, long term debt decreased $9.7 million,
which included $2.2 million in scheduled principal payments and a $7.5 million
decrease attributable to the weakening Canadian dollar and its impact on the
translation to US Dollars of the Canadian dollar portion of our long term
debt.




Investments
in Capital Expenditures and Drydockings




We
expended $8.5 million in paid and unpaid capital expenditures and drydocking
expenses duringthe nine month period
ended December 31, 2008 including $6.7 million relating to the 2008 Winter
season. Our capital expenditures and drydock expenses for the winter 2009
season, which commenced in the three month period ended December 31, 2008 were
$1.8 million as of December 31, 2008.




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
December 31, 2008, our liability for financial instruments with exposure to
foreign currency risk was approximately CDN $48.0 million of term borrowings in
Canada and CDN $7.0 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 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.




41




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 December 31, 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 made a demand against Lower Lakes pursuant to the terms of the
guarantee, an affiliate of Voyageur agreed to contribute half of any amounts
drawn under the guarantee through a CDN $0.6 million letter of credit provided
to Lower Lakes, which expired on December 31, 2008.




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 December 31, 2008 financial
statements.




42




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, “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.




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 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 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




43




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-balanceCommunication
      equipment
                        20%
      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.




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.




44




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” (“SFAS 123(R)”),
using the modified prospective method.  This method requires
compensation cost to be recognized beginning on the effective date based on the
requirements of SFAS 123(R) for all share-based payments granted or modified
after the effective date.  Under this method, the Company recognizes
compensation expense for all newly granted awards and awards modified,
repurchased or cancelled after April 1, 2007. Compensation expense for the
unvested portion of awards that were outstanding at April 1, 2007 is recognized
ratably over the remaining vesting period based on the fair value at date of
grant as calculated under the Black-Scholes option pricing model.




Interest
rate swap contracts
 
 The
Company accounts for its two interest rate swap contracts on its term debt
utilizing Statement of Financial Accounting Standards No. 133 (SFAS 133),
“Accounting for Derivative Instruments and Hedging Activities,” as amended. All
changes in the fair value of the swap contracts are recorded in earnings and the
fair value of the contracts is included in current liabilities on the
Consolidated Balance Sheet.


Variable
interest entities




Effective
for the second fiscal quarter ended September 30, 2006, the Company implemented
FASB Interpretation 46R (“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 six
month period ended September 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 six month
period ended September 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 September 30, 2007 includes the
results of WMS, as it was a VIE at that time.




45




Recently
Issued Pronouncements




Determination of the Useful Life of
Intangible Assets





In April
2008, the FASB issued FASB Staff Position No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FASB Staff Position No. 142”), which amends
the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142, Goodwill and Other Intangible Assets . The
intent of FASB Staff Position No. 142-3 is to improve the consistency between
the useful life of a recognized intangible asset under FASB Statement
No. 142 and the period of expected cash flows used to measure the fair
value of the asset under FASB Statement No. 141(R) and other U.S. generally
accepted accounting principles. FASB Staff Position No. 142-3 is effective for
fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years and early adoption is prohibited. The Company will be
required to adopt this standard for the fiscal year ending March 31, 2010. The
Company is presently evaluating the impact of adopting this standard on its
consolidated financial statements.




Non-controlling interests in
consolidated financial statements





On
December 4, 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (“SFAS 160”), an amendment of ARB No. 51.
SFAS 160 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





In
November of 2008, the SEC released a proposed roadmap regarding the potential
use by U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive
series of accounting standards published by the International Accounting
Standards Board (“IASB”). Under the proposed roadmap, the Company may be
required in fiscal 2015 to prepare financial statements in accordance with IFRS.
However, the SEC will make a determination in 2011 regarding the mandatory
adoption of IFRS. The Company is currently assessing the impact that this
potential change would have on its consolidated financial statements, and it
will continue to monitor the development of the potential implementation of
IFRS.


46


Fair
Value Measurement





In
September 2006, the FASB issued “SFAS” No. 157, Fair Value Measurements
(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. Specifically, this
Statement sets forth a definition of fair value, and establishes a hierarchy
prioritizing the inputs to valuation techniques, giving the highest priority to
quoted prices in active markets for identical assets and liabilities and the
lowest priority to unobservable inputs. The provisions of SFAS No. 157 are
generally required to be applied on a prospective basis, except to certain
financial instruments accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, for which the provisions of SFAS
No. 157 should be applied retrospectively. In February 2008, the FASB
issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement
No. 157, which defers the implementation for the non-recurring
nonfinancial assets and liabilities from fiscal years beginning after
November 15, 2007 to fiscal years beginning after November 15,
2008.  The disclosure requirements of SFAS No. 157 which took effect
on January 1, 2008 are presented in Note 18 to the December 31, 2008
interim financial statements.  On April 1, 2009, the Company will
implement the previously-deferred provisions of SFAS No. 157 for our
nonfinancial assets and liabilities which include goodwill and intangible
assets. The Company does not anticipate that the remaining provisions will
have a material effect on the Company’s consolidated financial position or
results of operations when they become effective.


Statement
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and establishes a hierarchy that
categorizes and prioritizes the inputs to be used to estimate fair value. The
three levels of inputs used are as follows:


Level 1 –
Quoted prices in active markets for identical assets or
liabilities.


Level 2 –
Inputs other than Level 1 that are observable for the asset or liability, either
directly or indirectly, such as quoted prices for similar assets and liabilities
in active markets; quoted prices for identical or similar assets or liabilities
in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data by correlation or other
means.


Level 3 –
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or
liabilities.





In
February 2007, the FASB issued Statement No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities (“Statement 159”).
Statement 159 permits companies to choose to measure certain financial
instruments at fair value that are not currently required to be measured at fair
value. Statement 159 was effective for the Company on April 1, 2008. The
Company has selected the option not to measure eligible financial assets and
liabilities at fair value. Accordingly, the adoption of Statement 159 had no
impact on the Company’s consolidated financial statements.


47


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
4T.  Controls
and Procedures.




As of
December 31, 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 December 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial
reporting.




48





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.




In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Item 1A. Risk Factors contained in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2008, as well as the
following, before investing in any of our securities.




Global
Economic Conditions Risk Factor





The
recent worldwide financial and credit crisis could lead to an extended worldwide
economic recession and have a material adverse effect on our financial results
and financial condition.





During
recent months, there has been substantial volatility and losses in worldwide
equity markets that could lead to an extended worldwide economic
recession.  In addition, due to the substantial uncertainty in the
global economies, there has been deterioration in the credit and capital markets
and access to financing is uncertain.  These conditions could have an
adverse effect on our industry and our business and future operating results.
Our customers may curtail their capital and operating expenditure programs,
which could result in a decrease in demand for our vessels and a reduction in
rates and/or utilization. In addition, certain of our customers could experience
an inability to pay suppliers, including us, in the event they are unable to
access the capital markets to fund their business operations. Likewise, our
suppliers may be unable to sustain their current level of operations, fulfill
their commitments and/or fund future operations and obligations, each of which
could adversely affect our operations.




There
have been no other material changes 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




49




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.





50




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:
      February 11, 2009
                
                /s/
      Laurence
      S. LevyLaurence
      S. LevyChairman
      of the Board and ChiefExecutive
      Officer (Principal Executive Officer)Date:
      February 11, 2009
                
                /s/
      Joseph
      W. McHugh, Jr.Joseph
      W. McHugh, Jr.Chief
      Financial Officer (Principal Financial and Accounting
    Officer)





51




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.