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, 2009or£
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Transition Period
      from                    to
 
 Commission
File Number: 001-33345
 _______________
 
 RAND
LOGISTICS, INC.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
              No.
      20-1195343(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)461
      Fifth Avenue, 25th
      FloorNew
      York, NY
              10017(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
telephone number, including area code:
 (212)
644-3450
 
 Indicate
by checkmark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act of 1934during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90
days.           Yes x No o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such
files).                        Yes
o No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
  Large
      accelerated filer £
                
                Non-accelerated
      filer £
              
              Accelerated
      filer £
                
                Smaller
      reporting company R
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes £     No
R
 
 13,320,516
shares of Common Stock, par value $.0001, were outstanding at February 8,
2010.
  
  RANDLOGISTICS, INC.
  INDEX
  PART I. FINANCIAL INFORMATION
                1Item 1. Financial Statements
                1Item 2. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                34Item 3. Quantitative and Qualitative Disclosures About Market
      Risk.
                50Item 4T. Controls and
      Procedures.
                50PART II. OTHER INFORMATION
                51Item 1. Legal Proceedings.
                51Item 1A. Risk Factors
                51Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                51Item 3. Defaults Upon Senior Securities.
                51Item 4. Submission of Matters to a Vote of Security
      Holders.
                51Item 5. Other Information.
                51Item 6. Exhibits.
                51
  Index
  PARTI. FINANCIAL INFORMATION
  Item
1.  Financial Statements.
  RAND
LOGISTICS, INC.
 Consolidated
Balance Sheets (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  December
      31,
                
                
                March
      31,2009
                
                
                2009ASSETSCURRENTCash and cash
      equivalents
                
                $
                8,528
                
                
                $
                1,953Accounts receivable (Note
      3)
                
                
                13,496
                
                
                
                1,166Prepaid expenses and other
      current assets (Note 4)
                
                
                3,220
                
                
                
                3,008Income taxes
      receivable
                
                
                -
                
                
                
                22Deferred income
      taxes
                
                
                392
                
                
                
                418Total
      current assets
                
                
                25,636
                
                
                
                6,567PROPERTY
      AND EQUIPMENT, NET (Note 6)
                
                
                93,287
                
                
                
                86,233LOAN
      TO EMPLOYEE
                
                
                250
                
                
                
                -OTHER
      ASSETS
                
                
                353
                
                
                
                -DEFERRED
      INCOME TAXES
                
                
                8,505
                
                
                
                12,140DEFERRED
      DRYDOCK COSTS, NET (Note 7)
                
                
                7,446
                
                
                
                7,274INTANGIBLE
      ASSETS, NET (Note 8)
                
                
                14,017
                
                
                
                13,497GOODWILL
      (Note 8)
                
                
                10,193
                
                
                
                10,193Total
      assets
                
                $
                159,687
                
                
                $
                135,904LIABILITIESCURRENTBank indebtedness (Note
      9)
                
                $
                4,879
                
                
                $
                2,786Accounts
    payable
                
                
                4,780
                
                
                
                4,131Accrued liabilities (Note
      10)
                
                
                12,034
                
                
                
                11,087Interest rate swap contracts
      (Note 18)
                
                
                2,360
                
                
                
                3,899Income taxes
      payable
                
                
                62
                
                
                
                –Deferred income
      taxes
                
                
                225
                
                
                
                480Current portion of long-term
      debt  (Note 11)
                
                
                4,619
                
                
                
                4,094Total
      current liabilities
                
                
                28,959
                
                
                
                26,477LONG-TERM
      DEBT  (Note 11)
                
                
                57,740
                
                
                
                54,240OTHER
      LIABILITIES
                
                
                232
                
                
                
                232DEFERRED
      INCOME TAXES
                
                
                13,571
                
                
                
                13,185Total
      liabilities
                
                
                100,502
                
                
                
                94,134COMMITMENTS
      AND CONTINGENCIES (Notes 12 and 13)STOCKHOLDERS’
      EQUITYPreferred stock, $.0001 par
      value,Authorized 1,000,000 shares,
      Issued and outstanding 300,000shares (Note
    14)
                
                
                14,900
                
                
                
                14,900Common stock, $.0001 par
      valueAuthorized 50,000,000 shares,
      Issuable and outstanding13,280,891 shares (Note
      14)
                
                
                1
                
                
                
                1Additional paid-in
      capital
                
                
                63,277
                
                
                
                61,675Accumulated
      deficit
                
                
                (19,052
                )
                
                
                (29,228
                )Accumulated other
      comprehensive income (loss)
                
                
                59
                
                
                
                (5,578
                )Total
      stockholders’ equity
                
                
                59,185
                
                
                
                41,770Total
      liabilities and stockholders’ equity
                
                $
                159,687
                
                
                $
                135,904
  The
accompanying notes are an integral part of these consolidated financial
statements.
  1
 Index
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Operations (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  Three
      months ended
                
                
                Three
      months ended
                
                
                Nine
      months ended
                
                
                Nine
      months endedDecember 31,
      2009
                
                
                December 31,
      2008
                
                
                December 31,
      2009
                
                
                December 31,
      2008REVENUEFreight
      and related revenue
                
                $
                28,598
                
                
                $
                24,237
                
                
                $
                80,879
                
                
                $
                83,863Fuel
      and other surcharges
                
                
                5,633
                
                
                
                6,212
                
                
                
                14,409
                
                
                
                28,791Outside
      voyage charter revenue
                
                
                3,088
                
                
                
                5,709
                
                
                
                7,525
                
                
                
                19,199TOTAL
      REVENUE
                
                
                37,319
                
                
                
                36,158
                
                
                
                102,813
                
                
                
                131,853EXPENSESOutside
      voyage charter fees (Note 15)
                
                
                3,089
                
                
                
                5,310
                
                
                
                7,509
                
                
                
                17,618Vessel
      operating expenses
                
                
                23,216
                
                
                
                24,025
                
                
                
                60,710
                
                
                
                79,936Repairs
      and maintenance
                
                
                68
                
                
                
                73
                
                
                
                785
                
                
                
                961General
      and administrative
                
                
                2,569
                
                
                
                2,326
                
                
                
                6,762
                
                
                
                7,457Depreciation
                
                
                2,411
                
                
                
                1,683
                
                
                
                6,792
                
                
                
                5,086Amortization
      of drydock costs
                
                
                619
                
                
                
                507
                
                
                
                1,799
                
                
                
                1,641Amortization
      of intangibles
                
                
                299
                
                
                
                398
                
                
                
                1,137
                
                
                
                1,269Loss
      (gain) on foreign exchange
                
                
                6
                
                
                
                22
                
                
                
                14
                
                
                
                (19
                )32,277
                
                
                
                34,344
                
                
                
                85,508
                
                
                
                113,949OPERATING
      INCOME
                
                
                5,042
                
                
                
                1,814
                
                
                
                17,305
                
                
                
                17,904OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                
                
                1,409
                
                
                
                1,538
                
                
                
                4,320
                
                
                
                5,011Interest
      income
                
                
                -
                
                
                
                (19
                )
                
                
                (5
                )
                
                
                (25
                )(Gain)
      loss on interest rate swap contracts
                  (Note
      18)
                
                
                (386
                )
                
                
                3,437
                
                
                
                (1,955
                )
                
                
                2,8651,023
                
                
                
                4,956
                
                
                
                2,360
                
                
                
                7,851INCOME
      (LOSS) BEFORE INCOME TAXES
                
                
                4,019
                
                
                
                (3,142
                )
                
                
                14,945
                
                
                
                10,053PROVISION  FOR
      INCOME TAXES (Note 5)Current
                
                
                15
                
                
                
                -
                
                
                
                84
                
                
                
                -Deferred
                
                
                600
                
                
                
                2,853
                
                
                
                3,275
                
                
                
                8,176615
                
                
                
                2,853
                
                
                
                3,359
                
                
                
                8,176NET
      INCOME (LOSS)
                
                
                3,404
                
                
                
                (5,995
                )
                
                
                11,586
                
                
                
                1,877PREFERRED
      STOCK DIVIDENDS
                
                
                490
                
                
                
                382
                
                
                
                1,410
                
                
                
                1,156NET
      INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
                
                $
                2,914
                
                
                $
                (6,377
                )
                
                $
                10,176
                
                
                $
                721Net
      income (loss) per share basic (Note 19)
                
                $
                0.22
                
                
                $
                (0.50
                )
                
                $
                0.78
                
                
                $
                0.06Net
      income (loss) per share diluted
                
                $
                0.22
                
                
                $
                (0.50
                )
                
                $
                0.75
                
                
                $
                0.06Weighted
      average shares basic
                
                
                13,141,574
                
                
                
                12,804,050
                
                
                
                12,980,831
                
                
                
                12,450,630Weighted
      average shares diluted
                
                
                15,560,929
                
                
                
                12,804,050
                
                
                
                15,400,186
                
                
                
                12,450,630
  The
accompanying notes are an integral part of these consolidated financial
statements.
 2
 Index
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Stockholders’ Equity and Other Comprehensive Income (Loss)
(Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  Common
      Stock
                
                
                Preferred
      Stock
                
                
                AdditionalPaid-In
                
                
                Accumulated
                
                
                Accumulated
                  Other
                  Comprehensive
                  Income
                
                
                Comprehensive
                
                
                Total
                  Stockholders’Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                (Loss)
                
                
                Income
      (Loss)
                
                
                EquityBalances,
      March 31, 2008
                
                
                12,105,051
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                58,350
                
                
                $
                (20,465
                )
                
                $
                1,078
                
                
                $
                (9,266
                )
                
                $
                53,864Net
      loss
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (7,174
                )
                
                
                --
                
                
                
                (7,174
                )
                
                
                (7,174
                )Preferred
      dividends
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (1,589
                )
                
                
                --
                
                
                
                --
                
                
                
                (1,589
                )Unrestricted
      shares issued undermanagement
      bonus program(Note 20)
                
                
                478,232
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,645
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,645Warrant
      conversion, net of expenses (Note 14)
                
                
                291,696
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                157
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                157Warrant
      extinguishment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (9
                )
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (9
                )Stock
      awards granted (Note 14)
                
                
                15,948
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                75
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                75Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                457
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                457Translation
      adjustment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (6,656
                )
                
                
                (6,656
                )
                
                
                (6,656
                )Balances,
      March 31, 2009
                
                
                12,890,927
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                61,675
                
                
                $
                (29,228
                )
                
                $
                (5,578
                )
                
                $
                (13,830
                )
                
                $
                41,770Net
      income
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,285
                
                
                
                --
                
                
                
                2,285
                
                
                
                2,285Preferred
      dividends
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (443
                )
                
                
                --
                
                
                
                --
                
                
                
                (443
                )Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131Translation
      adjustment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,185
                
                
                
                2,185
                
                
                
                2,185Balances,
      June 30, 2009
                
                
                12,890,927
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                61,806
                
                
                $
                (27,386
                )
                
                $
                (3,393
                )
                
                $
                4,470
                
                
                $
                45,928Net
      income
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                5,897
                
                
                
                --
                
                
                
                5,897
                
                
                
                5,897Preferred
      dividends
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (477
                )
                
                
                --
                
                
                
                --
                
                
                
                (477
                )Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                131Stock
      issued under employees retirement plan (Note 14)
                
                
                59,430
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                170
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                170Translation
      adjustment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,820
                
                
                
                2,820
                
                
                
                2,820Balances,
      September 30, 2009
                
                
                12,950,357
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                62,107
                
                
                $
                (21,966
                )
                
                $
                (573
                )
                
                $
                8,717
                
                
                $
                54,469Net
      income
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                3,404
                
                
                
                --
                
                
                
                3,404
                
                
                
                3,404Preferred
      dividends
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (490
                )
                
                
                --
                
                
                
                --
                
                
                
                (490
                )Stock
      options issued (Note 14)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                130
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                130Restricted
      stock issued
                
                
                39,660
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                126
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                126Stock
      issued under employees retirement plan (Note 14)
                
                
                100,313
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                311
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                311Stock
      issued in lieu of cash compensation
                
                
                158,325
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                500
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                500Unrestricted
      stock issued
                
                
                32,236
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                103
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                103Translation
      adjustment
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                632
                
                
                
                632
                
                
                
                632Balances,
      December 31, 2009
                
                
                13,280,891
                
                
                $
                1
                
                
                
                300,000
                
                
                $
                14,900
                
                
                $
                63,277
                
                
                $
                (19,052
                )
                
                $
                59
                
                
                
                4,036
                
                
                
                59,185
  The
accompanying notes are an integral part of these consolidated financial
statements.
 3
 Index
 RAND
LOGISTICS, INC.
 Consolidated
Statements of Cash Flows (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 Nine
      months ended
                
                
                Nine
      months endedDecember
      31, 2009
                
                
                December
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet income
                
                $
                11,586
                
                
                $
                1,877Adjustments to reconcile net
      income to net cash providedby operating
      activitiesDepreciation and amortization
      of drydock costs
                
                
                8,591
                
                
                
                6,727Amortization of intangibles
      and deferred financing costs
                
                
                1,433
                
                
                
                1,579Deferred income
      taxes
                
                
                3,275
                
                
                
                8,176(Gain) loss on interest rate
      swap contracts
                
                
                (1,955
                )
                
                
                2,865Equity
      compensation
                
                
                1,602
                
                
                
                647Deferred drydock costs
      paid
                
                
                (44
                )
                
                
                (451
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (12,330
                )
                
                
                (10,725
                )Prepaid
      expenses and other current assets
                
                
                (212
                )
                
                
                773Accounts
      payable and accrued liabilities
                
                
                22
                
                
                
                (8,158
                )Loan
      to employee
                
                
                (250
                )
                
                
                -Other
      assets
                
                
                (353
                )
                
                
                -Other
      liabilities
                
                
                -
                
                
                
                232Income
      taxes payable
                
                
                84
                
                
                
                (153
                )11,449
                
                
                
                3,389CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase of property and
      equipment
                
                
                (3,275
                )
                
                
                (6,726
                )Sale proceeds of retired
      vessel
                
                
                -
                
                
                
                250(3,275
                )
                
                
                (6,476
                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of warrants
                
                
                -
                
                
                
                192Warrant
      extinguishment
                
                
                -
                
                
                
                (9
                )Long-term
      debt repayment
                
                
                (3,374
                )
                
                
                (2,192
                )Proceeds
      from bank indebtedness
                
                
                13,457
                
                
                
                21,863Repayments
      of bank indebtedness
                
                
                (11,812
                )
                
                
                (9,835
                )(1,729
                )
                
                
                10,019EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
                
                
                130
                
                
                
                (1,109
                )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                6,575
                
                
                
                5,823CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                1,953
                
                
                
                5,626CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
                
                $
                8,528
                
                
                $
                11,449SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayments for
      interest
                
                $
                4,062
                
                
                $
                4,576Payment of income
      taxes
                
                $
                --
                
                
                $
                --Unpaid purchases of property
      and equipment and drydock cost
                
                $
                1,069
                
                
                $
                1,336Shares issued under management
      bonus program
                
                $
                --
                
                
                $
                2,645
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES
  Basis of Presentation and
Consolidation
  The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America and include the
accounts of Rand Finance Corp. (“Rand Finance”) and Rand LL Holdings Corp., 100%
subsidiaries of the Company, and the accounts of Lower Lakes Towing Ltd. (“Lower
Lakes Towing”), Lower Lakes Transportation Company (“Lower Lakes
Transportation”) and Grand River Navigation Company, Inc. (“Grand River”), each
of which is a 100% subsidiary of Rand LL Holdings Corp.
  The
consolidated financial statements include the accounts of the Company and all of
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. In the opinion of management, the interim
financial statements contain all adjustments necessary (consisting of normal
recurring accruals) to present fairly the financial information contained
herein. Operating results for the interim period presented are not necessarily
indicative of the results to be expected for a full year, in part due to the
seasonal nature of the business. The comparative balance sheet amounts are
derived from the March 31, 2009 audited consolidated financial statements. The
statements and related notes have been prepared pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements that were included
in the Company’s Annual Report on Form 10-K for the period ended March 31,
2009.
  Cash
and Cash Equivalents
  The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
  Accounts
Receivable and Concentration of Credit Risk
  The
majority of the Company’s accounts receivable are amounts due from
customers and other accounts receivable including insurance and Goods and
Services Tax refunds accounting for the balance.  The majority of
accounts receivable are due within 30 to 60 days and are stated at amounts due
from customers net of an allowance for doubtful accounts. The Company extends
credit to its customers based upon its assessment of their creditworthiness and
past payment history. Accounts outstanding longer than the contractual payment
terms are considered past due. The Company’s allowance for doubtful accounts was
$218 as of December 31, 2009 and $146 as of March 31, 2009.  The
Company has historically had no significant bad debts. Interest is not accrued
on outstanding receivables.
  5
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Revenue
and Operating Expenses Recognition
  The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis based on
origin-destination and cargo carried. Voyage revenue is recognized ratably over
the duration of a voyage based on the relative transit time in each reporting
period, when the following conditions are met: the Company has a signed contract
of affreightment, the contract price is fixed or determinable and collection is
reasonably assured.  Included in freight billings are other fees such
as fuel surcharges and other freight surcharges, which represent pass-through
charges to customers for toll fees, lockage fees and ice breaking fees paid to
other parties.  Fuel surcharges are recognized ratably over the
duration of the voyage, while freight surcharges are recognized when the
associated costs are incurred. Freight surcharges are less than 5% of total
revenue.
  Marine
operating expenses such as crewing costs, fuel, tugs and insurance are
recognized as incurred or consumed and thereby is recognized ratably in each
reporting period. Repairs and maintenance and other insignificant costs are
recognized as incurred.
  The
Company subcontracts excess customer demand to other freight
providers.  Service to customers under such arrangements is
transparent to the customer and no additional services are being provided to
customers.  Consequently, revenues recognized for customers serviced
by freight subcontractors are recognized on the same basis as described
above.  Costs for subcontracted freight providers, presented as
“outside voyage charter fees” on the statement of operation, are recognized as
incurred and thereby are recognized ratably over the voyage.
  The
Company accounts for sales taxes imposed on its services on a net basis in the
consolidated statement of operations.
  In
addition, all revenues are presented on a gross basis.
  Fuel and Lubricant
Inventories
  Raw
materials, fuel, and operating supplies are accounted for on a first-in,
first-out cost method (based on monthly averages). Raw materials and fuel are
stated at the lower of actual cost (first-in, first-out method) or market.
Operating supplies are stated at actual cost or average cost.
  Intangible Assets and
Goodwill
  Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. The
intangibles are amortized as follows:
  Trademarks
      and trade names
                      Non-competition
      agreements
                      Customer
      relationships and contracts
                  
                  10
      years straight-line
                      4
      years straight-line
                      15
      years straight-line
  6
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Property and Equipment
  Property
and equipment are recorded at cost.  Depreciation methods for capital
assets are as follows:
  Vessels
                          Leasehold
      improvements
                          Vehicles
                          Furniture
      and equipment
                          Computer
      equipment
                          Communication
      equipment
                  
                  4 -
      25 years straight-line
                        7 -
      11 years straight-line
                        20%
      declining-balance
                        20%
      declining-balance
                        45%
      declining-balance
                        20%
      declining-balance
 
 Impairment
of Fixed Assets and Intangible Assets with Finite Lives
  Unlike
goodwill and indefinite-lived intangible assets, fixed assets (e.g., property,
plant, and equipment) and finite-lived intangible assets (e.g. customer lists)
are tested for impairment upon occurrence of a triggering event that indicates
the carrying value is no longer recoverable. Examples of such triggering events
include a significant disposal of a portion of such assets, an adverse change in
the market involving the business employing the related asset, a significant
decrease in the benefits realized from an acquired business, difficulties or
delays in integrating the business, and a significant change in the operations
of an acquired business.
  Once a
triggering event has occurred, the recoverability test employed is based on
whether the intent is to hold the asset for continued use or to hold the asset
for sale. If the intent is to hold the asset for continued use, the
recoverability test involves a comparison of undiscounted cash flows against the
carrying value of the asset as an initial test. If the carrying value of such
asset exceeds the undiscounted cash flow, the asset would be deemed to be
impaired. Impairment would then be measured as the difference between the fair
value of the fixed or amortizing intangible asset and the carrying value of such
asset. The Company generally determines fair value by using the discounted cash
flow method. If the intent is to hold the asset for sale and certain other
criteria are met (i.e., the asset can be disposed of currently, appropriate
levels of authority have approved sale, and there is an actively pursuing
buyer), the impairment test is a comparison of the asset’s carrying value to its
fair value less costs to sell. To the extent that the carrying value is greater
than the asset’s fair value less costs to sell, an impairment loss is recognized
for the difference. Assets held for sale are separately presented on the balance
sheet and are no longer depreciated.
  7
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Impairment
of Goodwill and Indefinite-Lived Intangible Assets
  The
Company annually reviews the carrying value of intangible assets not subject to
amortization and goodwill, to determine whether impairment may exist. ASC
350 “Intangibles-Goodwill and
Other” requires that goodwill and certain intangible assets be assessed
annually for impairment using fair value measurement techniques. Specifically,
goodwill impairment is determined using a two-step process. The first step of
the goodwill impairment test is used to identify potential impairment by
comparing the fair value of a reporting unit with its carrying amount, including
goodwill. The estimates of fair value of the Company’s two reporting units,
which are the Company’s Canadian and US operations (excluding the parent), are
determined using various valuation techniques with the primary techniques being
a discounted cash flow analysis and peer analysis. A discounted cash flow
analysis requires one to make various judgmental assumptions including
assumptions about future cash flows, growth rates, and discount rates. The
assumptions about future cash flows and growth rates are based on the Company’s
forecast and long-term estimates. Discount rate assumptions are based on an
assessment of the risk inherent in the respective reporting units. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value,
the second step of the goodwill impairment test is performed to measure the
amount of impairment loss, if any. The second step of the goodwill impairment
test compares the implied fair value of the reporting unit’s goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit’s
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair value of goodwill
is determined in the same manner as the amount of goodwill recognized in a
business combination. That is, the fair value of the reporting unit is allocated
to all of the assets and liabilities of that unit (including any unrecognized
intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the purchase price paid
to acquire the reporting unit.  As of March 31, 2009, the Company
conducted an annual test and determined that the fair value of its two reporting
units exceeded their carrying amounts and the second step of the impairment
testing was therefore not necessary. There were no events or changes in
circumstances during the nine month period ended December 31, 2009 that
indicated that their carrying amounts may not be recoverable.
 
 The
impairment test for other intangible assets not subject to amortization consists
of a comparison of the fair value of the intangible asset with its carrying
value. If the carrying value of the intangible asset exceeds its fair value, an
impairment loss is recognized in an amount equal to that excess. The estimates
of fair value of intangible assets not subject to amortization are determined
using various discounted cash flow valuation methodologies. Significant
assumptions are inherent in this process, including estimates of discount rates.
Discount rate assumptions are based on an assessment of the risk inherent in the
respective intangible assets.
  Deferred
Charges
  Deferred
charges include capitalized drydock expenditures and deferred financing
costs.  Drydock costs incurred during statutory Canadian and United
States certification processes are capitalized and amortized on a straight-line
basis over the benefit period, which is generally 60 months. Drydock costs
include costs of work performed by third party shipyards, subcontractors and
other direct expenses to complete the mandatory certification process. Deferred
financing costs are amortized on a straight-line basis over the term of the
related debt, which approximates the effective interest method.
  8
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Repairs
and Maintenance
  The
Company’s vessels require repairs and maintenance each year to ensure the fleet
is operating efficiently during the shipping season.  The majority of
repairs and maintenance are completed in January, February and March of each
year when the vessels are inactive.  The Company expenses such routine
repairs and maintenance costs.  Significant repairs to the Company’s
vessels, whether owned or available to the Company under a time charter, such as
major engine overhauls and major hull steel repairs, are capitalized and
amortized over the remaining life of the vessel repaired, or remaining lease
term or the useful life of the asset, whether it is engine equipment, the
vessel, or leasehold improvements to a vessel leased under a time charter
agreement.
  Income
Taxes
  The
Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740
requires the determination of deferred tax assets and liabilities based on the
differences between the financial statement and income tax bases of tax assets
and liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.  A valuation allowance is
recognized, if necessary, to measure tax benefits to the extent that, based on
available evidence, it is more likely than not that they will be
realized.
  Accounting
for Uncertainty in Income taxes
  The
Company adopted the provisions of ASC 740-10-25 “Income Taxes-Overall-Recognition”effective April 1, 2007. ASC 740-10-25 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 ASC 740-10-25, 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 did not have a material effect on
the results of operations, financial condition or liquidity.
  The
adoption of ASC 740-10-25 did not result in a cumulative effect adjustment to
accumulated deficit. Upon adoption of the standard on April 1, 2007, the Company
had no unrecognized tax benefits which, if recognized, would favorably affect
the effective income tax rate in future periods. The Company also had no
unrecognized tax benefits as of December 31, 2009 and March 31,
2009.
  Consistent
with its historical financial reporting, the Company has elected to classify
interest expense related to income tax liabilities, when applicable, as part of
the interest expense in its Consolidated Statements of Operations rather than
income tax expense. The Company will continue to classify income tax penalties
as part of selling, general and administrative expense in its Consolidated
Statements of Operations.  To date, the Company has not incurred
material interest expenses or penalties relating to assessed taxation
years.
  9
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  There
have been no recent examinations by the Internal Revenue Service. The Company’s
primary state tax jurisdictions are Michigan, Ohio and New York and its only
international jurisdiction is Canada. The following table summarizes the open
tax years for each major jurisdiction:
  Jurisdiction
                  Open Tax YearsFederal
      (USA)
                  2005
      – 2008Michigan
                  2005
      – 2008Ohio
                  2005
      – 2008New
      York
                  2005
      – 2008Federal
      (Canada)
                  2003
      – 2008Ontario
                  2003
      – 2008
  Foreign
Currency Translation
  The
Company uses the U.S. Dollar as its reporting currency.  The
functional currency of Lower Lakes Towing Ltd. is the Canadian
Dollar.  The functional currency of the Company’s U.S. subsidiaries is
the U.S. Dollar. Assets and liabilities denominated in foreign currencies are
translated into U.S. Dollars at the rate of exchange at the balance sheet date,
while revenue and expenses are translated at the weighted average rates
prevailing during the respective periods.  Components of stockholders’
equity are translated at historical rates.  Exchange gains and losses
resulting from translation are reflected in accumulated other comprehensive
income or loss.
  Advertising
Costs
  The
Company expenses all advertising costs as incurred. These costs are included in
general and 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 ASC 718 “Compensation-Stock
Compensation”, using the modified prospective method.  This
method requires compensation cost to be recognized beginning on the effective
date based on the requirements of ASC 718 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 was
recognized ratably over the remaining vesting period based on the fair value at
date of grant.
  10
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  1.
                  SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Financial
Instruments
  The
Company accounts for its two interest rate swap contracts on its term debt
utilizing ASC 815 “Derivatives
and Hedging”. All changes in the fair value of the swap contracts are
recorded in earnings and the fair value of settlement cost to terminate the
contracts is included in current liabilities on the Consolidated Balance Sheet.
Disclosure requirements of ASC 815 are disclosed in Note 18.
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS
  The
Hierarchy of Generally Accepted Accounting Principles
  In
June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC
105, “Generally Accepted
Accounting Principles”. The objective of ASC 105 is to establish the FASB
Accounting Standards Codificationas
the source of authoritative accounting principles recognized by the FASB to be
applied by non-governmental entities in the preparation of financial statements
in conformity with GAAP. The standard is effective for interim and annual
periods ending after September 15, 2009. The Company adopted the provisions
of the standard on September 30, 2009, which did not have a material impact on
our financial statements.
  Fair Value
Measurements
  In
September 2006, the FASB issued guidance incorporated in ASC 820 “Fair Value Measurements and
Disclosures”. ASC 820 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. Specifically, ASC 820 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 disclosure requirements of ASC 820 related
to the Company’s financial assets and liabilities, which took effect on January
1, 2008, are presented in Note 18. On April 1, 2009, the Company implemented the
previously-deferred provisions of ASC 820 for our non-financial assets and
liabilities which include goodwill and intangible assets. The Company determined
that the remaining provisions did not have a material effect on the Company’s
consolidated financial position or results of operations when they became
effective.
  11
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS (continued)
  ASC 820
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 April
2009, the FASB amended ASC 820-10, “Fair Value Measurement and
Disclosures-Overall”. ASC 820-10-65 provides additional guidance for
estimating fair value in accordance with ASC 820 when the volume and level of
activity for the asset or liability have decreased significantly. ASC 820-10-65
also provides guidance on identifying circumstances that indicate a transaction
is not orderly. ASC 820-10-65 is effective for interim and annual reporting
periods ending after June 15, 2009. The Company adopted ASC 820-10-65 in the
first quarter of fiscal 2010 and it did not have a material impact on its
consolidated financial statements upon adoption.
  In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, an amendment
to ASC 820-10, “Fair Value
Measurements and Disclosures—Overall,” for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using certain other valuation
techniques. The guidance provided in this ASU is effective for the first
reporting period (including interim periods) beginning after issuance. The
Company adopted ASU 2009-05 as of October 1, 2009. ASU 2009-05 had no impact on
our financial condition, results of operations or cash flows.
  Non-controlling
Interests in Consolidated Financial Statements
  On
December 4, 2007, the FASB issued ASC 810-10-65 “Consolidation-Overall-Transition and
Open Effective Date Information”. ASC 810-10-65 requires entities to
report non-controlling (minority) interests of consolidated subsidiaries as a
component of shareholders’ equity on the balance sheet, include all earnings of
a consolidated subsidiary in consolidated results of operations, and treat all
transactions between an entity and the non-controlling interest as equity
transactions between the parties.  ASC 810-10-65 applies to all fiscal
years beginning on or after December 15, 2008. The Company adopted this standard
as of April 1, 2009; however, the Company does not have any partially owned
subsidiaries to consolidate and therefore the application of this standard has
no impact on its consolidated financial statements.
  Derivative
Instruments and Hedging Activities
  In March
2008, the FASB issued ASC 815 “Derivatives and Hedging”. ASC
815 provides enhanced disclosure requirements surrounding how and why an entity
uses derivative instruments, how derivative instruments and related hedged items
are accounted for and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance and cash flows. ASC 815 is
effectivefor fiscal
years beginning after November 15, 2008. The Company adopted ASC 815 as of
April 1, 2009.
  12
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS (continued)
  Determination
of the Useful Life of Intangible Assets
  In April
2008, the FASB updated guidance in ASC 350-30-50 “Intangibles—Goodwill and
Other”, 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 ASC 350. The intent of ASC 350-30-50 is to
improve the consistency between the useful life of a recognized intangible asset
and the period of expected cash flows used to measure the fair value of the
asset under ASC 805-10-10 “Business Combinations” and
other U.S. generally accepted accounting principles. ASC 350-30-50 is effective
for fiscal years beginning after December 15, 2008 and interim periods within
those fiscal years and early adoption is prohibited. The Company adopted this
standard for the fiscal year ending March 31, 2010. The adoption of ASC
350-30-50 did not have a material impact on the Company’s consolidated financial
statements.
  Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies
  In April
2009, the FASB updated guidance in ASC 805-20-25 “Business Combinations”. ASC
805-20-25 addresses application issues raised on initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-20-25
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008, and interim periods within those fiscal years. The
Company adopted ASC 805-20-25 effective April 1, 2009 and there was no impact on
the Company’s consolidated financial statements; however, any business
combinations we engage in will be recorded and disclosed in accordance with this
statement.
 
 Recognition
and Presentation of Other-Than-Temporary Impairments
  In April
2009, the FASB updated guidance in ASC 320-10-65 “Investments-Debt and Equity
Securities”. The objective of ASC 320-10-65 is to amend the
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. ASC 320-10-65 is effective for interim and annual reporting periods
ending after June 15, 2009.  The impact of adoption did not have a material
impact on the Company’s consolidated financial statements.
 
 Interim
Disclosures about Fair Value of Financial Instruments
  In April
2009, the FASB issued ASC 825-10-65 “Financial Instruments”. ASC 820-10-65
requires disclosure about fair value of financial instruments in interim
reporting periods of publicly traded companies that were previously only
required to be disclosed in annual financial statements. This standard is
effective for interim and annual periods ending after June 15,
2009.   The Company adopted ASC 825-10-65 as of
June 30, 2009, as required.
  13
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS (continued)
 
 Subsequent
Events
  In May
2009, the FASB issued ASC 855 “Subsequent Events”. ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. It requires the disclosure of the date through which
an entity has evaluated subsequent events and the basis for that date, that is,
whether that date represents the date the financial statements were issued or
were available to be issued. This standard is effective for interim and annual
periods ending after June 15, 2009 and the Company adopted ASC 855 as of
June 30, 2009. The disclosure requirements of ASC 855 applicable to
the Company are presented in Note 22.
  Consolidation
of Variable Interest Entities
  In June
2009, the FASB issued ASC 810-10-05 “Consolidation”. ASC 810-10-05
contains new criteria for determining the primary beneficiary and increases the
frequency of required reassessments to determine whether a company is the
primary beneficiary of a variable interest entity. ASC 810-10-05 also contains a
new requirement that any term, transaction, or arrangement that does not have a
substantive effect on an entity’s status as a variable interest entity, a
company’s power over a variable interest entity, or a company’s obligation to
absorb losses or its right to receive benefits of an entity must be disregarded
in applying ASC 810-10-05. ASC 810-10-05 is applicable for annual periods
beginning after November 15, 2009 and interim periods therein. The Company is
currently assessing the impacts, if any, on its consolidated financial
statements.
  In
December 2009, the FASB issued Accounting Standards Update No. 2009-17, “Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”)
amending the FASB Accounting Standards Codification. The amendments in ASU
2009-17 replace the quantitative-based risks and rewards calculation for
determining which enterprise, if any, has a controlling financial interest in a
variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impacts the entity’s economic performance and has either
(1) the obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity.  An approach that is expected to be
primarily qualitative will be more effective for identifying which enterprise
has a controlling financial interest in a variable interest
entity.  The amendments in ASU 2009-17 also require additional
disclosures about an enterprise’s involvement in variable interest entities,
which will enhance the information provided to users of financial
statements.  This update shall be effective as of the beginning first
annual reporting period that begins after November 15, 2009 and interim periods
within that first annual reporting period, and for interim and annual reporting
periods thereafter.  Earlier application is prohibited.  The
Company is currently assessing the impact, if any, that the issuance of this
update will have on its financial statements.
  14
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  2.
                  RECENTLY
      ISSUED PRONOUNCEMENTS (continued)
 
 Distinguishing
Liabilities from Equity
  The FASB
issued ASU 2009-04 in August 2009, an update to ASC 480-10-S99, “Distinguishing Liabilities from
Equity,” per EITF Topic D-98, “Classification and Measurement of
Redeemable Securities.” to reflect the SEC staff's views regarding the
application of Accounting Series Release No. 268, “Presentation in Financial
Statements of Redeemable Preferred Stocks".This ASU has had no
impact on the financial condition, results of operations or cash flows of
the Company.
  Multiple-Deliverable Revenue
Arrangements
  In
October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue
Arrangements”, which amends ASC 605-25.  ASU 2009-13 modifies how
consideration is allocated for the purpose of revenuerecognition in
multiple-element arrangements based on an element's estimated selling price if
vendor-specific or other third-party evidence of value is not available. ASU 2009-13 will be effective
for the Company on April 1, 2010, with early adoption permitted.  The
Company is currently evaluating the impact the adoption of ASU 2009-13 will have
on its financial position and results of operations.
 
 Equity:
Accounting for Distributions to Shareholders with Components of Stock and
Cash
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-01, “Equity: Accounting for
Distributions to Shareholders with Components of Stock and Cash” (“ASU
2010-01”).  ASU 2010-01 amends the ASC to clarify that the stock
portion of a distribution to shareholders that allows them to elect to receive
cash or stock with a potential limitation on the total amount of cash that all
shareholders can elect to receive in the aggregate is considered a share
issuance that is reflected in earnings per share prospectively and is not a
stock dividend. ASU 2010-01 is effective for fiscal years beginning after
December 15, 2009.  Early application is prohibited.  ASU
2010-01 will not have a material impact on the Company’s financial
statements.
 
 Consolidation:
Accounting and Reporting for Decreases in Ownership of a Subsidiary – A Scope
Clarification
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-02, “Consolidation: Accounting and
Reporting for Decreases in Ownership of a Subsidiary – A Scope
Clarification” (“ASU 2010-02”).  ASU 2010-02 amends the
Codification to clarify that the scope of the decrease in ownership provisions
of ASC 810-10 and related guidance applies to:  (i) a subsidiary or
group of assets that is a business or nonprofit activity; (ii) a subsidiary that
is a business or nonprofit activity that is transferred to an equity method or
joint venture; (iii) an exchange of a group of assets that constitutes a
business or nonprofit activity for a non-controlling interest in an entity
(including an equity-method investee or joint venture); and (iv) a decrease in
ownership in a subsidiary that is not a business or nonprofit activity when the
substance of the transaction causing the decrease in ownership is not addressed
in other authoritative guidance.  If no other guidance exists, an
entity should apply the guidance in ASC 810-10.  ASU 2010-02 is
effective for fiscal years beginning on or after December 15, 2009 and will not
have a material impact on the Company’s financial statements.
  15
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  3.
                  ACCOUNTS
      RECEIVABLE
  Trade
receivables are presented net of an allowance for doubtful
accounts.  The allowance was $218 as of December 31, 2009 and $146 as
of March 31, 2009. The allowance for doubtful accounts reflects estimates of
probable losses in trade receivables.  The Company manages and
evaluates the collectability of its trade receivables as
follows:  management reviews aged accounts receivable listings and
contact is made with customers that have extended beyond agreed upon credit
terms. Senior management and operations are notified such that when they are
contacted by such customers for a future delivery, the customer can be requested
to pay any past amounts before any future cargo is booked for shipment. Customer
credit risk is also managed by reviewing the history of payments by the
customer, the size and credit quality of the customer, the period of time
remaining in the shipping season and the demand for future cargos.
  4.
                  PREPAID
      EXPENSES AND OTHER CURRENT ASSETS
  Prepaid
expenses and other current assets are comprised of the following:
  December
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2009Prepaid
      insurance
                  
                  $
                  121
                  
                  
                  $
                  861Fuel
      and lubricants
                  
                  
                  2,459
                  
                  
                  
                  1,481Deposits
      and other prepaids
                  
                  
                  640
                  
                  
                  
                  666$
                  3,220
                  
                  
                  $
                  3,008
  5.
                  INCOME
      TAXES
  The
Company's effective tax rate was 22.5% for the nine months ended December 31,
2009 compared to 81.3% for the nine months ended December 31, 2008. The
effective tax rate for the current fiscal period is lower than the statutory tax
rate due to the tax benefit associated with the reduction of the valuation
allowance related to the net U.S. Federal deferred tax assets.  The
effective tax rate for the prior fiscal period was higher than its statutory tax
rate based on a near breakeven full year forecast which, when combined with
permanent book to tax differences, resulted in a high tax rate which was then
applied to our seasonally high year-to-date income. In addition, there was a
provision of $677 associated with a change in certain management compensation
from cash to stock which changed characterization of such compensation from
deductible to non-deductible on the Company’s Canadian tax return.
  16
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  6.
                  PROPERTY
      AND EQUIPMENT
  Property
and equipment are comprised of the following:
  December
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2009CostVessels
                  
                  $
                  111,187
                  
                  
                  $
                  96,240Leasehold
      improvements
                  
                  
                  2,139
                  
                  
                  
                  2,110Furniture
      and equipment
                  
                  
                  260
                  
                  
                  
                  209Vehicles
                  
                  
                  22
                  
                  
                  
                  18Computer,
      communication equipment and purchased software
                  
                  
                  2,320
                  
                  
                  
                  1,978$
                  115,928
                  
                  
                  $
                  100,555Accumulated
      depreciationVessels
                  
                  $
                  21,336
                  
                  
                  $
                  13,537Leasehold
      improvements
                  
                  
                  568
                  
                  
                  
                  425Furniture
      and equipment
                  
                  
                  83
                  
                  
                  
                  49Vehicles
                  
                  
                  6
                  
                  
                  
                  3Computer,
      communication equipment and purchased software
                  
                  
                  648
                  
                  
                  
                  30822,641
                  
                  
                  
                  14,322$
                  93,287
                  
                  
                  $
                  86,233
  7.
                  DEFERRED
      DRYDOCK COSTS
  Deferred
drydock costs are comprised of the following:
  December
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2009Drydock
      expenditures
                  
                  $
                  13,423
                  
                  
                  $
                  10,935Accumulated
      amortization
                  
                  
                  5,977
                  
                  
                  
                  3,661$
                  7,446
                  
                  
                  $
                  7,274
  The
following table shows periodic deferrals of drydock costs and
amortization.
  Balance
      as of March 31, 2008
                  
                  $
                  9,082Drydock
      expenditures paid and accrued
                  
                  
                  1,400Amortization
      of drydock costs
                  
                  
                  (2,141
                  )Foreign
      currency translation adjustment
                  
                  
                  (1,067
                  )Balance
      as of March 31, 2009
                  
                  $
                  7,274Amortization
      of drydock costs
                  
                  
                  (578
                  )Foreign
      currency translation adjustment
                  
                  
                  437Balance
      as of June 30, 2009
                  
                  $
                  7,133Amortization
      of drydock costs
                  
                  
                  (602
                  )Foreign
      currency translation adjustment
                  
                  
                  438Balance
      as of September 30, 2009
                  
                  $
                  6,969Drydock
      expenditures paid and accrued
                  
                  
                  1,000Amortization
      of drydock costs
                  
                  
                  (619
                  )Foreign
      currency translation adjustment
                  
                  
                  96Balance
      as of December 31, 2009
                  
                  $
                  7,446
  17
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  8.
                  INTANGIBLE
      ASSETS AND GOODWILL
  Intangibles
are comprised of the following:
  December
      31,
                      2009
                  
                  
                  March
      31,
                      2009Intangible
      assetsDeferred
      financing costs
                  
                  $
                  2,103
                  
                  
                  $
                  1,886Trademarks and
      trade names
                  
                  
                  986
                  
                  
                  
                  868Non-competition
      agreements
                  
                  
                  -
                  
                  
                  
                  1,989Customer
      relationships and contracts
                  
                  
                  15,662
                  
                  
                  
                  13,585Total
      identifiable intangibles
                  
                  $
                  18,751
                  
                  
                  $
                  18,328Accumulated
      amortizationDeferred
      financing costs
                  
                  $
                  781
                  
                  
                  $
                  426Trademarks and
      trade names
                  
                  
                  377
                  
                  
                  
                  267Non-competition
      agreements
                  
                  
                  -
                  
                  
                  
                  1,700Customer
      relationships and contracts
                  
                  
                  3,576
                  
                  
                  
                  2,438Total
      accumulated amortization
                  
                  
                  4,734
                  
                  
                  
                  4,831Total
      intangible assets
                  
                  $
                  14,017
                  
                  
                  $
                  13,497Goodwill
                  
                  $
                  10,193
                  
                  
                  $
                  10,193
 
 Intangible
asset amortization over the next five years is estimated as
follows:
  Period
      ending December 31, 2010
                  
                  $
                  1,550Period
      ending December 31, 2011
                  
                  
                  1,550Period
      ending December 31, 2012
                  
                  
                  1,550Period
      ending December 31, 2013
                  
                  
                  1,244Period
      ending December 31, 2014
                  
                  
                  1,142$
                  7,036
  9.
                  BANK
      INDEBTEDNESS
  As
discussed in detail in Note 11, the Company amended and restated its Credit
Agreement with its senior lender on February 13, 2008.  At December
31, 2009 and March 31, 2009, the Company had authorized operating lines of
credit under its amended and restated credit agreement in the amounts of CDN
$13,500 and US $13,500 with its senior lender, and was utilizing CDN $2,500 at
December 31, 2009 (CDN $2,359 at March 31, 2009) and US $2,500 at December 31,
2009 (US $916 at March 31, 2009), and maintained letters of credit of CDN
$1,396.  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
the U.S. Base rate plus 2.75% or LIBOR plus 3.75% on U.S. Dollar borrowings. The
amended and restated credit agreement is secured under the same terms and has
the same financial covenants described in Note 11.  The effective
interest rates on the operating lines of credit at December 31, 2009 and March
31, 2009 were 4.15% and 4.41%, respectively, on the Canadian line of credit and
3.98% and 5.06%, respectively, on the U.S. 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, 2009 the Company had additional credit
availability of $4,496 based on eligible receivables.
  18
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  10.
                  ACCRUED
      LIABILITIES
  Accrued
liabilities are comprised of the following:
  December
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2009Payroll
      compensation and benefits
                  
                  $
                  2,584
                  
                  
                  $
                  1,879Preferred
      stock dividends
                  
                  
                  4,590
                  
                  
                  
                  3,180Professional
      fees
                  
                  
                  455
                  
                  
                  
                  749Interest
                  
                  
                  397
                  
                  
                  
                  401Winter
      work and capital expenditures
                  
                  
                  1,289
                  
                  
                  
                  2,731Capital
      and franchise taxes
                  
                  
                  238
                  
                  
                  
                  307Other
                  
                  
                  2,481
                  
                  
                  
                  1,840$
                  12,034
                  
                  
                  $
                  11,087
 
 11.
                  LONG-TERM
      DEBT
  On
February 13, 2008, Lower Lakes Towing, Lower Lakes Transportation and Grand
River, as borrowers, Rand LL Holdings, Rand Finance and Rand Logistics, Inc., as
guarantors, General Electric Capital Corporation, as agent and lender, and
certain other lenders, entered into an Amended and Restated Credit Agreement
which (i) amended and restated the Credit Agreement to which the borrowers are a
party, dated as of March 3, 2006, in its entirety, (ii) restructured the
tranches of loans provided for under the 2006 Credit Agreement and advanced
certain new loans, (iii) financed, in part, the acquisition of the three vessels
by Grand River from Wisconsin & Michigan Steamship Company (“WMS”), and (iv)
provided working capital financing, funds for other general corporate purposes
and funds for other permitted purposes.  The Amended and Restated
Credit Agreement provided for (i) a revolving credit facility under which Lower
Lakes Towing may borrow up to CDN $13,500 with a seasonal overadvance facility
of US $8,000 (US $10,000 for calendar year 2008 only), and a swing line facility
of CDN $4,000 subject to limitations, (ii) a revolving credit facility under
which Lower Lakes Transportation may borrow up to US $13,500 with a seasonal
overadvance facility of US $8,000 (US $10,000 for calendar year 2008 only), and
a swing line facility of US $4,000 subject to limitations, (iii) a Canadian
dollar denominated term loan facility under which Lower Lakes Towing borrowed
CDN $41,700 (iv) a US dollar denominated term loan facility under which
Grand River borrowed US $22,000 (v) a Canadian dollar denominated “Engine” term
loan facility under which Lower Lakes Towing borrowed CDN $8,000.
  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 (ii) a final
payment in the outstanding principal amount of the US term loan 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 (ii) a final payment in the outstanding
principal amount of the Engine term loan payable upon the Engine term loan
facility’s maturity on April 1, 2013.
  19
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  LONG-TERM
      DEBT (continued)
  Borrowings
under the Canadian revolving credit facility, the Canadian term loan and the
Canadian swing line facility bear an interest rate per annum, at the borrowers’
option, equal to (i) the Canadian Prime Rate (as defined in the Amended and
Restated Credit Agreement), plus 2.75% per annum or (ii) the BA Rate (as defined
in the Amended and Restated Credit Agreement) plus 3.75% per
annum.  The US revolving credit facility, the US term loan and the US
swing line facility bear interest, at the borrower’s option, equal to
(i) LIBOR (as defined in the Amended and Restated Credit Agreement) plus
3.75% per annum, or (ii) the US Base Rate (as defined in the Amended and
Restated Credit Agreement), plus 2.75% per annum.  Borrowings under
the Canadian “Engine” term loan bear an interest rate per annum, at the
borrowers’ option, equal to (i) the Canadian Prime Rate (as defined in the
Amended and Restated Credit Agreement), plus 4.00% per annum or (ii) the BA Rate
(as defined in the Amended and Restated Credit Agreement) plus 5.00% per annum.
The interest rates may be adjusted quarterly commencing on the second quarter of
fiscal year 2009, based upon the borrowers’ senior debt to EBITDA ratio as
calculated in accordance with the Amended and Restated Credit
Agreement.
  Obligations
under the Amended and Restated Credit Agreement are secured by (i) a first
priority lien and security interest on all of the borrowers’ and guarantors’
assets, tangible or intangible, real, personal or mixed, existing and newly
acquired, (ii) a pledge by Rand LL Holdings of all of the outstanding capital
stock of the borrowers; (iii) a pledge by the Company of all of the outstanding
capital stock of Rand LL Holdings and Rand Finance.  The indebtedness
of each borrower under the Amended and Restated Credit Agreement is
unconditionally guaranteed by each other borrower and by the guarantors, and
such guaranty is secured by a lien on substantially all of the assets of each
borrower and each guarantor.
  Under the
Amended and Restated Credit Agreement, the borrowers will be required to make
mandatory prepayments of principal on term loan borrowings (i) if the
outstanding balance of the term loans plus the outstanding balance of the
seasonal facilities exceeds the sum of 75% of the fair market value of the
vessels owned by the borrowers, less the amount of outstanding liens against the
vessels with priority over the lenders’ liens, in an amount equal to such
excess, (ii) in the event of certain dispositions of assets and insurance
proceeds (all subject to certain exceptions), in an amount equal to 100% of the
net proceeds received by the borrowers there from, and (iii) in an amount equal
to 100% of the net proceeds to a borrower from any issuance of a Borrower’s debt
or equity securities.
  The
Amended and Restated Credit Agreement contains certain covenants, including
those limiting the guarantors, the borrowers, and their subsidiaries’ ability to
incur indebtedness, incur liens, sell or acquire assets or businesses, change
the nature of their businesses, engage in transactions with related parties,
make certain investments or pay dividends.  In addition, the Amended
and Restated Credit Agreement requires the borrowers to maintain certain
financial ratios.  Failure of the borrowers or the guarantors to
comply with any of these covenants or financial ratios could result in the loans
under the Amended and Restated Credit Agreement being accelerated. The Company
was in compliance with such covenants as of December
31, 2009.
  20
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  LONG-TERM
      DEBT (continued)
  On June
24, 2008, the Company entered into a First Amendment to the Amended and Restated
Credit Agreement with the lenders signatory thereto and General Electric Capital
Corporation, as Agent.  Under this Amendment, the borrowers amended
the definition of “Fixed Charge Coverage Ratio,” modified the formula for the
maximum amounts outstanding under the Canadian and US Revolving Credit
Facilities and modified the measurement dates of the Maximum Capital
Expenditures (as defined therein).
  On June
23, 2009, the Company further amended its Amended and Restated Credit Agreement.
Under this Amendment, the parties amended the definitions of “Fixed Charge
Coverage Ratio”, “Fixed Charges”, “Funded Debt” and “Working Capital”, modified
the maximum amount and duration of the seasonal overadvance facilities under the
Canadian and US Revolving Credit Facilities and modified the Minimum Fixed
Charge Coverage Ratio and the Maximum Senior Funded Debt to EBITDA
Ratio.
  The
effective interest rates on the term loans at December 31, 2009, including the
effect from interest rate swap contracts, were 7.08% (7.84% at March 31, 2009)
on the Canadian term loan, 5.43% (9.09% at March 31, 2009) on the Canadian
engine loan and 7.40% (7.40% at March 31, 2009) on the US term loan. The actual
interest rate charged without the effect of interest rate swap contracts were
4.18% (4.59% at March 31, 2009) on the Canadian term loan, 5.43% (5.84% at
March 31, 2009) on the Canadian engine loan and 4.01% (5.01% at March 31, 2009)
on the US term loan.
  December
      31,
                      2009
                  
                  
                  March
      31,
                      2009a)
                  Canadian
      term loan bearing interest at Canadian Prime rate plus 2.75% or Canadian
      BA rate plus 3.75% at the Company’s option.  The loan is
      repayable over a five-year term until April 1, 2013 with current quarterly
      payments of CDN $695 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the Company.
                  
                  $
                  35,709
                  
                  
                  $
                  31,408b)
                  Canadian
      engine term loan bearing interest at Canadian Prime rate plus 4% or
      Canadian BA rate plus 5% at the Company’s option.  The loan is
      repayable over a five-year term until April 1, 2013 with current quarterly
      payments of CDN $133 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the Company.
                  
                  
                  6,850
                  
                  
                  
                  6,026c)
                  US
      term loan bearing interest at LIBOR rate plus 3.75% or US base rate plus
      2.75% at the Company’s option. The loan is repayable over a five-year term
      until April 1, 2013 with current quarterly payments of US $367 commencing
      September 1, 2008 until March 1, 2013 and the balance due April 1,
      2013.  The term loan is collateralized by the existing and newly
      acquired assets of the Company.
                  
                  
                  19,800
                  
                  
                  
                  20,900$
                  62,359
                  
                  
                  $
                  58,334Less
      amounts due within 12 months
                  
                  
                  4,619
                  
                  
                  
                  4,094$
                  57,740
                  
                  
                  $
                  54,240
  21
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  11.
                  LONG-TERM
      DEBT (continued)
  Principal
payments are due as follows:
  Period
      ending December 31, 2010
                  
                  $
                  4,619Period
      ending December 31, 2011
                  
                  
                  4,619Period
      ending December 31, 2012
                  
                  
                  4,619Period
      ending December 31, 2013
                  
                  
                  48,502$
                  62,359
  12.
                  COMMITMENTS
  The
Company did not have any leases which met the criteria of a capital
lease.  Leases which do not qualify as capital leases are classified
as operating leases.  Operating lease rental and sublease rental
payments included in general and administrative expenses are as
follows:
  Three
      months ended
                    December
      31, 2009
                  
                  
                  Three
      months ended
                    December
      31, 2008
                  
                  
                  Nine
      months ended
                    December
      31, 2009
                  
                  
                  Nine
      months ended
                    December
      31, 2008Operating
      leases
                  
                  $
                  57
                  
                  
                  $
                  57
                  
                  
                  $
                  174
                  
                  
                  $
                  178Operating
      subleases
                  
                  
                  36
                  
                  
                  
                  36
                  
                  
                  
                  108
                  
                  
                  
                  108$
                  93
                  
                  
                  $
                  93
                  
                  
                  $
                  282
                  
                  
                  $
                  286
  The
Company entered into a bareboat charter agreement for the McKee Sons barge which
expires in 2018.  The chartering cost included in vessel operating
expenses was $232 for each of the three month periods ended December 31, 2009
and 2008, $696 for the nine months period ended December 31, 2009 and $695 for
nine months period ended December 31, 2008. The lease was amended on February
22, 2008 to provide a lease payment deferment in return for leasehold
improvements. Total charter commitments for the McKee vessel for the term of the
lease before inflation adjustment are set forth below.  The lease
contains a clause whereby annual payments escalate at the Consumer Price Index,
capped at a maximum annual increase of 3%.
  Period
      ending December 31, 2010
                  
                  $
                  696Period
      ending December 31, 2011
                  
                  
                  696Period
      ending December 31, 2012
                  
                  
                  696Period
      ending December 31, 2013
                  
                  
                  696Period
      ending December 31, 2014
                  
                  
                  696Thereafter
                  
                  
                  2783$
                  6,263
  The
Company’s future minimum rental commitments under other operating leases are as
follows.
  Period
      ending December 31, 2010
                  
                  $
                  237Period
      ending December 31, 2011
                  
                  
                  173Period
      ending December 31, 2012
                  
                  
                  116Period
      ending December 31, 2013
                  
                  
                  93Period
      ending December 31, 2014
                  
                  
                  65Thereafter
                  
                  
                  280$
                  964
  22
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  13.
                  CONTINGENCIES
  Rand is
not involved in any legal proceedings which are expected to have a significant
effect on its business, financial position, results of operations or liquidity,
nor is the Company aware of any proceedings that are pending or threatened which
may have a significant effect on the Company’s business, financial position,
results of operations or liquidity.  From time to time, Lower Lakes
may be subject to legal proceedings and claims in the ordinary course of
business involving principally commercial charter party disputes.  It
is expected that larger claims would be covered by insurance if they involve
liabilities that may arise from collision, other marine casualty, damage to
cargoes, oil pollution, death or personal injuries to crew, subject to customary
deductibles.  Those claims, even if lacking merit, could result in the
expenditure of significant financial and managerial resources.  Most
of these claims are for insignificant amounts.  Given management’s
assessment that losses were probable and reasonably estimable, and based on
advice from the Company’s outside counsel, a provision of $719 as of December
31, 2009 and $604 as of March 31, 2009 has been recorded for various
claims.  Management does not anticipate material variations in actual
losses from the amounts accrued related to these claims.
  On August
27, 2007, in connection with the COA and Option Agreement (see Note 21) with
Voyageur, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE
Canada.  Lower Lakes’ maximum future payments under the Guarantee are
limited to the Guaranteed Obligations plus the costs and expenses GE Canada
incurs while enforcing its rights under the Guarantee.  Lower Lakes’
obligations under the Guarantee shall become due should Voyageur fail to meet
certain financial covenants under the terms of its loan from GE Canada or if
Voyageur breaches certain of its obligations under the COA.  Lower
Lakes has several options available to it in the event that GE Canada intends to
draw under the Guarantee, including (i) the right to exercise its option for the
Trader under the Option Agreement and (ii) the right to make a subordinated
secured loan to Voyageur in an amount at least equal to the amount intended to
be drawn by GE Canada on terms as are reasonably satisfactory to GE Canada and
Voyageur.
  The
Company has determined that there is no carrying amount of the liability for the
guarantor’s obligations under the guarantees.
  23
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  STOCKHOLDERS’
      EQUITY
  At
December 31, 2005, 10,100,000 shares of common stock were reserved for issuance
upon exercise of redeemable warrants and the underwriter’s unit purchase
option.  Each redeemable warrant allowed its holder to purchase one
fully paid and non-assessable share of the Company’s common stock at the price
of $5.00 per share.  The redeemable warrants expired on October 26,
2008. The underwriter’s options and redeemable warrants issued in conjunction
with the Company’s initial public offering are equity linked derivatives and
accordingly represent off-balance sheet arrangements.  The
underwriter’s options and redeemable warrants meet the scope exception as the
contracts involved the Company’s own equity and accordingly were not accounted
for as derivatives for purposes of ASC 815, but instead were accounted for as
equity.
  During
the year ended March 31, 2009, 89,885 warrants were exercised for cash ($449
gross proceeds).
  On
September 23, 2008, the Company announced an offer to holders of all remaining
5,194,481 outstanding, publicly-traded warrants that would permit the exercise
of the warrants on amended terms, for a limited time.  The offer
modified the terms of the warrants to allow holders to receive one share of
common stock for every 25 warrants surrendered, without paying a cash exercise
price. Prior to the expiration of the offer on October 26, 2008, 5,045,275
warrants were converted into common stock under this offer. The remaining 74,555
publicly traded warrants expired on October 26, 2008.
  The
following schedule summarizes outstanding share purchase warrants:
  Outstanding
      warrants
                  
                  
                  Exercise
      Price
                  
                  
                  Cumulative
      proceeds from exercise of warrantsBalance
      March 31, 2007
                  
                  
                  9,196,180
                  
                  
                  
                  
                  
                  $
                  19Issued
                  
                  
                  --
                  
                  
                  
                  
                  
                  
                  --Exercised
                  
                  
                  (3,964,965
                  )
                  
                  $
                  4.50
                  
                  
                  
                  17,843Balance
      March 31, 2008
                  
                  
                  5,231,215
                  
                  
                  
                  
                  
                  
                  $
                  17,862Exercised
                  
                  
                  (89,885
                  )
                  
                  
                  5.00
                  
                  
                  
                  449Exercised
      under cashless offer
                  
                  
                  (5,045,275
                  )
                  
                  
                  
                  
                  
                  
                  --Extinguished
                  
                  
                  (21,500
                  )
                  
                  
                  
                  
                  
                  
                  (9
                  )Expired
                  
                  
                  (74,555
                  )
                  
                  
                  
                  
                  
                  
                  --Balance
      March 31, 2009
                  
                  
                  --
                  
                  
                  
                  
                  
                  
                  $
                  18,302
  Exercise
price of $4.50 was net of $0.50 stock warrant inducement discount per stock
warrant from May 4, 2007 until July 13, 2007 and $5.00 at all other
periods.
  24
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  STOCKHOLDERS’
      EQUITY (continued)
  EarlyBirdCapital,
who acted as the representative to the underwriters in connection with the
Company’s initial public offering, held an underwriter’s option to purchase up
to 300,000 units at a purchase price of $9.90 per unit.  Each unit
consisted of one share of common stock and two warrants. Each warrant entitled
the holder to purchase one share of common stock at an exercise price of
$6.25.  If the option was exercised in full, the Company would have
received gross proceeds of $2,970 and issued 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 were exercised, the Company would have issued an
additional 600,000 shares of common stock and received 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 was exercisable by the holder for cash or on a
“cashless” basis, at the holder’s option, such that the holder may have used 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 expired on October 12, 2009.
  The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences that may be determined
from time to time by the Board of Directors. The shares of series A convertible
preferred stock: rank senior to the Company’s common stock with respect to
liquidation and dividends; are entitled to receive a cash dividend at the annual
rate of 7.75% (based on the $50 per share issue price), payable quarterly
(subject to increases of 0.5% for each six month period in respect of which the
dividend is not timely paid, up to a maximum of 12%, subject to reversion to
7.75% upon payment of all accrued and unpaid dividends); are convertible into
shares of the Company’s common stock at any time at the option of the series A
preferred stockholder at a conversion price of $6.20 per share (based on the $50
per share issue price and subject to adjustment) or 8.065 shares of common stock
for each Series A Preferred Share (subject to adjustment); are convertible into
shares of the Company’s common stock (based on a conversion price of $6.20 per
share, subject to adjustment) at the option of the Company if, after the third
anniversary of the acquisition, the trading price of the Company’s common stock
for 20 trading days within any 30 trading day period equals or exceeds $8.50 per
share (subject to adjustment); may be redeemed by the Company in connection with
certain change of control or acquisition transactions; will vote on an
as-converted basis with the Company’s common stock; and have a separate vote
over certain material transactions or changes involving the Company. The accrued
dividend payable at December 31, 2009 was $4,590 and at March 31, 2009 was
$3,180. As of December 31, 2009, the effective rate of preferred dividends was
10.25% (9.75% as of March 31, 2009). The rate will increase to 10.75% effective
January 1, 2010 and will increase 0.5% every six months thereafter until it
reaches 12% or the accrued dividends are paid. The Company is limited in the
payment of preferred dividends by the fixed charge coverage ratio covenant in
the Amended and Restated Credit Agreement.
  25
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  STOCKHOLDERS’
      EQUITY (continued)
  On
January 17, 2007, the Company awarded 215,000 shares of its common stock to two
key executives. The shares of common stock awarded (the “Restricted Shares”)
were not registered under the Securities Act of 1933 and constitute “restricted
securities” within the meaning of the Act. The Restricted Shares were awarded
pursuant to Restricted Share Award Agreements (the “Award Agreements”), dated
January 17, 2007.  The shares were valued at the closing
price on January 17, 2007 of $6.72 per share. The Company recorded expense of
$361 in both 2008 and 2009 related to such awards. Pursuant to the Award
Agreements: 44% of the Restricted Shares vested on the date of the award; 6% of
the Restricted Shares vested on March 31, 2007; 25% of the Restricted
Shares vested on March 31, 2008; and 25% of the Restricted Shares vested on
March 31, 2009. However, in order to facilitate the Company’s federal and state
tax withholding obligations in respect of the Restricted Stock awards, some of
the Restricted Shares which vested on the date of the award were withheld by the
Company, which paid the withholding taxes, resulting in 120,400 shares actually
issued. On October 13, 2009, the Company awarded 39,660 shares to a key
executive in connection with an Employment Agreement. These shares vest over 4.5
years.
 
 Since
January 2007, share-based compensation has been granted to management and
directors from time to time.  The Company had no surviving,
outstanding share-based compensation agreements with employees or directors
prior to that date except as described above.  The Company has
reserved 2,500,000 shares for issuance under the Company’s 2007 Long Term
Incentive Plan (the “LTIP”) to employees, officers, directors and
consultants.  At December 31, 2009, a total of 1,136,071 shares were
available under the LTIP for future awards.
  For all
share-based compensation, as employees and directors render service over the
vesting periods, expense is recorded in general and administrative expenses.
Generally this expense is for the straight-line amortization of the grant date
fair market value adjusted for expected forfeitures. Other capital is
correspondingly increased as the compensation is recorded. Grant date fair
market value for all non-option share-based compensation is the closing market
value on the date of grant.
  The
general characteristics of issued types of share-based awards granted under the
LTIP through December 31, 2009 are as follows:
  Stock Awards-All of the
vested shares issued to non-employee outside directors vest
immediately.  The first award to non-employee outside directors in the
amount of 12,909 shares was made on February 13, 2008 for services through March
31, 2008.  During the fiscal year ended March 31, 2009, the Company
awarded 15,948 shares for services from April 1, 2008 through December 31, 2008.
The Company awarded 32,236 shares during the nine months period ended December
31, 2009 for services from January 1, 2009 through December 31,
2009.
 
 On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus program as
discussed in detail in Note 20. Pursuant to the terms of the management bonus
program, Rand issued 478,232 shares of common stock to such employee
participants.
  26
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  14.
                  STOCKHOLDERS’
      EQUITY (continued)
  Stock Options — Stock options
granted to management employees vest over three years in equal annual
installments. All options issued through March 31, 2009, expire ten years from
the date of grant. Stock option grant date fair values are determined at the
date of grant using a Black-Scholes option pricing model, a closed-form fair
value model, based on market prices at the date of grant. At each grant date the
Company has estimated a dividend yield of 0%.  The weighted average
risk free interest rate within the contractual life of the option is based on
the U.S. Treasury yield curve in effect at the time of the grant, which 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”. We will continue to use the simplified
method as we do not have sufficient historical data to estimate the expected
term of share based awards.  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, 2009, had a remaining weighted average contractual life
of approximately eight years and three months. The Company has recorded
compensation expenses of $130 for three months ended December 31, 2009 ($131 for
the three months ended December 31, 2008). One third of the stock options
granted in February 2008 (243,199) and one third of the stock options granted in
July 2008 (236,586), have vested as of December 31, 2009.
  Shares issued under Employees’
Retirement Savings Plans-As of December 31, 2009, the Company had issued
under the LTIP, an aggregate of 159,743 shares to the individual retirement
plans of all eligible Canadian employees for the period of June 1, 2009 through
December 31, 2009.  The Canadian employees’ plans are managed by
an independent brokerage. These shares vested immediately but are subject to the
Company’s Insider Trading Policy. The shares were issued using the fair value
share price, as defined by the LTIP, as of the first trading day of each month
for that previous period’s accrued expense. The Company granted $311 of equity
for the quarter ended December 31, 2009  and $481 for nine month
period ended December 31, 2009 ($ Nil for 2008) of such accrued compensation
expense.
  Shares issued in lieu of cash
compensation- The Company experienced a decrease in customer demand at
the beginning of the 2009 sailing season and in an effort to maximize the
Company’s liquidity, the Compensation Committee of the Company’s board of
directors requested that three of the Company’s executive officers and all of
its outside directors receive common stock as compensation in lieu of cash until
the Company had better visibility about its outlook. As of November 16, 2009,
the Company issued 158,325 shares to such officers and all of its outside
directors. The shares were issued under LTIP and vest immediately. Commencing
the third quarter, compensation reverted back to cash.
  15.
                  OUTSIDE
      VOYAGE CHARTER FEES
  Outside
voyage charter fees relate to the subcontracting of external vessels chartered
to service the Company’s customers and supplement the existing shipments made by
the Company’s operated vessels.
  27
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  16.
                  INTEREST
      EXPENSE
  Interest
expense is comprised of the following:
  Three
      months
                    ended
                    December
      31, 2009
                  
                  
                  Three
      months
                    ended
                    December
      31, 2008
                  
                  
                  Nine
      months
                    ended
                    December
      31, 2009
                  
                  
                  Nine
      months
                    ended
                    December
      31, 2008Bank
      indebtedness
                  
                  $
                  104
                  
                  
                  $
                  215
                  
                  
                  $
                  383
                  
                  
                  $
                  658Amortization
      of deferred financing costs
                  
                  
                  101
                  
                  
                  
                  97
                  
                  
                  
                  296
                  
                  
                  
                  310Long-term
      debt – senior
                  
                  
                  683
                  
                  
                  
                  1,046
                  
                  
                  
                  2,092
                  
                  
                  
                  3,580Interest
      rate swap
                  
                  
                  521
                  
                  
                  
                  180
                  
                  
                  
                  1,549
                  
                  
                  
                  463$
                  1,409
                  
                  
                  $
                  1,538
                  
                  
                  $
                  4,320
                  
                  
                  $
                  5,011
  17.
                  SEGMENT
      INFORMATION
  The
Company has identified only one reportable segment under ASC 280, “Segment
Reporting”.
  Information
about geographic operations is as follows:
  Three
      months ended
                    December
      31, 2009
                  
                  
                  Three
      months ended
                    December
      31, 2008
                  
                  
                  Nine
      months ended
                    December
      31, 2009
                  
                  
                  Nine
      months ended
                    December
      31, 2008Revenue
      by countryCanada
                  
                  $
                  24,681
                  
                  
                  $
                  23,544
                  
                  
                  $
                  67,035
                  
                  
                  $
                  86,077United
      States
                  
                  
                  12,638
                  
                  
                  
                  12,614
                  
                  
                  
                  35,778
                  
                  
                  
                  45,776$
                  37,319
                  
                  
                  $
                  36,158
                  
                  
                  $
                  102,813
                  
                  
                  $
                  131,853
  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,
                    2009
                  
                  
                  March 31,
                    2009Property
      and equipment by countryCanada
                  
                  $
                  66,594
                  
                  
                  $
                  56,962United
      States
                  
                  
                  26,693
                  
                  
                  
                  29,271$
                  93,287
                  
                  
                  $
                  86,233Intangible
      assets by countryCanada
                  
                  $
                  10,957
                  
                  
                  $
                  10,047United
      States
                  
                  
                  3,060
                  
                  
                  
                  3,450$
                  14,017
                  
                  
                  $
                  13,497Goodwill
      by countryCanada
                  
                  $
                  8,284
                  
                  
                  $
                  8,284United
      States
                  
                  
                  1,909
                  
                  
                  
                  1,909$
                  10,193
                  
                  
                  $
                  10,193Total
      assets by countryCanada
                  
                  $
                  113,552
                  
                  
                  $
                  92,052United
      States
                  
                  
                  46,135
                  
                  
                  
                  43,852$
                  159,687
                  
                  
                  $
                  135,904
  28
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  18.
                  FINANCIAL
      INSTRUMENTS
  Fair
Value of Financial Instruments
  Financial
instruments comprise cash and cash equivalents, accounts receivable, accounts
payable, long-term debts and accrued liabilities and bank
indebtedness.  The estimated fair values of cash, accounts receivable,
accounts payable and accrued liabilities approximate book values because of the
short-term maturities of these instruments.  The estimated fair value
of senior debt approximates the carrying value as the debt bears interest at
variable interest rates, which are based on rates for similar debt with similar
credit rates in the open market.
  Fair
value guidance 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, 2009:
  Fair
      Value Measurements at December 31, 2009Carrying
      value at
                    December
      31, 2009
                  
                  
                  Quoted
      prices in
                    active
      markets
                    (Level
      1)
                  
                  
                  Significant
      other
                    Observable
                    Inputs
                    (Level
      2)Interest
      rate swap contracts liability
                  
                  $
                  2,360
                  
                  
                  $
                  -
                  
                  
                  $
                  2,360
  Interest
rate swap contracts are measured at fair value using available rates on the
similar instruments and are classified within Level 2 of the valuation
hierarchy.
  The
Company has recorded a liability of $2,360 as of December 31, 2009 ($3,899
as of March 31, 2009) for two interest rate swap contracts on the Company’s term
debt. For the three months ended December 31, 2009, the fair value adjustment of
the interest rate swap contracts has resulted in a gain of $386 (loss of $3,437
for three month period ended December 31, 2008). For the nine month period ended
December 31, 2009, the fair value adjustment of the interest rate swap contracts
has resulted in a gain of $1,955 (loss of $2,865 for nine month period ended
December 31, 2008).  These gains and losses are included in the
earnings, and the fair value of settlement cost to terminate the contracts is
included in current liabilities on the Consolidated Balance Sheet.
  29
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  18.
                  FINANCIAL
      INSTRUMENTS (continued)
  Foreign
Exchange Risk
  Foreign
currency exchange risk to the Company results primarily from changes in exchange
rates between the Company’s reporting currency, the U.S. Dollar and the Canadian
dollar.  The Company is exposed to fluctuations in foreign exchange as
a significant portion of revenue and operating expenses are denominated in
Canadian dollars.
  Interest
Rate Risk
  The
Company is exposed to fluctuations in interest rates as a result of its banking
facilities and senior debt bearing variable interest rates.
  The
Company is exposed to interest rate risk due to its long-term debt agreement,
which requires that at least 50% of the outstanding term debt is hedged with
interest rate swaps. Effective February 15, 2008, the Company entered into a CDN
$49,700 interest rate swap derivative to pay interest at a fixed rate of
approximately 4.09% on its CDN $49,700 term debt and receive 3-month BA variable
rate interest payments quarterly through April 1, 2013.  The notional
amount of the Canadian debt swap decreases with each scheduled principle
payment, except that the hedged amount decreases an additional CDN $15,000 on
December 1, 2009.  Additionally, effective February 15, 2008, the
Company entered into a US $22,000 interest rate swap derivative to pay interest
at a fixed rate of approximately 3.65% on its US $22,000 term debt and receive
3-month LIBOR variable rate interest payments quarterly through April 1,
2013.  The notional amount of the US debt swap decreases with each
scheduled principle payment.
  The
following table sets forth the fair values of derivative
instruments:
 
 Derivatives
      not designated as hedging instrument:
                  Balance Sheet
      location
                  Fair
      Value as at December 31, 2009
                  Fair
      Value as at March 31, 2009Interest
      rate swap contracts liability
                  Current
      liability
                  $      2,360
                  $       3,899
 
 The
Company has not designated these contracts for hedge accounting treatment and
therefore changes in fair value of these contracts are recorded in earnings as
follows:
 
 Derivatives
      not designated as hedging instrument:
                  Location
      of (gain) loss -Recognized in
                    earnings
                  Three
      months ended
                    December 31,
      2009
                  Three
      months ended
                    December 31,
      2008
                  Nine
      months ended
                    December 31,
      2009
                  Nine
      months ended
                    December 31,
      2008Interest
      rate swap contracts liability
                  Other
      (income) and expenses
                  $   (386)
                  $   3,437
                  $  (1,955)
                  $   2,865
 
 Credit
Risk
  Accounts
receivable credit risk is mitigated by the dispersion of the Company’s customers
among industries and the short shipping season.
  Liquidity
Risk
  The
current tightening of credit in financial markets and the general economic
downturn may adversely affect the ability of our customers and suppliers to
obtain financing for significant operations and purchases and to perform their
obligations under agreements with us.  The tightening could result in
a decrease in, or cancellation of, existing business, could limit new business,
could negatively impact our ability to collect our accounts receivable on a
timely basis, and could affect the eligible receivables that are collateral for
our lines of credit.
  30
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  19.
                  EARNINGS
      PER SHARE
  The
Company has a total of 13,280,891 common shares issued and outstanding out
of an authorized total of 50,000,000 common shares.  The fully diluted
totals of 15,560,929 shares for the quarter ended December 31, 2009 and
15,223,405 shares for the quarter ended December 31, 2008 are based on the
calculations set forth below. Since the calculations for the quarter and nine
months period ended December 31, 2008 are anti-dilutive, the basic and fully
diluted weighted average shares outstanding are 12,804,050 and 12,450,630
respectively.There were
no warrants outstanding as of December 31, 2009 and December 31, 2008. The
convertible preferred shares convert to an aggregate of 2,419,355 common shares
based on a conversion price of $6.20. In connection with the Company’s initial
public offering, the Company issued to the representative of the underwriters in
the initial public offering, for a de minimus amount, an option to purchase up
to a total of 300,000 units, with each unit consisting of one share of common
stock and two warrants.  The units issuable upon exercise of the
option were identical to those issued in the Company’s initial public offering
except that the warrants included in the units underlying the option had an
exercise price of $6.25 per share.  The option was exercisable by the
holder at $9.90 per unit commencing upon the consummation of a business
combination by the Company on March 3, 2006 and expired on October 12,
2009.  The underwriter units are excluded from the dilution
calculation on an annual basis for December 31, 2008 as the exercise price of
$9.90 exceeded the estimated market value.
  Three
      months ended
                    December 31,
      2009
                  
                  
                  Three
      months ended
                    December 31,
      2008
                  
                  
                  Nine
      months ended
                    December 31,
      2009
                  
                  
                  Nine
      months ended
                    December 31,
      2008Numerator:Net
      income (loss) before preferred stock dividend
                  
                  $
                  3,404
                  
                  
                  $
                  (5,995
                  )
                  
                  $
                  11,586
                  
                  
                  $
                  1,877Preferred
      stock dividends
                  
                  
                  (490
                  )
                  
                  
                  (382
                  )
                  
                  
                  (1,410
                  )
                  
                  
                  (1,156
                  )Net
      income (loss) available to common stockholders
                  
                  $
                  2,914
                  
                  
                  $
                  (6,377
                  )
                  
                  $
                  10,176
                  
                  
                  $
                  721Denominator:Weighted
      average common shares for basic EPS
                  
                  
                  13,141,574
                  
                  
                  
                  12,804,050
                  
                  
                  
                  12,980,831
                  
                  
                  
                  12,450,630Effect
      of dilutive securities:Total
      outstanding warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Average
      exercise price
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Average
      price during period
                  
                  
                  3.16
                  
                  
                  
                  4.53
                  
                  
                  
                  3.24
                  
                  
                  
                  5.36Shares
      that could be acquired with the proceeds of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Dilutive
      shares due to warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Long-term
      incentive stock option plan
                  
                  
                  479,785
                  
                  
                  
                  479,785
                  
                  
                  
                  479,785
                  
                  
                  
                  383,430Average
      exercise price of stock options
                  
                  
                  5.66
                  
                  
                  
                  5.66
                  
                  
                  
                  5.66
                  
                  
                  
                  5.66Shares
      that could be acquired with the proceeds of options
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --Dilutive
      shares due to options
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --Weighted
      average convertible preferred shares at $6.20
                  
                  
                  2,419,355
                  
                  
                  
                  2,419,355
                  
                  
                  
                  2,419,355
                  
                  
                  
                  2,419,355Weighted
      average common shares for diluted EPS
                  
                  
                  15,560,929
                  
                  
                  
                  12,804,050
                  
                  
                  
                  15,400,186
                  
                  
                  
                  12,450,630Basic
      EPS
                  
                  $
                  0.22
                  
                  
                  $
                  (0.50
                  )
                  
                  $
                  0.78
                  
                  
                  $
                  0.06Diluted
      EPS
                  
                  $
                  0.22
                  
                  
                  $
                  (0.50
                  )
                  
                  $
                  0.75
                  
                  
                  $
                  0.06
  31
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  20.
                  ACQUIRED
      MANAGEMENT BONUS PROGRAM
  On March
3, 2006, in connection with the closing of the acquisition of Lower Lakes, the
Company adopted a management bonus program (“the Program”), the participants of
which were employed by Lower Lakes or its affiliates.  Participants
were eligible to receive awards based on a formula that adjusts an aggregate
initial plan account balance of $3,000 by audited earnings before interest,
taxes, depreciation and amortization for fiscal years 2007 and
2008.
  On July
31, 2008, Rand’s board of directors authorized management to make payments
effective as of that date to the participants of the Program. Pursuant to the
terms of the Program, Rand issued 478,232 shares of common stock to the employee
participants for $2,645. In addition, $467 was paid in cash to former employee
participants and for payments of certain participants’ withholding
taxes.  The Company has remaining liabilities of $58 for the
Program.
  21.
                  VARIABLE
      INTEREST ENTITIES
  In the
normal course of business, the Company interacts with various entities that may
be variable interest entities (VIEs).
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited (“Voyageur”) and
Voyageur Pioneer Marine Inc. pursuant to which Lower Lakes purchased the
VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER (the “Vessels”).
  Certain
customer contracts were also assigned to the Company under a Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management
practices.  Under the Crew Manning Agreement, Voyageur was responsible
for selecting and training the Vessels’ crews, payroll, tax and pension
administration, union negotiations and disputes and ensuring compliance with
applicable requirements of Canadian maritime law. Under the Crew Manning
Agreement, Lower Lakes was obligated to pay Voyageur an annual fee of $175 and
pay or reimburse Voyageur for its reasonable crew payroll expenses. The Company
terminated the Crew Manning Agreement in March 2008.
  Also on
August 27, 2007, Lower Lakes entered into a Contract of
Affreightment  (“COA”) with Voyageur and Voyageur Maritime Trading
Inc. (“VMT”) pursuant to which Voyageur and VMT made a Canadian flagged vessel
owned by VMT, the MARITIME TRADER (the “Trader”), available exclusively to Lower
Lakes for its use in providing transportation and storage services for its
customers.
  In
connection with the COA, on August 27, 2007, Lower Lakes entered into an Option
Agreement (the “Option Agreement”) with VMT pursuant to which Lower Lakes
obtained the option to acquire the Trader for CDN $5,000 subject to certain
adjustments. The option is exercisable between January 1, 2012 and December 31,
2017, subject to certain early exercise provisions. If, at any time prior to
expiration of the option, VMT receives a bona fide offer from a third party to
purchase the Trader which VMT wishes to accept, Lower Lakes shall have the right
to acquire the Trader at the option price.
  On August
27, 2007, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE Canada.
Under the Guarantee, Lower Lakes has several options available to it in the
event that GE Canada intends to draw under the Guarantee, including (i) the
right to exercise its option for the Trader under the Option Agreement and (ii)
the right to make a subordinated secured loan to Voyageur in an amount at least
equal to the amount intended to be drawn by GE Canada on terms as are reasonably
satisfactory to GE Canada and Voyageur.
  32
 Index
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
  21.
                  VARIABLE
      INTEREST ENTITIES (continued)
  Though
the Voyageur group of companies (Voyageur and its subsidiaries) is a variable
interest entity for Rand, the Company is not deemed the “Primary Beneficiary” of
Voyageur because Voyageur manages its own vessel costs and absorbs the majority
of expected losses or receives the majority of expected residual returns. The
Company has guaranteed Voyageur’s indebtedness to enable the undisrupted use in
providing transportation and storage services for Rand’s customers. However, the
orderly liquidation value of the vessel exceeds the Voyageur’ indebtedness, such
that the Company’s exposure is limited. The maximum exposure of the Company in
the event of a Voyageur default is CDN $1,250, representing the guarantee of
Voyageur’s indebtedness to GE Canada, unless the Company exercises its purchase
option, the value of which is also less than the orderly liquidation value.
Therefore, the Company is not required to consolidate Voyageur’s financial
statements. Voyageur became a VIE to the Company on August 27, 2007. Voyageur is
a privately held Canadian corporation and operates a Canadian flagged vessel in
The Great Lakes region for bulk shipping, which operates under a Contract of
Affreightment with the Company.  The Company continues to evaluate new
investments for the application of consolidation and regularly reviews all
existing entities in connection with any reconsideration events  that
may result in an entity becoming a VIE or the Company becoming the primary
beneficiary of an existing VIE. There is no change in a previous conclusion
about whether a VIE should be consolidated. The Company has not provided support
to the VIE when it was not contractually obliged to do so.
  22.
                  SUBSEQUENT
      EVENT
 
 The
Company has evaluated subsequent events through February 8, 2010 and no
event has occurred from the balance sheet date through that date that would
impact the consolidated financial statements.
  33
 Index
  Item 2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
  All
dollar amounts below $500,000 presented herein are in thousands, values greater
than $500,000 are presented in millions except share, per share and per day
amounts.
  The
following MD&A is written to help the reader understand our company. The
MD&A is provided as a supplement to, and should be read in conjunction with,
the Consolidated Financial Statements and the accompanying financial statement
notes of the Company appearing elsewhere in this Quarterly Report on Form 10-Q
for the three and nine month periods ended December 31, 2009.
  Cautionary
Note Regarding Forward-Looking Statements
  This
quarterly report on Form 10-Q contains forward-looking statements, including
those relating to our capital needs, business strategy, expectations and
intentions. Statements that use the terms “believe”, “anticipate”, “expect”,
“plan”, “estimate”, “intend” and similar expressions of a future or
forward-looking nature identify forward-looking statements for purposes of the
U.S. federal securities laws or otherwise. For these statements and all other
forward-looking statements, we claim the protection of the Safe Harbor for
Forward-Looking Statements contained in the Private Securities Litigation Reform
Act of 1995.
  Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy or are otherwise beyond our control and some
of which might not even be anticipated.  Forward-looking statements
reflect our current views with respect to future events and because our business
is subject to such risks and uncertainties, actual results, our strategic plan,
our financial position, results of operations and cash flows could differ
materially from those described in or contemplated by the forward-looking
statements contained in this report.
  Important
factors that contribute to such risks include, but are not limited to, those
factors set forth under “Risk Factors” on our Form 10-K filed with the
Securities and Exchange Commission on June 25, 2009 as well as the following:
the effect of the economic downturn in our markets; the weather conditions on
the Great Lakes; and our ability to maintain and replace our vessels as they
age.  The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with other cautionary
statements that are included in this report. We undertake no obligation to
publicly update or review any forward-looking statements, whether as a result of
new information, future developments or otherwise.
  Overview
  Business
  Rand
Logistics, Inc. (formerly Rand Acquisition Corporation) was incorporated in the
State of Delaware on June 2, 2004 as a blank check company to effect a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating business.
  On
March 3, 2006, we acquired all of the outstanding shares of capital stock of
Lower Lakes Towing Ltd., a Canadian corporation which, with its subsidiary Lower
Lakes Transportation Company, provides bulk freight shipping services throughout
the Great Lakes region. As part of the acquisition of Lower Lakes, we also
acquired Lower Lakes’ affiliate, Grand River Navigation Company, Inc. Prior to
the acquisition we did not conduct, or have any investment in, any operating
business. In this discussion of our business, unless the context otherwise
requires, references to Rand, we, us and the Company include Rand and its direct
and indirect subsidiaries, and references to Lower Lakes’ business or the
business of Lower Lakes mean the combined businesses of Lower Lakes Towing,
Lower Lakes Transportation and Grand River.
  34
 Index
  Our
shipping business is operated in Canada by Lower Lakes Towing and in the United
States by Lower Lakes Transportation. Lower Lakes Towing was organized in March
1994 under the laws of Canada to provide marine transportation services to dry
bulk goods suppliers and purchasers operating in ports in the Great Lakes that
were restricted in their ability to receive larger vessels. Lower Lakes has
grown from its origin as a small tug and barge operator to a full service
shipping company with a fleet of thirteen cargo-carrying vessels, including one
vessel operated under a contract of affreightment.  From its
exclusively Canadian beginnings, Lower Lakes has also grown to offer domestic
services to both Canadian and U.S. customers as well as cross-border routes.
Lower Lakes services the construction, electric utility and integrated steel
industries through the transportation of limestone, coal, iron ore, salt, grain
and other dry bulk commodities.
  We
believe that Lower Lakes is the only company providing significant domestic
port-to-port services to both Canada and the United States in the Great Lakes
region. Lower Lakes maintains this operating flexibility by operating both U.S.
and Canadian flagged vessels in compliance with the Shipping Act, 1916, and the
Merchant Marine Act, 1920, commonly referred to as the Jones Act, in the U.S.
and the Coasting Trade Act (Canada) in Canada.
  Results
of Operations
  Three
month period ended December 31, 2009 compared to the three month period ended
December 31, 2008:
  The three
month period ended December 31, 2009 was highlighted by several significant
changes as compared to the three month period ended December 31,
2008:
  (1)
                    There
      was a leveling of the drop-off in demand in our markets during the three
      month period ended December 31, 2009 compared to the three month period
      ended December 31, 2008, when a weakening economy reduced our vessel
      scheduling flexibility and decreased the overall operating efficiency of
      our fleet.  Despite our overall level customer demand in the
      three month period ended December 31, 2009 compared to the three month
      period ended December 31, 2008, we experienced an increase in demand from
      our contract business customer base, including shipments that had been
      pushed back into the three month period ended December 31, 2009 and from
      customers restocking their raw material inventories.  Our
      outside charter business decreased in the three month period ended
      December 31, 2009 compared to the three month period ended December 31,
      2008 as a result of one-time spot market business carried in the three
      month period ended December 31, 2008.  We also benefited from
      favorable weather conditions, improved vessel scheduling flexibility and a
      stronger Canadian dollar, which all contributed to increased vessel
      operating margins compared to the three month period ended December 31,
      2008.
  (2)
                    We
      increased tonnage shipped by our own vessels by approximately 10% with
      increased shipments of grain and ore
cargos.
  (3)
                    Primarily
      as a result of an increase in business with our contract
      customers, our total Sailing Days, which we define as days a vessel is
      crewed and available for sailing, increased 46 days, or 4.5%, to 1,065
      Sailing Days during the three month period ended December 31, 2009 from
      1,019 Sailing Days during the three month period ended December 31,
      2008.
  (4)
                    During
      the three month period ended December 31, 2009, we sailed each of our
      Canadian and U.S. vessels throughout the quarter until the winter layup,
      which commenced for four of our vessels in late
  December.
  (5)
                    We
      benefited from additional new business and contractual rate increases from
      existing customers during the three month period ended December 31, 2009
      compared to the three month period ended December 31,
  2008.
  (6)
                    All
      of our customer contracts have fuel surcharge provisions whereby the
      increases and decreases in our fuel costs are passed on to
      customers.  Such increases and decreases in fuel surcharges
      impact our margin percentages, but do not significantly impact our margin
      dollars.  Due to reduced fuel prices during the three month
      period ended December 31, 2009, fuel surcharge revenues declined almost
      10% as compared to the three month period ended December 31,
      2008.
  (7)
                    The
      Canadian dollar strengthened by approximately 15% versus the U.S. dollar,
      averaging approximately $0.947 USD per CAD during the three month period
      ended at December 31, 2009 compared to approximately $0.825 USD per CAD
      during the three month period ended December 31, 2008.  The
      Company’s balance sheet translation rate increased from $0.793 USD per CAD
      at March 31, 2009, to $0.951 USD per CAD at December 31,
    2009.
  35
 Index
  Selected
Financial Information
 (Unaudited)
  (USD
      in 000’s)
                    
                    Three
      month period ended December 31, 2009
                    
                    
                    Three
      month period ended December 31, 2008
                    
                    
                    $
      Change
                    
                    
                    %
      ChangeRevenue:Freight
      and related revenue
                    
                    $
                    28,598
                    
                    
                    $
                    24,237
                    
                    
                    $
                    4,361
                    
                    
                    
                    18.0
                    %Fuel
      and other surcharges
                    
                    
                    5,633
                    
                    
                    
                    6,212
                    
                    
                    
                    (579
                    )
                    
                    
                    (9.3
                    )%Outside
      voyage charter revenue
                    
                    
                    3,088
                    
                    
                    
                    5,709
                    
                    
                    
                    (2,621
                    )
                    
                    
                    (45.9
                    )%Total
                    
                    $
                    37,319
                    
                    
                    $
                    36,158
                    
                    
                    $
                    1,161
                    
                    
                    
                    3.2
                    %Expenses:Outside
      voyage charter fees
                    
                    $
                    3,089
                    
                    
                    $
                    5,310
                    
                    
                    $
                    (2,221
                    )
                    
                    
                    (41.8
                    )%Vessel
      operating expenses
                    
                    $
                    23,216
                    
                    
                    $
                    24,025
                    
                    
                    $
                    (809
                    )
                    
                    
                    (3.4
                    )%Repairs
      and maintenance
                    
                    $
                    68
                    
                    
                    $
                    73
                    
                    
                    $
                    (5
                    )
                    
                    
                    (6.8
                    )%Sailing Days:
                    
                    
                    1,065
                    
                    
                    
                    1,019
                    
                    
                    
                    46
                    
                    
                    
                    4.5
                    %Per Day in Whole USD:Revenue per Sailing Day:Freight
      and related revenue
                    
                    $
                    26,853
                    
                    
                    $
                    23,785
                    
                    
                    $
                    3,068
                    
                    
                    
                    12.9
                    %Fuel
      and other surcharges
                    
                    $
                    5,289
                    
                    
                    $
                    6,096
                    
                    
                    $
                    (807
                    )
                    
                    
                    (13.2
                    )%Expenses per Sailing Day:Vessel
      operating expenses
                    
                    $
                    21,799
                    
                    
                    $
                    23,577
                    
                    
                    $
                    (1,778
                    )
                    
                    
                    (7.5
                    )%Repairs
      and maintenance
                    
                    $
                    64
                    
                    
                    $
                    72
                    
                    
                    $
                    (8
                    )
                    
                    
                    (11.1
                    )%
  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.
  36
 Index
  The
following table summarizes the changes in the components of our revenue and
vessel operating expenses as well as changes in Sailing Days during the three
month period ended December 31, 2009 compared to the three month period ended
December 31, 2008:
  (USD
      in 000’s) (Unaudited)
                    
                    Sailing
      Days
                    
                    
                    Freight
      and Related Revenue
                    
                    
                    Fuel
      and Other Surcharges
                    
                    
                    Outside
      Voyage Charter
                    
                    
                    Total
      Revenue
                    
                    
                    Vessel
      Operating ExpensesThree
      month period ended December 31, 2008
                    
                    
                    1,019
                    
                    
                    $
                    24,237
                    
                    
                    $
                    6,212
                    
                    
                    $
                    5,709
                    
                    
                    $
                    36,158
                    
                    
                    $
                    24,025Changes in the three month
      period ended December 31,2009:Increase
      attributable to stronger Canadian dollar
                    
                    
                    -
                    
                    
                    $
                    2,033
                    
                    
                    $
                    253
                    
                    
                    $
                    319
                    
                    
                    $
                    2,605
                    
                    
                    $
                    1,579Net
      increase attributable to increased customer demand (excluding currency
      impact)
                    
                    
                    46
                    
                    
                    $
                    2,328
                    
                    
                    $
                    (832
                    )
                    
                    $
                    -
                    
                    
                    $
                    1,496
                    
                    
                    $
                    (2,388
                    )Changes
      in outside charter revenue (excluding currency impact)
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (2,940
                    )
                    
                    $
                    (2,940
                    )
                    
                    $
                    -Sub-Total
                    
                    
                    46
                    
                    
                    $
                    4,361
                    
                    
                    $
                    (579
                    )
                    
                    $
                    (2,621
                    )
                    
                    $
                    1,161
                    
                    
                    $
                    (809
                    )Three
      month period ended December 31, 2009
                    
                    
                    1,065
                    
                    
                    $
                    28,598
                    
                    
                    $
                    5,633
                    
                    
                    $
                    3,088
                    
                    
                    $
                    37,319
                    
                    
                    $
                    23,216
  Total
revenue during the three month period ended December 31, 2009 was $37.3 million,
an increase of $1.1 million, or 3.2%, compared to $36.2 million during the three
month period ended December 31, 2008.  This increase was primarily
attributable to a stronger Canadian dollar, partially offset by reduced fuel
surcharges.
  Freight
and related revenue generated from Company-operated vessels increased $4.4
million, or 18.0%, to $ 28.6 million during the three month period ended
December 31, 2009 compared to $24.2 million during the three month period ended
December 31, 2008. Freight and related revenue per Sailing Day increased $3,068,
or 12.9%, to $26,853 per Sailing Day in the three month period ended December
31, 2009 compared to $23,785 in the three month period ended December 31,
2008.  This increase was attributable to a stronger Canadian dollar
and more efficient trade patterns in December 2009 compared to December
2008.
  Fuel
and other pass through surcharges decreased $0.6 million, or 9.3%, to $5.6
million during three month period ended December 31, 2009 compared to $6.2
million during the three month period ended December 31, 2008. Fuel and other
surcharges revenue per Sailing Day decreased $807 to $5,289 per Sailing Day in
the three month period ended December 31, 2009 compared to $6,096 in the three
month period ended December 31, 2008.
  Outside
voyage charter revenues decreased $2.6 million, or 45.9%, to $3.1 million during
the three month period ended December 31, 2009 compared to $5.7 million during
the three month period ended December 31, 2008.  The decrease in
outside voyage charter revenue was attributable to one-time spot
market business shipped by outside charterers in the three month
period ended December 31, 2008.
  Vessel
operating expenses decreased $0.8 million, or 3.4%, to $23.2 million in the
three month period ended December 31, 2009 compared to $24.0 million in the
three month period ended December 31, 2008.  This decrease was
primarily attributable to reduced fuel and other vessel costs, as well as
improved trade patterns in December 2009, partially offset by a stronger
Canadian dollar.  Vessel operating expenses per Sailing Day decreased
$1,778, or 7.5%, to $21,799 in the three month period ended December 31, 2009
compared to $23,577 in the three month period ended December 31,
2008.
  37
 Index
  Our
general and administrative expenses increased $243 to $2.6 million during the
three month period ended December 31, 2009 from $2.3 million in the three month
period ended December 31, 2008. The increase in general and administrative
expenses was a result of a stronger Canadian dollar and a $50 increase in the
provision for doubtful accounts during the three month period ending December
31, 2009.  Our general and administrative expense represented 6.9% of
revenues during the three month period ended December 31, 2009, an increase from
6.4% of revenues during the three month period ended December 31,
2008.  During the three month period ended December 31, 2009, $0.7
million of our general and administrative expenses was attributable to our
parent company and $1.9 million was attributable to our operating
companies.
  Depreciation
expense increased $0.7 to $2.4 million during the three month period ended
December 31, 2009 compared to $1.7 million during the three month period ended
December 31, 2008.  The increase was primarily attributable to capital
expenditures during the fiscal 2009 winter lay-up period and a stronger Canadian
dollar.
  Amortization
of drydock costs increased $112 to $0.6 million during the three month period
ended December 31, 2009 due to an increase in drydock amortization arising from
the drydock of the Mississagi during the fiscal 2009 winter lay-up period, as
well as the stronger Canadian dollar.  During the three month period
ended December 31, 2009, the Company amortized the deferred drydock costs of
seven of its twelve vessels compared to six vessels during the three month
period ended December 31, 2008.
  Amortization
of intangibles decreased $99 to $299 during the three month period ended
December 31, 2009 from $398 during the three month period ended December 31,
2008 primarily due to the expiration and completion of amortizing of certain
acquired non-competition agreements during the three month period ending
December 31, 2009.
  As a
result of the items described above, during the three month period ended
December 31, 2009, the Company’s operating income increased $3.2 million to $5.0
million compared to $1.8 million during the three month period ended December
31, 2008.
  Interest
expense decreased $129 to $1.4 million during the three month period ended
December 31, 2009 from $1.5 million during the three month period ended December
31, 2008. This decrease in interest expense was primarily a result of slightly
lower average debt balances during the three month period ended December 31,
2009.
  We
recorded a net gain on interest rate swap contracts of $386 during the three
month period ended December 31, 2009 compared to a loss of $3.4 million incurred
in the three month period ended December 31, 2008 due to recording the fair
value of our two interest rate swap agreements.  We recorded a gain of
$265 on our interest rate swap in Canada, and a gain of $121 on our interest
rate swap in the U.S.
  Our
income before income taxes was $4.0 million in the three month period ended
December 31, 2009 compared to loss before income taxes of $3.1 million in the
three month period ended December 31, 2008.
  Our
provision for income tax expense was $0.6 million during the three month period
ended December 31, 2009 compared to an income tax expense of $2.9 million during
the three month period ended December 31, 2008.  The Company's
effective tax rate was 15.3% for the three month period ended December 31,
2009.  Our effective tax rate for the three month period ended
December 31, 2008 was substantially higher than the statutory tax rate based on
a near breakeven full year forecast which, when combined with permanent book to
tax differences, resulted in an unusually high effective tax rate which was then
applied to our seasonally high year-to-date income.  In addition,
there was a provision of $0.7 million in the three month period ended September
30, 2008 associated with a change in certain management compensation from cash
to stock, which changed the characterization of such compensation from
deductible to non-deductible on our Canadian tax returns.
  Our net
income increased $9.4 million to $3.4 million in the three month period ended
December 31, 2009 compared to a net loss of $6.0 million in the three month
period ended December 31, 2008.
  We
accrued $490 for cash dividends on our preferred stock during the three month
period ended December 31, 2009 compared to $382 during the three month period
ended December 31, 2008.  The dividends accrued at a rate of 10.25%
for the three month period ended December 31, 2009 compared to a rate of 9.25%
for the three month period ended December 31, 2008.  When the
dividends are not paid in cash, the rate increases 0.5% every six months to a
cap of 12.0%, and increased to 10.75% effective January 1, 2010.
  38
 Index
  Our net
income applicable to common stockholders increased $9.3 million to $2.9 million
during the three month period ended December 31, 2009 compared to a net loss
applicable to common shareholders of $6.4 million during the three month period
ended December 31, 2008.
  During
the three month period ended December 31, 2009, the Company operated five
vessels in the U.S. and seven vessels in Canada, and the percentage of our total
freight and other revenue, fuel and other surcharge revenue, vessel operating
expenses, repairs and maintenance costs, and combined depreciation and
amortization costs approximate the percentage of vessels operated by
country.  Our outside voyage charter revenue and costs relate solely
to our Canadian subsidiary and approximately 50% of our general and
administrative costs are incurred in Canada.  Approximately two-thirds
of our interest expense is incurred in Canada, consistent with our percentage of
overall indebtedness by country.  In addition, substantially all of
our tax provision was incurred in Canada during the three month period ended
December 31, 2009, because a valuation allowance was recorded in the U.S. during
the three month period ended March 31, 2009.  All of our preferred
stock dividends are accrued in the U.S.
  Nine
month period ended December 31, 2009 compared to the nine month period ended
December 31, 2008:
  The
nine month period ended December 31, 2009 was highlighted by several significant
changes as compared to the nine month period ended December 31,
2008:
  (1)
                    There
      was a reduction in demand from our customers in the nine month period
      ended December 31, 2009 compared to the nine month period ended December
      31, 2008, due to the weakened economy and the resultant delayed openings
      of our customers’ facilities for the 2009 sailing season.  Such
      factors reduced our vessel scheduling flexibility and decreased the
      overall operating efficiency of our fleet during the first six months of
      the nine month period ending December 31, 2009.  The decline in
      customer demand in the nine month period ended December 31, 2009 reduced
      revenues from both our own vessels and outside charter revenues as
      compared to the nine month period ended December 31, 2008; however, the
      percentage reduction of outside charter revenues was much greater and had
      a lesser impact on our margins.
  (2)
                    We
      partially offset the reduction in demand with increased business in our
      grain and salt cargos.
  (3)
                    Primarily
      as a result of the net reduced demand from our customers, our total
      Sailing Days decreased 89 days, or 2.9%, to 2,977 Sailing Days during the
      nine month period ended December 31, 2009 from 3,066 Sailing Days during
      the nine month period ended December 31,
2008.
  (4)
                    Due
      to the repowering and other upgrading of the Saginaw during the nine month
      period ended December 31, 2008, we operated this vessel an additional 72
      Sailing Days during the nine month period ended December 31,
      2009.
  (5)
                    Due
      to reduced demand from our customers, we operated the McKee Sons only 137
      Sailing Days during the nine month period ended December 31,
      2009.  We operated the McKee Sons for all possible 275 Sailing
      Days during the nine month period ended December 31,
  2008.
  (6)
                    Excluding
      the Saginaw and the McKee Sons, we operated our remaining ten Canadian and
      U.S. vessels for 23 fewer Sailing Days in the nine month period ended
      December 31, 2009 compared to the nine month period ended December 31,
      2008.
  (7)
                    We
      benefited from additional new business and contractual rate increases from
      existing customers during the nine month period ended December 31, 2009
      compared to the nine month period ended December 31,
  2008.
  (8)
                    All
      of our customer contracts have fuel surcharge provisions whereby the
      increases or decreases in our fuel costs are passed on to
      customers.  Such increases or decreases in fuel surcharges
      impact our margin percentages, but do not significantly impact our margin
      dollars.  Due to reduced fuel prices during the nine month
      period ended December 31, 2009, fuel surcharge revenues declined sharply
      as compared to the nine month period ended December 31,
    2008.
  (9)
                    The
      Canadian dollar weakened by approximately 1.7% versus the U.S. dollar,
      averaging approximately $0.903 USD per CAD during the nine month period
      ended at December 31, 2009 compared to approximately $0.919 USD per CAD
      during the nine month period ending December 31, 2008.  The
      Company’s balance sheet translation rate increased from $0.793 USD per CAD
      at March 31, 2009 to $0.951 USD per CAD at December 31,
    2009.
  39
 Index
  Selected
Financial Information
 (Unaudited)
  (USD
      in 000’s)
                    
                    Nine
      month period ended December 31, 2009
                    
                    
                    Nine
      month period ended December 31, 2008
                    
                    
                    $
      Change
                    
                    
                    %
      ChangeRevenue:Freight
      and related revenue
                    
                    $
                    80,879
                    
                    
                    $
                    83,863
                    
                    
                    $
                    (2,984
                    )
                    
                    
                    (3.6
                    )%Fuel
      and other surcharges
                    
                    
                    14,409
                    
                    
                    
                    28,791
                    
                    
                    
                    (14,382
                    )
                    
                    
                    (50.0
                    )%Outside
      voyage charter revenue
                    
                    
                    7,525
                    
                    
                    
                    19,199
                    
                    
                    
                    (11,674
                    )
                    
                    
                    (60.8
                    )%Total
                    
                    $
                    102,813
                    
                    
                    $
                    131,853
                    
                    
                    $
                    (29,040
                    )
                    
                    
                    (22.0
                    )%Expenses:Outside
      voyage charter fees
                    
                    $
                    7,509
                    
                    
                    $
                    17,618
                    
                    
                    $
                    (10,109
                    )
                    
                    
                    (57.4
                    )%Vessel
      operating expenses
                    
                    $
                    60,710
                    
                    
                    $
                    79,936
                    
                    
                    $
                    (19,226
                    )
                    
                    
                    (24.1
                    )%Repairs
      and maintenance
                    
                    $
                    785
                    
                    
                    $
                    961
                    
                    
                    $
                    (176
                    )
                    
                    
                    (18.3
                    )%Sailing Days:
                    
                    
                    2,977
                    
                    
                    
                    3,066
                    
                    
                    
                    (89
                    )
                    
                    
                    (2.9
                    )%Per Day in Whole USD:Revenue per Sailing Day:Freight
      and related revenue
                    
                    $
                    27,168
                    
                    
                    $
                    27,353
                    
                    
                    $
                    (185
                    )
                    
                    
                    (0.7
                    )%Fuel
      and other surcharges
                    
                    $
                    4,840
                    
                    
                    
                    9,390
                    
                    
                    $
                    (4,550
                    )
                    
                    
                    (48.5
                    )%Expenses per Sailing Day:Vessel
      operating expenses
                    
                    $
                    20,393
                    
                    
                    $
                    26,072
                    
                    
                    $
                    (5,679
                    )
                    
                    
                    (21.8
                    )%Repairs
      and maintenance
                    
                    $
                    264
                    
                    
                    $
                    313
                    
                    
                    $
                    (49
                    )
                    
                    
                    (15.6
                    )%
  Management
believes that each of our vessels should achieve approximately 270 Sailing Days
in an average first three fiscal quarters, assuming no major repairs or
incidents and normal dry-docking cycle times performed during the winter lay
period.
  40
 Index
  The
following table summarizes the changes in the components of our revenue and
vessel operating expenses as well as changes in Sailing Days during the nine
month period ended December 31, 2009 compared to the nine month period ended
December 31, 2008:
  (USD
      in 000’s) (Unaudited)
                    
                    Sailing
      Days
                    
                    
                    Freight
      and Related Revenue
                    
                    
                    Fuel
      and Other Surcharges
                    
                    
                    Outside
      Voyage Charter
                    
                    
                    Total
      Revenue
                    
                    
                    Vessel
      Operating ExpensesNine
      month period ended December 31, 2008
                    
                    
                    3,066
                    
                    
                    $
                    83,863
                    
                    
                    $
                    28,791
                    
                    
                    $
                    19,199
                    
                    
                    $
                    131,853
                    
                    
                    $
                    79,936Changes
      in the nine month period ended December 31, 2009:Decrease
      attributable to weaker Canadian dollar
                    
                    
                    -
                    
                    
                    $
                    (1,124
                    )
                    
                    $
                    (228
                    )
                    
                    $
                    (107
                    )
                    
                    $
                    (1,459
                    )
                    
                    $
                    (642
                    )Net
      decrease attributable to reduced customer demand (excluding currency
      impact)
                    
                    
                    (89
                    )
                    
                    $
                    (1,860
                    )
                    
                    $
                    (14,154
                    )
                    
                    $
                    -
                    
                    
                    $
                    (16,014
                    )
                    
                    $
                    (18,584
                    )Changes
      in outside charter revenue (excluding currency impact)
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (11,567
                    )
                    
                    $
                    (11,567
                    )
                    
                    $
                    -Sub-Total
                    
                    
                    (89
                    )
                    
                    $
                    (2,984
                    )
                    
                    $
                    (14,382
                    )
                    
                    $
                    (11,674
                    )
                    
                    $
                    (29,040
                    )
                    
                    $
                    (19,226
                    )Nine
      month period ended December 31, 2009
                    
                    
                    2,977
                    
                    
                    $
                    80,879
                    
                    
                    $
                    14,409
                    
                    
                    $
                    7,525
                    
                    
                    $
                    102,813
                    
                    
                    $
                    60,710
  Total
revenue during the nine month period ended December 31, 2009 was $102.8 million,
a decrease of $29.1 million, or 22.0%, compared to $131.9 million during the
nine month period ended December 31, 2008.  This decrease was
primarily attributable to reduced fuel surcharges, and reduced customer demand,
which is further discussed below.
  Freight
and related revenue generated from Company-operated vessels decreased $3.0
million, or 3.6%, to $80.9 million during the nine month period ended December
31, 2009 compared to $83.9 million during the nine month period ended December
31, 2008. Freight and related revenue per Sailing Day decreased $185, or 0.7%,
to $27,168 per Sailing Day in the nine month period ended December 31, 2009
compared to $27,353 in the nine month period ended December 31,
2008.  This decrease was attributable to a weaker Canadian dollar and
less efficient trade patterns during the first six months of the nine month
period ended December 31, 2009 and was slightly offset by higher pricing and
improved vessel productivity.
  Fuel
and other pass through surcharges decreased $14.4 million, or 50.0%, to $14.4
million during nine month period ended December 31, 2009 compared to $28.8
million during the nine month period ended December 31, 2008 due to lower fuel
prices.  Fuel and other surcharges revenue per Sailing Day decreased
$4,550 to $4,840 per Sailing Day in the nine month period ended December 31,
2009 compared to $9,390 in the nine month period ended December 31,
2008.
  Outside
voyage charter revenues decreased $11.7 million, or 60.8%, to $7.5 million
during the nine month period ended December 31, 2009 compared to $19.2 million
during the nine month period ended December 31, 2008. The decrease in outside
voyage charter revenue was attributable to a reduction in overall customer
demand and a shift of certain tonnage shipped by outside charterers in the nine
month period ended December 31, 2008, which were shipped by the Company’s own
vessels during the nine month period ended December 31, 2009.
  41
 Index
  Vessel
operating expenses decreased $19.2 million, or 24.1%, to $60.7 million in the
nine month period ended December 31, 2009 compared to $79.9 million in the nine
month period ended December 31, 2008.  This decrease was primarily
attributable to reduced fuel and other vessel costs and reduced Sailing
Days.  Vessel operating expenses per Sailing Day decreased $5,679, or
21.8%, to $20,393 in the nine month period ended December 31, 2009 compared to
$26,072 in the nine month period ended December 31, 2008.
  Repairs
and maintenance expenses, which consist of expensed winter work, decreased $176
to $0.8 million during the nine month period ended December 31, 2009 from $1.0
million during the nine month period ended December 31, 2008.  Repairs
and maintenance per Sailing Day decreased $49 to $264 per Sailing Day in the
nine month period ended December 31, 2009 from $313 during the nine month period
ended December 31, 2008.  This decrease was related to the timing of
completing the 2009 winter lay-up work and the commencement of the 2010 winter
lay-up work in the nine month period ended December 31, 2009 as compared to the
timing of completing the 2008 winter lay-up work and the commencement of the
2009 winter lay-up work in the nine month period ended December 31,
2008.
  Our
general and administrative expenses decreased $0.7 million to $6.8 million
during the nine month period ended December 31, 2009 from $7.5 million in the
nine month period ended December 31, 2008. The decrease in general and
administrative expenses was a result of cost reductions offset by a loan
amendment fee of $446 during the nine month period ending December 31,
2009.  Our general and administrative expenses represented 6.6% of
revenues during the nine month period ended December 31, 2009, an increase from
5.7% of revenues during the nine month period ended December 31,
2008.  During the nine month period ended December 31, 2009, $1.8
million of our general and administrative expenses was attributable to our
parent company and $5.0 million was attributable to our operating companies,
including the loan amendment fee.
  Depreciation
expense rose $1.7 million to $6.8 million during the nine month period ended
December 31, 2009 compared to $5.1 million during the nine month period ended
December 31, 2008.  The increase was primarily attributable to capital
expenditures related to the repowering of the Saginaw and capital expenditures
during the fiscal 2009 winter lay-up period.
  Amortization
of drydock costs increased $158 to $1.8 million during the nine month period
ended December 31, 2009 due to an increase in drydock amortization resulting
from the winter 2009 drydock of the Mississagi.  During the nine month
period ended December 31, 2009, the Company amortized the deferred drydock costs
of seven of its twelve vessels compared to six vessels during the nine month
period ended December 31, 2008.
  Amortization
of intangibles decreased $132 to $1.1 million during the nine month period ended
December 31, 2009 primarily due to the expiration and completion of amortizing
of certain acquired non-competition agreements during the nine month period
ended December 31, 2009.
  As a
result of the items described above, during the nine month period ended December
31, 2009, the Company’s operating income decreased $0.6 million to $17.3 million
compared to $17.9 million during the nine month period ended December 31,
2008.
  Interest
expense decreased $0.7 million to $4.3 million during the nine month period
ended December 31, 2009 from $5.0 million during the nine month period ended
December 31, 2008. This decrease in interest expense was primarily a result
of   a lower average debt balance during the nine month period
ended December 31, 2009.
  We
recorded a gain on interest rate swap contracts of $2.0 million during the nine
month period ended December 31, 2009 compared to a loss of $2.9 million incurred
in the nine month period ended December 31, 2008, due to recording the fair
value of our two interest rate swap agreements.
  Our
income before income taxes was $14.9 million in the nine month period ended
December 31, 2009 compared to income before income taxes of $10.1 million in the
nine month period ended December 31, 2008.
  Our
provision for income tax expense was $3.4 million during the nine month period
ended December 31, 2009 compared to an income tax expense of $8.2 million during
the nine month period ended December 31, 2008.  The effective tax rate
of 22.5% for the current fiscal period is lower than the statutory tax rate due
to the tax benefit associated with the reduction of the valuation allowance
related to the net U.S. Federal deferred tax assets.  Our effective
tax rate of 81.3% for the nine month period ended December 31, 2008 was higher
than its statutory tax rate based on a near breakeven full year tax forecast
which, when combined with permanent book to tax differences, resulted in an
unusually high effective tax rate which was then applied to our seasonally high
year-to-date income.  In addition, there was a provision of $0.7
million associated with a change in certain management compensation from cash to
stock which changed the characterization from deductible to non-deductible on
our Canadian tax returns, which was recorded in the prior year.
  42
 Index
  Our net
income increased $9.7 million, to $11.6 million in the nine month period ended
December 31, 2009 compared to net income of $1.9 million in the nine month
period ended December 31, 2008.
  We
accrued $1.4 million for cash dividends on our preferred stock during the nine
month period ended December 31, 2009 compared to $1.2 million during the nine
month period ended December 31, 2008.  The dividends accrued at an
average rate of  10.1% for the nine month period ended December 31,
2009 and at a rate of 9.1% for the nine month period ended December 31,
2008.  When the dividends are not paid in cash, the rate increases
0.5% every six months to a cap of 12.0%, and increased to 10.75% effective
January 1, 2010.
  Our net
income applicable to common stockholders increased $9.5 to $10.2 million during
the nine month period ended December 31, 2009 compared to $0.7 million during
the nine month period ended December 31, 2008.
  During
the nine month period ended December 31, 2009, the Company operated
approximately 4.5 equivalent vessels in the U.S. and seven vessels in Canada,
and the percentage of our total freight and other revenue, fuel and other
surcharge revenue, vessel operating expenses, repairs and maintenance costs, and
combined depreciation and amortization costs approximate the percentage of
vessels operated by country.  Our outside voyage charter revenue and
costs relate solely to our Canadian subsidiary and approximately 50% of our
general and administrative costs are incurred in
Canada.  Approximately two-thirds of our interest expense is incurred
in Canada, consistent with our percentage of overall indebtedness by
country.  Approximately 80% of our gain on interest rate swap
contracts was realized in Canada based on the larger amount of indebtedness in
Canada during the nine month period ended December 31, 2009. In addition,
substantially all of our tax provision was incurred in Canada during the nine
month period ended December 31, 2009, because a valuation allowance was recorded
in the U.S. during the three month period ended March 31, 2009.  All
of our preferred stock dividends are accrued in the U.S.
  Impact
of Inflation and Changing Prices
  During
the nine month period ended December 31, 2009, there were major reductions in
our fuel costs. Our contracts with our customers provide for recovery of fuel
costs over specified rates through fuel surcharges.  In addition,
there were changes in the exchange rate between the U.S. dollar and the Canadian
dollar, which impacted our translation of our Canadian subsidiary’s revenue and
costs to U.S. dollars by a reduction of approximately 1.7%.
  Liquidity
and Capital Resources
  Our
primary sources of liquidity are cash from operations, the proceeds of our
credit facility and proceeds from sales of our common stock. Our principal uses
of cash are vessel acquisitions, capital expenditures, drydock expenditures,
operations and interest and principal payments under our credit
facility.  Information on our consolidated cash flow is presented in
the consolidated statement of cash flows (categorized by operating, investing
and financing activities) which is included in our consolidated financial
statements for the nine month periods ended December 31, 2009 and December 31,
2008.  We believe cash generated from our operations and availability
of borrowing under our credit facility will provide sufficient cash availability
to cover our anticipated working capital needs, capital expenditures and debt
service requirements for the next twelve months.  However, if the
Company experiences a material shortfall to its financial forecasts or if the
Company’s customers materially delay their receivable payments due to further
deterioration of economic conditions, the Company may breach its financial
covenants and collateral thresholds and/or be strained for
liquidity.  The Company has implemented a program to reduce fiscal
2010 cash expenses relative to actual fiscal 2009 expenses, maintained its
continued focus on productivity gains and is closely monitoring customer credit
and accounts receivable balances.
  Net cash
provided by operating activities for the nine month period ended December 31,
2009 was $11.4 million, an increase of $8.0 million compared to net cash
provided of $3.4 million during the nine month period ended December 31,
2008.  This increase was substantially attributable to the timing of
the payment of accounts payable and accrued liabilities and $2.0 million in
higher cash earnings (gross of equity compensation) compared to the nine month
period ended December 31, 2008.
  Cash used
in investing activities decreased by $3.2 million to $3.3 million during the
nine month period ended December 31, 2009 compared to $6.5 million during the
nine month period ended December 31, 2008.  This decrease was
attributable to reduced payments of carryover capital expenditures in the 2009
winter lay-up period as compared to the 2008 winter lay-up period, offset by
$250 of proceeds from the scrap sale of a vessel during the nine month period
ended December 31, 2008.
  43
 Index
  Cash flow
used in financing activities was $1.7 million during the nine month period ended
December 31, 2009, compared to cash flows provided from financing activities of
$10.0 million during the nine month period ended December 31,
2008.  During the nine month period ended December 31, 2009, the
Company made net borrowings under its revolving credit facility of $1.7
million compared to net borrowings of $12.0 million during the nine month period
ended December 31, 2008, and made principal payments on its term debt of $3.4
million during the nine month period ended December 31, 2009 compared to $2.2
million during the nine month period ended December 31, 2008.
  During
the nine month period ended December 31, 2009, long-term debt, including the
current portion, increased $4.1 million to $62.4 million from $58.3 million at
March 31, 2009, which reflected an increase of $7.5 million from a
strengthening Canadian dollar from its low point during the nine month period
ended December 31, 2009, offset by the $3.4 million scheduled principal payment
made during such period.
  Our
Amended and Restated Credit Agreement, as amended, requires the Company to meet
certain quarterly and annual financial covenants, including minimum EBITDA (as
defined therein), minimum fixed charge ratios, maximum senior debt-to-EBITDA
ratios, and maximum capital expenditures and drydock
expenditures.  The Company met those financial covenants during the
nine month period ended December 31, 2009.  The Amended and Restated
Credit Agreement’s covenants are set in Canadian dollars in order to better
match the cash earnings and debt levels of the business by
currency.
  On June
23, 2009, Lower Lakes Towing, Lower Lakes Transportation Company, Grand River
Navigation Company, Inc. and the other Credit Parties thereto entered into a
Second Amendment (the “Amendment”), to the Amended and Restated Credit Agreement
with the Lenders signatory thereto and General Electric Capital Corporation, as
Agent. Under the Amendment, the parties amended the definitions of “Fixed Charge
Coverage Ratio”, “Fixed Charges”, “Funded Debt” and “Working Capital”, modified
the maximum amounts and duration of the seasonal overadvance facilities under
the Canadian and U.S. Revolving Credit Facilities and modified the Minimum Fixed
Charge Coverage Ratio and the Maximum Senior Funded Debt to EBITDA
Ratio.
  Preferred
Stock and Preferred Stock Dividends
  The
Company has accrued, but not paid, its preferred stock dividends since January
1, 2007.  The shares of the series A convertible preferred stock: rank
senior to the Company’s common stock with respect to liquidation and dividends;
are entitled to receive a cash dividend at the annual rate of 7.75% (based on
the $50 per share issue price), payable quarterly (subject to increases of 0.5%
for each six month period in respect of which the dividend is not timely paid,
up to a maximum of 12%, subject to reversion to 7.75% upon payment of all
accrued and unpaid dividends); are convertible into shares of the Company’s
common stock at any time at the option of the series A preferred stockholder at
a conversion price of $6.20 per share (based on the $50 per share issue price
and subject to adjustment) or 8.065 shares of common stock for each Series A
Preferred Share (subject to adjustment); are convertible into shares of the
Company’s common stock (based on a conversion price of $6.20 per share, subject
to adjustment) at the option of the Company if, after the third anniversary of
our acquisition of Lower Lakes, the trading price of the Company’s common stock
for 20 trading days within any 30 trading day period equals or exceeds $8.50 per
share (subject to adjustment); may be redeemed by the Company in connection with
certain change of control or acquisition transactions; will vote on an
as-converted basis with the Company’s common stock; and have a separate vote
over certain material transactions or changes involving the Company. The accrued
dividend payable at December 31, 2009 was $4.6 million compared to $3.2 million
at March 31, 2009. During the three month period ended December 31, 2009, the
effective rate of preferred dividends was 10.25%. The dividend rate increased to
10.75% effective January 1, 2010. The Company is limited in the payment of
preferred stock dividends by the fixed charge coverage ratio covenant in the
Company’s Amended and Restated Credit Agreement. In addition, the Company has
made the decision to make its investments in vessels before applying cash to pay
preferred stock dividends. Under the terms of the preferred stock, upon the
conversion of the preferred stock to common stock, a subordinated promissory
note will be issued whereby the cash dividends will accrue at the rates set for
the preferred stock and the note must be paid at the later of the second
anniversary of the conversion, or seven years from the initial issuance date of
the preferred stock.
  Investments
in Capital Expenditures and Drydockings
  We
invested $3.5 million in paid and accrued capital expenditures and drydock
expenses during the nine month period ended December 31, 2009, including $1.7
million relating to carryover from the 2009 winter season. Our capital
expenditures and drydock expenses paid and accrued for the total 2009 winter
season were approximately $6.3 million.
  44
 Index
  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, 2009, our liability for financial instruments with exposure to
foreign currency risk was approximately CDN $44.7 million of term borrowings in
Canada and CDN $2.5 million of revolving borrowings in
Canada.  Although we have tried to match our indebtedness and cash
flows from earnings by country, the sudden change in exchange rates can increase
the indebtedness as converted to U.S. dollars before operating cash flows can
make up for such a currency rate change.
  From a
cash flow perspective, our operations are partially 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 our revolver indebtedness
under our Amended and Restated Credit Agreement, which carries interest rates
which vary with Canadian Prime Rates and B.A. Rates for Canadian borrowings, and
U.S. Prime Rates and Libor Rates on U.S. borrowings.
  We hold
two interest rate swap contracts for approximately 75% of our term loans for the
remaining term of such loans based on three month BA rates for the Canadian term
loans and three month U.S. Libor rates for the U.S. term loans, which were set
in February 2008.  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 U.S. term loans. We will be exposed to interest rate risk under our
interest rate swap contracts if such contracts are required to be amended or
terminated earlier than their termination dates.
  Critical
accounting policies
  Rand’s
significant accounting policies are presented in Note 1 to its consolidated
financial statements, and the following summaries should be read in conjunction
with the financial statements and the related notes included in this quarterly
report on Form 10-Q. While all accounting policies affect the financial
statements, certain policies may be viewed as critical.
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the application of
certain accounting policies, many of which require the Company to make estimates
and assumptions about future events and their impact on amounts reported in the
financial statements and related notes.  Since future events and their
impact cannot be determined with certainty, the actual results will inevitably
differ from our estimates.  Such differences could be material to the
financial statements.
  Revenue
Recognition
  The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis based on
origin-destination and cargo carried. Voyage revenue is recognized ratably over
the duration of a voyage based on the relative transit time in each reporting
period when the following conditions are met: the Company has a signed contract
of affreightment, the contract price is fixed or determinable and collection is
reasonably assured.  Included in freight billings are other fees such
as fuel surcharges and other freight surcharges, which represent pass-through
charges to customers for toll fees, lockage fees and ice breaking fees paid to
other parties.  Fuel surcharges are recognized ratably over the
duration of the voyage, while freight surcharges are recognized when the
associated costs are incurred. Freight surcharges are less than 5% of total
revenue.
  The
Company subcontracts excess customer demand to other freight
providers.  Service to customers under such arrangements is
transparent to the customer and no additional services are provided to
customers.  Consequently, revenues recognized for customers serviced
by freight subcontractors are recognized on the same basis as described
above.  Costs for subcontracted freight providers, presented as
“outside voyage charter fees” on the consolidated statement of operations are
recognized as incurred and thereby are recognized ratably over the
voyage.
  45
 Index
  In
addition, all revenues are presented on a gross basis.
  Intangible
Assets and Goodwill
  Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and
contracts.  The intangibles are amortized as follows:
  Trademarks
      and trade names
                    10
      years straight-lineNon-competition
      agreements
                    4
      years straight-lineCustomer
      relationships and contracts
                    15
      years straight-line
  Non-competition
agreements are amortized over the period which consists of the remainder of the
employment contract and the non-compete period after its
expiration.
  Although
customer contracts have a typical duration of only three to five years, the
Company has experienced a consistent track record of serial renewals by its
significant contract customers (and such customers comprise most of the
Company’s business).  The Company’s customer relationships are
fortified by the fact that there are a limited number of Great Lakes shipping
companies as well as a declining number of vessels operating on the Great
Lakes.  The Company has an additional advantage in that it operates
half of the vessels on the Great Lakes which are classified as “river-class
vessels” and capable of accessing docks and customers not accessible to larger
vessels.  Accordingly, customers have a substantial interest in
protecting their Great Lakes transportation relationships.  Based on
the foregoing, the Company has determined that 15 years is the most appropriate
“best estimate” amortization period for its customer relationships and
contracts. The Company has estimated a 10 year useful life for its trademarks
and trade names. In accordance with ASC 350-30-35 “Determining the Life of an
Intangible Asset,” since the Company cannot reliably determine the
pattern of economic benefit of the use of the customer relationships and
trademarks and trade names, the Company has determined that the straight line
amortization is appropriate.
  Impairment
of Fixed Assets and Intangible Assets with Finite Lives
  Fixed
assets and finite-lived intangible assets are tested for impairment when a
triggering event occurs. Examples of such triggering events include a
significant disposal of a portion of such assets, an adverse change in the
market involving the business employing the related assets, a significant
decrease in the benefits realized from an acquired business, difficulties or
delays in integrating the business, and a significant change in the operations
of an acquired business. The Company determined that there was an adverse change
in our markets that could affect the valuation of our assets during the three
month period ended March 31, 2009.  Accordingly, as of March 31, 2009,
the Company updated its estimates of undiscounted cash flows for each of its
asset groups to test our long-term assets for recoverability. These estimates
are subject to uncertainty.  We then compared those undiscounted
cash-flows by asset group to the sum of the carrying value of each asset group
and determined that there were no impairment indicators.  There were
no events or changes in circumstances during the nine month period ended
December 31, 2009 that indicated that its carrying amount may not be
recoverable.
  Impairment
of Goodwill
  As of
March 31, 2009, the Company made its annual test of Goodwill. Significant
assumptions are inherent in this process, including estimates of our
undiscounted cash flows, discount rates, comparable companies and comparable
transactions. Discount rate assumptions are based on an assessment of the risk
inherent in the respective intangible assets. The Company presently has no
intangible assets not subject to amortization other than goodwill. The fair
market values of each of our reporting units exceeded the sum of the carrying
values of those reporting units as of March 31, 2009.  There were no
events or changes in circumstances during the nine month period ended December
31, 2009 that indicated that its carrying amount may not be
recoverable.
  Income
Taxes
  The
Company accounts for income taxes in accordance with ASC 740 “Income Taxes”.  ASC
740 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.
  46
 Index
  The
Company adopted the provisions of ASC 740-10-25 “Income Taxes”effective April
1, 2007. ASC 740-10-25 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 ASC 740-10-25, 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 did not have a material effect on the results of operations, financial
condition or liquidity.
  Stock-Based
Compensation
  The
Company has adopted ASC 718 “Compensation-Stock
Compensation”, using the modified prospective method.  This
method requires compensation cost to be recognized beginning on the effective
date based on the requirements of ASC 718 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. The Company applies business judgment in factors determining the
volatility to be used in the calculation.
  Recently
Issued Pronouncements
  The
Hierarchy of Generally Accepted Accounting Principles
  In
June 2009, the Financial Accounting Standards Board (“FASB”), issued ASC
105, “Generally Accepted
Accounting Principles”. The objective of ASC 105 is to establish the FASB
Accounting Standards Codificationas
the source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. The standard is effective for interim and annual
periods ending after September 15, 2009. The Company adopted the provisions
of the standard on September 30, 2009, which did not have a material impact on
our financial statements.
  Fair
Value Measurements
  In
September 2006, the FASB issued, ASC 820 “Fair Value Measurements and
Disclosures”. ASC 820 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. Specifically, ASC 820 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 disclosure requirements of ASC 820 related
to the Company’s financial assets and liabilities, which took effect on January
1, 2008, are presented in Note 18 to the Company’s consolidated financial
statements. On April 1, 2009, the Company implemented the previously-deferred
provisions of ASC 820 for our non-financial assets and liabilities which include
goodwill and intangible assets. The Company determined that the remaining
provisions did not have a material effect on the Company’s consolidated
financial position or results of operations when they became
effective.
  ASC 820
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.
  47
 Index
  In April
2009, the FASB amended ASC 820-10, “Fair Value Measurement and
Disclosures-Overall”. ASC 820-10-65 provides additional guidance for
estimating fair value in accordance with ASC 820 when the volume and level of
activity for the asset or liability have decreased significantly. ASC 820-10-65
also provides guidance on identifying circumstances that indicate a transaction
is not orderly. ASC 820-10-65 is effective for interim and annual reporting
periods ending after June 15, 2009. The Company adopted ASC 820-10-65 in the
first quarter of fiscal 2010 and it did not have a material impact on its
consolidated financial statements upon adoption.
  In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, an amendment
to ASC 820-10, “Fair Value
Measurements and Disclosures—Overall,” for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using certain other valuation
techniques. The guidance provided in this ASU is effective for the first
reporting period (including interim periods) beginning after issuance. ASU
2009-05 will have no impact on our financial condition, results of operations or
cash flows.
  Non-controlling
Interests in Consolidated Financial Statements
  On
December 4, 2007, the FASB issued ASC 810-10-65 “Consolidation-Overall-Transition and
Open Effective Date Information”. ASC 810-10-65 requires entities to
report non-controlling (minority) interests of consolidated subsidiaries as a
component of shareholders’ equity on the balance sheet, include all earnings of
a consolidated subsidiary in consolidated results of operations, and treat all
transactions between an entity and the non-controlling interest as equity
transactions between the parties.  ASC 810-10-65 applies to all fiscal
years beginning on or after December 15, 2008. The Company has adopted this
standard as of April 1, 2009; however, the Company does not have any partially
owned subsidiaries to consolidate, and therefore the application of this
standard has no impact on its consolidated financial statements.
  Derivative
Instruments and Hedging Activities
  In March
2008, the FASB issued ASC 815 “Derivatives and Hedging”. ASC
815 provide enhanced disclosure requirements surrounding how and why an entity
uses derivative instruments, how derivative instruments and related hedged items
are accounted for and how derivative instruments and related hedged items affect
an entity’s financial position, financial performance and cash flows. ASC 815 is
effectivefor fiscal
years beginning after November 15, 2008. The Company adopted ASC 815 as of
April 1, 2009. The disclosure requirements of ASC 815 are disclosed in Note 18
of our financial statements.
  Determination
of the Useful Life of Intangible Assets
  In April
2008, the FASB updated guidance ASC 350-30-50 “Intangibles—Goodwill and
Other”, 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 ASC 350. The intent of ASC 350-30-50 is to
improve the consistency between the useful life of a recognized intangible asset
and the period of expected cash flows used to measure the fair value of the
asset under ASC 805-10-10 “BusinessCombinations” and other U.S.
generally accepted accounting principles. ASC 350-30-50 is effective for fiscal
years beginning after December 15, 2008 and interim periods within those fiscal
years and early adoption is prohibited. The Company adopted this standard for
the fiscal year ending March 31, 2010. The adoption of ASC 350-30-50 did not
have a material impact on the Company’s consolidated financial
statements.
  Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies
  In April
2009, the FASB issued ASC 805-20-25 “Business Combinations”. ASC
805-20-25 addresses application issues raised on initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-20-25
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008, and interim periods within those fiscal years. The
Company adopted ASC 805-20-25 effective April 1, 2009 and there was no impact on
the Company’s consolidated financial statements; however, any future business
combinations we engage in will be recorded and disclosed in accordance with this
statement.
  48
 Index
  Recognition
and Presentation of Other-Than-Temporary Impairments
  In April
2009, the FASB updated guidance to ASC 320-10-65 “Investments-Debt and Equity
Securities”. The objective of ASC 320-10-65 is to amend the
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than temporary impairments on debt and equity securities in the financial
statements. ASC 320-10-65 is effective for interim and annual reporting periods
ending after June 15, 2009.  The impact of adoption did not have a material
impact on the Company’s consolidated financial statements.
  Interim Disclosures about Fair Value
of Financial Instruments
  In April
2009, the FASB issued ASC 825-10-65 “Financial Instruments”. ASC
820-10-65 requires disclosure about fair value of financial instruments in
interim reporting periods of publicly traded companies that were previously only
required to be disclosed in annual financial statements. This standard is
effective for interim and annual periods ending after June 15,
2009.  The Company has adopted ASC 825-10-65 as of
June 30, 2009, as required.
  Subsequent
Events
  In May
2009, the FASB issued ASC 855 “Subsequent Events”. ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. It requires the disclosure of the date through which
an entity has evaluated subsequent events and the basis for that date, that is,
whether that date represents the date the financial statements were issued or
were available to be issued. This standard is effective for interim and annual
periods ending after June 15, 2009. The Company adopted ASC 855 as of
June 30, 2009. The disclosure requirements of ASC 855 applicable to
the Company are presented in Note 22 to the Company’s consolidated financial
statements.
  Consolidation
of Variable Interest Entities
  In June
2009, the FASB issued ASC 810-10-05 “Consolidation”. ASC 810-10-05
contains new criteria for determining the primary beneficiary, and increases the
frequency of required reassessments to determine whether a company is the
primary beneficiary of a variable interest entity. ASC 810-10-05 also contains a
new requirement that any term, transaction, or arrangement that does not have a
substantive effect on an entity’s status as a variable interest entity, a
company’s power over a variable interest entity, or a company’s obligation to
absorb losses or its right to receive benefits of an entity must be disregarded
in applying Interpretation ASC 810-10-05. ASC 810-10-05 is applicable for annual
periods beginning after November 15, 2009 and interim periods therein. The
Company is currently assessing ASC 810-10-5 impact, if any, on its consolidated
financial statements.
  In
December 2009, the FASB issued Accounting Standards Update No. 2009-17, “Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”)
amending the FASB Accounting Standards Codification. The amendments in ASU
2009-17 replace the quantitative-based risks and rewards calculation for
determining which enterprise, if any, has a controlling financial interest in a
variable interest entity with an approach focused on identifying which
enterprise has the power to direct the activities of a variable interest entity
that most significantly impacts the entity’s economic performance and has either
(1) the obligation to absorb losses of the entity or (2) the right to receive
benefits from the entity.  An approach that is expected to be
primarily qualitative will be more effective for identifying which enterprise
has a controlling financial interest in a variable interest
entity.  The amendments in ASU 2009-17 also require additional
disclosures about an enterprise’s involvement in variable interest entities,
which will enhance the information provided to users of financial
statements.  This update shall be effective as of the beginning first
annual reporting period that begins after November 15, 2009 and interim periods
within that first annual reporting period, and for interim and annual reporting
periods thereafter.  Earlier application is prohibited.  The
Company is currently assessing the impact, if any, that the issuance of this
update will have on its financial statements.
  49
 Index
 
 Distinguishing
Liabilities from Equity
  In August
2009, the FASB issued ASU 2009-04, an update to ASC 480-10-S99, “Distinguishing Liabilities from
Equity,” per EITF Topic D-98, “Classification and Measurement of
Redeemable Securities.” to reflect the SEC staff's views regarding the
application of Accounting Series Release No. 268, “Presentation in Financial
Statements of "Redeemable Preferred Stocks."”This ASU will have no
impact on financial condition, results of operations or cash flows of the
Company.
  Multiple-Deliverable Revenue
Arrangements
  In
October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue
Arrangements,” which amends ASC 605-25.  ASU 2009-13 modifies how
consideration is allocated for the purpose of revenuerecognition in
multiple-element arrangements based on an element's estimated selling price if
vendor-specific or other third-party evidence of value is not available. ASU 2009-13 will be effective
for the Company on April 1, 2010, with early adoption permitted.  The
Company is currently evaluating the impact the adoption of ASU 2009-13 will have
on its financial position and results of operations.
  Equity:
Accounting for Distributions to Shareholders with Components of Stock and
Cash
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-01, “Equity: Accounting for
Distributions to Shareholders with Components of Stock and Cash,” (“ASU
2010-01”).  ASU 2010-01 amends the Accounting Standards Codification
(the “Codification”) to clarify that the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a potential
limitation on the total amount of cash that all shareholders can elect to
receive in the aggregate is considered a share issuance that is reflected in
earnings per share prospectively and is not a stock dividend. ASU 2010-01is
effective for fiscal years beginning after December 15, 2009.  Early
application is prohibited.  ASU 2010-01will not have a material impact
on the financial statements of the Company.
 
 Consolidation:
Accounting and Reporting for Decreases in Ownership of a Subsidiary – A Scope
Clarification
 
 In
January 2010, the FASB issued Accounting Standards Update 2010-02, “Consolidation: Accounting and
Reporting for Decreases in Ownership of a Subsidiary – A Scope
Clarification,” (“ASU 2010-02”).  ASU 2010-02 amends the
Codification to clarify that the scope of the decrease in ownership provisions
of ASC 810-10 and related guidance applies to:  (i) a subsidiary or
group of assets that is a business or nonprofit activity; (ii) a subsidiary that
is a business or nonprofit activity that is transferred to an equity method or
joint venture; (iii) an exchange of a group of assets that constitutes a
business or nonprofit activity for a non-controlling interest in an entity
(including an equity-method investee or joint venture); and (iv) a decrease in
ownership in a subsidiary that is not a business or nonprofit activity when the
substance of the transaction causing the decrease in ownership is not addressed
in other authoritative guidance.  If no other guidance exists, an
entity should apply the guidance in ASC 810-10.  ASU 2010-02 is
effective for fiscal years beginning on or after December 15,
2009.  ASU 2010-02 will not have a material impact on the financial
statements of the Company.
   Item3.  Quantitative and Qualitative Disclosures About
Market Risk.
  We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
  Item4T.  Controls and
Procedures.
  As of
December 31, 2009, our management carried out an evaluation, with the
participation of our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.
  In
designing and evaluating our disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934), management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the desired
control objectives, as ours are designed to do, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We believe that our disclosure controls and
procedures provide such reasonable assurance.
  No change
occurred in our internal controls concerning financial reporting during the
three month period ended December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
  50
 Index
  PART II. OTHER
INFORMATION
  Item
1.  Legal Proceedings.
  The
nature of our business exposes us to the potential for legal proceedings related
to labor and employment, personal injury, property damage, and environmental
matters. Although the ultimate outcome of any legal matter cannot be predicted
with certainty, based on present information, including our assessment of the
merits of each particular claim, as well as our current reserves and insurance
coverage, we do not expect that any known legal proceeding will in the
foreseeable future have a material adverse impact on our financial condition or
the results of our operations.
  Item
1A.  Risk Factors.
  There has
been no material change to our Risk Factors from those presented in our Form
10-K for the fiscal year ended March 31, 2009.
  Item
2.  Unregistered Sales of Equity Securities and Use of Proceeds.
  None.
  Item3.  Defaults Upon Senior Securities.
  None.
  Item 4.  Submission of Matters to a Vote of Security
Holders.
  None.
  Item5.  Other Information.
  None.
  Item 6.  Exhibits.
  (a)
Exhibits
  31.1
                    Chief
      Executive Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                    Chief
      Financial Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                    Chief
      Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                    Chief
      Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
  51
 Index
  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 8, 2010
                    
                    /s/
      Laurence S. LevyLaurence
      S. LevyChairman
      of the Board and ChiefExecutive
      Officer (Principal Executive Officer)Date:
      February 8, 2010
                    
                    /s/
      Joseph W. McHugh, Jr.Joseph
      W. McHugh, Jr.Chief
      Financial Officer (Principal Financial and Accounting
    Officer)
  52
 Index
 
 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.