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 September 30, 2009or£
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Transition Period
      from                    to





Commission
File Number: 001-33345


_______________





RAND
LOGISTICS, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            No.
      20-1195343(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)461
      Fifth Avenue, 25th
      FloorNew
      York, NY
            10017(Address
      of principal executive offices)
            (Zip
      Code)





Registrant’s
telephone number, including area code:


(212)
644-3450





Indicate
by checkmark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act of 1934during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes R
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
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
      accelerated filer £
              
              Accelerated
      filer £Non-accelerated
      filer £
              
              Smaller
      reporting company R


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





13,077,140
shares of Common Stock, par value $.0001, were outstanding at November 11,
2009.










RAND
LOGISTICS, INC.




INDEX




PART I. FINANCIAL INFORMATION
              1Item 1.  Financial Statements.
              1Item 2.  Management’s Discussion and Analysis of
      Financial Condition and Results of Operations.
              33Item 3.  Quantitative and Qualitative Disclosures
      About Market Risk.
              49Item 4.  Controls and Procedures.
              49PART II. OTHER INFORMATION
              50Item 1.  Legal Proceedings.
              50Item 1A.  Risk Factors.
              50Item 2.  Unregistered Sales of Equity Securities and
      Use of Proceeds.
              50Item 3.  Defaults Upon Senior
      Securities.
              50Item 4.  Submission of Matters to a Vote of Security
      Holders.
              50Item 5.  Other Information.
              50Item 6.  Exhibits.
              50


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)
 
 September
      30,
                
                
                March
      31,2009
                
                
                2009ASSETSCURRENTCash and cash
      equivalents
                
                $
                7,171
                
                
                $
                1,953Accounts receivable (Note
      3)
                
                
                17,386
                
                
                
                1,166Prepaid expenses and other
      current assets (Note 4)
                
                
                3,516
                
                
                
                3,008Income taxes
      receivable
                
                
                -
                
                
                
                22Deferred income
      taxes
                
                
                419
                
                
                
                418Total
      current assets
                
                
                28,492
                
                
                
                6,567PROPERTY
      AND EQUIPMENT, NET (Note 6)
                
                
                93,629
                
                
                
                86,233DEFERRED
      INCOME TAXES
                
                
                10,721
                
                
                
                12,140DEFERRED
      DRYDOCK COSTS, NET (Note 7)
                
                
                6,969
                
                
                
                7,274INTANGIBLE
      ASSETS, NET (Note 8)
                
                
                14,212
                
                
                
                13,497GOODWILL
      (Note 8)
                
                
                10,193
                
                
                
                10,193Total
      assets
                
                $
                164,216
                
                
                $
                135,904LIABILITIESCURRENTBank indebtedness (Note
      9)
                
                $
                11,424
                
                
                $
                2,786Accounts
    payable
                
                
                6,543
                
                
                
                4,131Accrued liabilities (Note
      10)
                
                
                10,806
                
                
                
                11,087Interest rate swap contracts
      (Note 18)
                
                
                2,714
                
                
                
                3,899Income taxes
      payable
                
                
                46
                
                
                
                –Deferred income
      taxes
                
                
                582
                
                
                
                480Current portion of long-term
      debt  (Note 11)
                
                
                4,561
                
                
                
                4,094Total
      current liabilities
                
                
                36,676
                
                
                
                26,477LONG-TERM
      DEBT  (Note 11)
                
                
                58,156
                
                
                
                54,240OTHER
      LIABILITIES
                
                
                232
                
                
                
                232DEFERRED
      INCOME TAXES
                
                
                14,683
                
                
                
                13,185Total
      liabilities
                
                
                109,747
                
                
                
                94,134COMMITMENTS
      AND CONTINGENCIES (Notes 12 and 13)STOCKHOLDERS’
      EQUITYPreferred stock, $.0001 par
      value,Authorized 1,000,000 shares,
      Issued and outstanding 300,000shares (Note
    14)
                
                
                14,900
                
                
                
                14,900Common stock, $.0001 par
      valueAuthorized 50,000,000 shares,
      Issued and outstanding12,950,357 shares (Note
      14)
                
                
                1
                
                
                
                1Additional paid-in
      capital
                
                
                62,107
                
                
                
                61,675Accumulated
      deficit
                
                
                (21,966
                )
                
                
                (29,228
                )Accumulated other
      comprehensive loss
                
                
                (573
                )
                
                
                (5,578
                )Total
      stockholders’ equity
                
                
                54,469
                
                
                
                41,770Total
      liabilities and stockholders’ equity
                
                $
                164,216
                
                
                $
                135,904
  The
accompanying notes are an integral part of these consolidated financial
statements.
  1
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Operations (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Three
      months ended
                
                
                Three
      months ended
                
                
                Six
      months ended
                
                
                Six
      months endedSeptember
      30, 2009
                
                
                September
      30, 2008
                
                
                September
      30, 2009
                
                
                September
      30, 2008REVENUEFreight
      and related revenue
                
                $
                28,136
                
                
                $
                32,325
                
                
                $
                52,281
                
                
                $
                59,626Fuel
      and other surcharges
                
                
                5,467
                
                
                
                13,161
                
                
                
                8,776
                
                
                
                22,579Outside
      voyage charter revenue
                
                
                2,640
                
                
                
                6,803
                
                
                
                4,437
                
                
                
                13,490TOTAL
      REVENUE
                
                
                36,243
                
                
                
                52,289
                
                
                
                65,494
                
                
                
                95,695EXPENSESOutside
      voyage charter fees (Note 15)
                
                
                2,634
                
                
                
                6,062
                
                
                
                4,420
                
                
                
                12,308Vessel
      operating expenses
                
                
                19,608
                
                
                
                30,356
                
                
                
                37,494
                
                
                
                55,911Repairs
      and maintenance
                
                
                63
                
                
                
                -
                
                
                
                717
                
                
                
                888General
      and administrative
                
                
                1,796
                
                
                
                2,662
                
                
                
                4,193
                
                
                
                5,131Depreciation
                
                
                2,373
                
                
                
                1,785
                
                
                
                4,381
                
                
                
                3,403Amortization
      of drydock costs
                
                
                602
                
                
                
                567
                
                
                
                1,180
                
                
                
                1,134Amortization
      of intangibles
                
                
                429
                
                
                
                440
                
                
                
                838
                
                
                
                871(Gain)
      loss on foreign exchange
                
                
                (39
                )
                
                
                (43
                )
                
                
                8
                
                
                
                (41
                )27,466
                
                
                
                41,829
                
                
                
                53,231
                
                
                
                79,605OPERATING
      INCOME
                
                
                8,777
                
                
                
                10,460
                
                
                
                12,263
                
                
                
                16,090OTHER
      (INCOME) AND EXPENSESInterest
      expense (Note 16)
                
                
                1,482
                
                
                
                1,799
                
                
                
                2,911
                
                
                
                3,473Interest
      income
                
                
                (4
                )
                
                
                (1
                )
                
                
                (5
                )
                
                
                (6
                )(Gain)
      loss on interest rate swap contracts
                  (Note
      18)
                
                
                (296
                )
                
                
                662
                
                
                
                (1,569
                )
                
                
                (572
                )1,182
                
                
                
                2,460
                
                
                
                1,337
                
                
                
                2,895INCOME
      BEFORE INCOME TAXES
                
                
                7,595
                
                
                
                8,000
                
                
                
                10,926
                
                
                
                13,195PROVISION  FOR
      INCOME TAXES (Note 5)Current
                
                
                69
                
                
                
                -
                
                
                
                69
                
                
                
                -Deferred
                
                
                1,629
                
                
                
                2,807
                
                
                
                2,675
                
                
                
                5,3231,698
                
                
                
                2,807
                
                
                
                2,744
                
                
                
                5,323NET
      INCOME
                
                
                5,897
                
                
                
                5,193
                
                
                
                8,182
                
                
                
                7,872PREFERRED
      STOCK DIVIDENDS
                
                
                477
                
                
                
                411
                
                
                
                920
                
                
                
                774NET
      INCOME APPLICABLE TO COMMON STOCKHOLDERS
                
                $
                5,420
                
                
                $
                4,782
                
                
                $
                7,262
                
                
                $
                7,098Net
      income per share basic (Note 19)
                
                $
                0.42
                
                
                $
                0.38
                
                
                $
                0.56
                
                
                $
                0.58Net
      income per share diluted
                
                $
                0.38
                
                
                $
                0.34
                
                
                $
                0.53
                
                
                $
                0.52Weighted
      average shares basic
                
                
                12,909,014
                
                
                
                12,436,508
                
                
                
                12,900,020
                
                
                
                12,271,685Weighted
      average shares diluted
                
                
                15,328,369
                
                
                
                15,345,199
                
                
                
                15,319,375
                
                
                
                15,075,817
  The
accompanying notes are an integral part of these consolidated financial
statements.
 2
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Stockholders’ Equity and Other Comprehensive Income (Loss)
(Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 
 Common
      Stock
                
                
                Preferred
      Stock
                
                
                Additional
                  Paid-In
                
                
                Accumulated
                
                
                Accumulated
                  Other
      Comprehensive Income
                
                
                Comprehensive
      Income
                
                
                Total
      Stockholders’Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                (Loss)
                
                
                (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
                
                
                $
                54,469
  The
accompanying notes are an integral part of these consolidated financial
statements.
 3
  RAND
LOGISTICS, INC.
 Consolidated
Statements of Cash Flows (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share data)
 Six
      months ended
                
                
                Six
      months endedSeptember
      30, 2009
                
                
                September
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet income
                
                $
                8,182
                
                
                $
                7,872Adjustments
      to reconcile net income to net cash usedby operating
      activitiesDepreciation and amortization
      of drydock costs
                
                
                5,561
                
                
                
                4,537Amortization of intangibles
      and deferred financing costs
                
                
                1,033
                
                
                
                1,085Deferred income
      taxes
                
                
                2,675
                
                
                
                5,263Gain on interest rate swap
      contracts
                
                
                (1,569
                )
                
                
                (572
                )Equity
      compensation
                
                
                432
                
                
                
                401Deferred drydock costs
      paid
                
                
                --
                
                
                
                (305
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (16,220
                )
                
                
                (16,271
                )Prepaid expenses and other
      current assets
                
                
                (508
                )
                
                
                (911
                )Accounts payable and accrued
      liabilities
                
                
                2,037
                
                
                
                (5,471
                )Other
    liabilities
                
                
                --
                
                
                
                232Income taxes
      payable
                
                
                69
                
                
                
                --1,692
                
                
                
                (4,140
                )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase of property and
      equipment
                
                
                (2,476
                )
                
                
                (6,074
                )Sale proceeds of retired
      vessel
                
                
                --
                
                
                
                250(2,476
                )
                
                
                (5,824
                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds from exercise of
      warrants
                
                
                --
                
                
                
                76Warrant
      extinguishment
                
                
                --
                
                
                
                (9
                )Long-term debt
      repayment
                
                
                (2,219
                )
                
                
                (1,145
                )Proceeds from bank
      indebtedness
                
                
                13,457
                
                
                
                21,781Repayment of bank
      indebtedness
                
                
                (5,189
                )
                
                
                (7,596
                )6,049
                
                
                
                13,107EFFECT
      OF FOREIGN EXCHANGE RATES ON CASH
                
                
                (47
                )
                
                
                (419
                )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                5,218
                
                
                
                2,724CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                
                
                1,953
                
                
                
                5,626CASH
      AND CASH EQUIVALENTS, END OF  PERIOD
                
                $
                7,171
                
                
                $
                8,350SUPPLEMENTAL
      CASH FLOW DISCLOSUREPayments for
      interest
                
                $
                2,670
                
                
                $
                2,796Payment of income
      taxes
                
                $
                35
                
                
                $
                --Unpaid purchase of property
      and equipment
                
                $
                77
                
                
                $
                314Shares issued under management
      bonus program
                
                $
                --
                
                
                $
                2,645
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 4
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES
  Basis of Presentation and
Consolidation
  The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America and include the
accounts of Rand Finance Corp. (“Rand Finance”) and Rand LL Holdings Corp., 100%
subsidiaries of the Company, and the accounts of Lower Lakes Towing Ltd. (“Lower
Lakes Towing”), Lower Lakes Transportation Company (“Lower Lakes
Transportation”) and Grand River Navigation Company, Inc. (“Grand River”), each
of which is a 100% subsidiary of Rand LL Holdings Corp.
  The
consolidated financial statements include the accounts of the Company and all of
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. In the opinion of management, the interim
financial statements contain all adjustments necessary (consisting of normal
recurring accruals) to present fairly the financial information contained
herein. Operating results for the interim period presented are not necessarily
indicative of the results to be expected for a full year, in part due to the
seasonal nature of the business. The comparative balance sheet amounts are
derived from the March 31, 2009 audited consolidated financial statements. The
statements and related notes have been prepared pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements that were included
in the Company’s Annual Report on Form 10-K for the period ended March 31,
2009.
  Cash
and Cash Equivalents
  The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
  Accounts
Receivable and Concentration of Credit Risk
  The
majority of the Company’s accounts receivable are amounts due from customers
with other accounts receivable including insurance and Goods and Services Tax
refunds accounting for the balance.  The majority of accounts
receivable are due within 30 to 60 days and are stated at amounts due from
customers net of an allowance for doubtful accounts. The Company extends credit
to its customers based upon its assessment of their credit worthiness and past
payment history. Accounts outstanding longer than the contractual payment terms
are considered past due. The Company’s allowance for doubtful accounts was $168
as of September 30, 2009 and $146 as of March 31, 2009.  The Company
has historically had no significant bad debts. Interest is not accrued on
outstanding receivables.
  5
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
                SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Revenue
and Operating Expenses Recognition
  The
Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis based on
origin-destination and cargo carried. In accordance with Accounting Standards
Codification (“ASC”) 605-20-25,“Revenue
Recognition-Services-Recognition” (formerly Emerging Issues Task Force
(“EITF”) Issue No. 91-09, “Revenue and Expense Recognition for
Freight Services in Progress” Method 5), voyage revenue is recognized
ratably over the duration of a voyage based on the relative transit time in each
reporting period, when the following conditions are met: the Company has a
signed contract of affreightment, the contract price is fixed or determinable
and collection is reasonably assured.  Included in freight billings
are other fees such as fuel surcharges and other freight surcharges, which
represent pass-through charges to customers for toll fees, lockage fees and ice
breaking fees paid to other parties.  Fuel surcharges are recognized
ratably over the duration of the voyage, while freight surcharges are recognized
when the associated costs are incurred. Freight surcharges are less than 5% of
total revenue.
  Marine
operating expenses such as crewing costs, fuel, tugs and insurance are
recognized as incurred or consumed and thereby is recognized ratably in each
reporting period. Repairs and maintenance and other insignificant costs are
recognized as incurred.
  The
Company subcontracts excess customer demand to other freight
providers.  Service to customers under such arrangements is
transparent to the customer and no additional services are being provided to
customers.  Consequently, revenues recognized for customers serviced
by freight subcontractors are recognized on the same basis as described
above.  Costs for subcontracted freight providers, presented as
“outside voyage charter fees” on the statement of operation, are recognized as
incurred and thereby are recognized ratably over the voyage.
  In
addition, all revenues are presented on a gross basis in accordance with the
guidance in ASC 605-45-05, “Revenue Recognition-Principal Agent
Considerations” (formerly EITF 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent.”).
  Fuel and Lubricant
Inventories
  Raw
materials, fuel, and operating supplies, are accounted for on a first-in,
first-out cost method (based on monthly averages). Raw materials and fuel are
stated at the lower of actual cost (first-in, first-out method) or market.
Operating supplies are stated at actual cost or average cost.
  Intangible Assets and
Goodwill
  Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and contracts. The
intangibles are amortized as follows:
  Trademarks
      and trade names
                    Non-competition
      agreements
                    Customer
      relationships and contracts
                  
                  10
      years straight-line
                    4
      years straight-line
                    15
      years straight-line
   6
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 1.
              SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Property and Equipment
  Property
and equipment are recorded at cost.  Depreciation methods for capital
assets are as follows:
  Vessels
                      Leasehold
      improvements
                      Vehicles
                      Furniture
      and equipment
                      Computer
      equipment
                      Communication
      equipment
                  
                  4 -
      25 years straight-line
                      7 -
      11 years straight-line
                      20%
      declining-balance
                      20%
      declining-balance
                      45%
      declining-balance
                      20%
      declining-balance
 Impairment
of Fixed Assets and Intangible Assets with Finite Lives
  Unlike
goodwill and indefinite-lived intangible assets, 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 impairment test employed is based on whether
the intent is to hold the asset for continued use or to hold the asset for sale.
If the intent is to hold the asset for continued use, the impairment test
involves a comparison of undiscounted cash flows against the carrying value of
the asset as an initial test. If the carrying value of such asset exceeds the
undiscounted cash flow, the asset would be deemed to be impaired. Impairment
would then be measured as the difference between the fair value of the fixed or
amortizing intangible asset and the carrying value 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
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
              SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Impairment
of Goodwill and Indefinite-Lived Intangible Assets
  The
Company annually reviews the carrying value of intangible assets not subject to
amortization, which is its goodwill, to determine whether impairment may exist.
ASC 350 “Intangibles-Goodwill
and Other” (formerly FASB Statement of Financial Accounting Standards No.
142, “Goodwill and Other
Intangible Assets,”) requires that goodwill and certain intangible assets
be assessed annually for impairment using fair value measurement techniques.
Specifically, goodwill impairment is determined using a two-step process. The
first step of the goodwill impairment test is used to identify potential
impairment by comparing the fair value of a reporting unit with its carrying
amount, including goodwill. The estimates of fair value of the Company’s two
reporting units, which are the Company’s Canadian and US operations (excluding
the parent), are determined using various valuation techniques with the primary
techniques being a discounted cash flow analysis and peer analysis. A discounted
cash flow analysis requires one to make various judgmental assumptions including
assumptions about future cash flows, growth rates, and discount rates. The
assumptions about future cash flows and growth rates are based on the Company’s
forecast and long-term estimates. Discount rate assumptions are based on an
assessment of the risk inherent in the respective reporting units. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value,
the second step of the goodwill impairment test is performed to measure the
amount of impairment loss, if any. The second step of the goodwill impairment
test compares the implied fair value of the reporting unit’s goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit’s
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair value of goodwill
is determined in the same manner as the amount of goodwill recognized in a
business combination. That is, the fair value of the reporting unit is allocated
to all of the assets and liabilities of that unit (including any unrecognized
intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the purchase price paid
to acquire the reporting unit.  As of March 31, 2009, the Company
conducted an annual test and determined that the fair value of its two reporting
units exceeded their carrying amounts, such that goodwill of the reporting units
were considered not impaired and the second step of the impairment testing was
not necessary. There were no events or changes in circumstances during the six
month period ended September 30, 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
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
              SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Repairs
and Maintenance
  The
Company’s vessels require repairs and maintenance each year to ensure the fleet
is operating efficiently during the shipping season.  The majority of
repairs and maintenance are completed in January, February and March of each
year when the vessels are inactive.  The Company expenses such routine
repairs and maintenance costs.  Significant repairs to the Company’s
vessels, whether owned or available to the Company under a time charter, such as
major engine overhauls and major hull steel repairs, are capitalized and
amortized over the remaining life of the asset repaired, or remaining lease
term, whether it is engine equipment, the vessel, or leasehold improvements to a
vessel leased under time charter
agreement.
  Presentation
of Taxes Collected from Customers (Gross Versus Net)
  The
Company has adopted ASC 605-45-50 “Revenue Recognition-Principal Agent
Consideration-Disclosure” (formerly “EITF Issue No. 06-3, “How Taxes Collected from Customers
and Remitted to Governmental Authorities Should be Presented in the Income
Statement (That is, Gross Versus Net Presentation)”).  The
Company accounts for sales taxes imposed on its services on a net basis in the
consolidated statement of operations.
  Income
Taxes
  The
Company accounts for income taxes in accordance with ASC 740 “Income Taxes” (Formerly SFAS
No. 109, “Accounting for
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”(formerly FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an Interpretation of FASB Statement No. 109”) 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 in accordance with ASC 740-10-25 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 September 30, 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
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
              SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  There
have been no recent examinations by the Internal Revenue Service. The Company’s
primary state tax jurisdictions are Michigan, Ohio and New York and its only
international jurisdiction is Canada. The following table summarizes the open
tax years for each major jurisdiction:
  Jurisdiction
              Open Tax YearsFederal
      (USA)
              2005
      – 2008Michigan
              2005
      – 2008Ohio
              2005
      – 2008New
      York
              2005
      – 2008Federal
      (Canada)
              2003
      – 2008Ontario
              2003
      – 2008
  Foreign
Currency Translation
  The
Company uses the U.S. Dollar as its reporting currency.  The
functional currency of Lower Lakes Towing Ltd. is the Canadian
Dollar.  The functional currency of the Company’s U.S. subsidiaries is
the U.S. Dollar.  In accordance with ASC 830 “Foreign Currency Matters”
(formerly SFAS No. 52, “Foreign Currency
Translation,”) assets and liabilities denominated in foreign currencies
are translated into U.S. Dollars at the rate of exchange at the balance sheet
date, while revenue and expenses are translated at the weighted average rates
prevailing during the respective periods.  Components of stockholders’
equity are translated at historical rates.  Exchange gains and losses
resulting from translation are reflected in accumulated other comprehensive
income or loss.
  Advertising
Costs
  The
Company expenses all advertising costs as incurred. These costs are included in
administration costs and were insignificant during the periods
presented.
  Estimates
and Measurement Uncertainty
  The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period.  Significant estimates included
in the preparation of these financial statements include the assumptions used in
determining whether assets are impaired and the assumptions used in determining
the valuation allowance for deferred income tax assets.  Actual
results could differ from those estimates.
  Stock-based
Compensation
  The
Company has adopted ASC 718 “Compensation-Stock
Compensation” (formerly SFAS No. 123(R), “Share-Based Payment”), using
the modified prospective method.  This method requires compensation
cost to be recognized beginning on the effective date based on the requirements
of 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.
  10
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  1.
              SIGNIFICANT
      ACCOUNTING POLICIES (continued)
  Interest
Rate Swap Contracts
  The
Company accounts for its two interest rate swap contracts on its term debt
utilizing ASC 815 “Derivatives
and Hedging” (formerly SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended). All changes in the fair
value of the swap contracts are recorded in earnings and the fair value of
settlement cost to terminate the contracts is included in current liabilities on
the Consolidated Balance Sheet.
  Variable
Interest Entities
  In 2006,
the Company implemented ASC 810-10-05 “Consolidation” (formerly FASB
Interpretation No. 46R, “Consolidation of Variable Interest
Entities: Interpretations of FASB Interpretation No. 46”), which requires
that the Company consolidate certain entities on the basis other than through
ownership of a voting interest of the entity (see Note 21). Though the Voyageur
group of companies is a variable interest entity for the Company, it does not
meet the criteria for consolidation and hence is not consolidated.
  2.
              RECENTLY
      ISSUED PRONOUNCEMENTS
  The
Hierarchy of Generally Accepted Accounting Principles
  In
June 2009, the FASB issued ASC 105, “Generally Accepted Accounting
Principles” (formerly Statement No. 168,“The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162”). The objective of ASC 105 is
to establish the FASB Accounting Standards Codification
as the source of authoritative accounting principles recognized by the FASB to
be applied by nongovernmental entities in the preparation of financial
statements in conformity with GAAP. The standard is effective for interim and
annual periods ending after September 15, 2009. 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” (formerly SFAS No. 157, “Fair Value Measurements”).
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
 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 issued ASC 820-10, “Fair Value Measurement and
Disclosures-Overall” (formerly FASB Staff Position No. FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”). 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 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” (formerly SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”). 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.
  12
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  2.
              RECENTLY
      ISSUED PRONOUNCEMENTS (continued)
  Derivative
Instruments and Hedging Activities
  In March
2008 FASB issued ASC 815 “Derivatives and Hedging”
(formerly SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”). 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.
  Determination
of the Useful Life of Intangible Assets
  In April
2008, the FASB issued ASC 350-30-50 “Intangibles—Goodwill and
Other” (formerly FASB Staff Position No. 142-3, “Determination of the Useful Life of
Intangible Assets”), which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under 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 issued ASC 805-20-25 “Business Combinations”
(formerly FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies”). ASC 805-20-25 address application issues raised on
initial recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination. 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 issued ASC 320-10-65 “Investments-Debt and Equity
Securities” (formerly FASB Staff Position Nos. FAS 115-2 and FAS 124-2,
“Recognition and Presentation
of Other-Than-Temporary Impairments”). 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.
  13
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  2.
              RECENTLY ISSUED PRONOUNCEMENTS
      (continued)
  Interim
Disclosures about Fair Value of Financial Instruments
  In April
2009, the FASB issued ASC 825-10-65 “Financial Instruments”
(formerly FAS 107-1 and Accounting Principles Board (“APB”) No. 28-1, “Interim Disclosures about Fair
Value of 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” (formerly
SFAS No. 165, “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.
  Consolidation
of Variable Interest Entities
  In June
2009 the FASB issued ASC 810-10-05 “Consolidation” (formerly SFAS
167, “Amendments to FASB
Interpretation No. 46(R)”). 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 2008, the FASB issued ASC 860-10-65, “Intangibles-Goodwill and
Other” (formerly FSP FAS No. 140-4 and FIN 46R-8 “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities”). ASC 860-10-65 require additional disclosure about
transfers of financial assets and involvement with variable interest entities.
The requirements apply to transferors, sponsors, servicers, primary
beneficiaries and holders of significant variable interests in a variable
interest entity or qualifying special purpose entity. ASC 860-10-65 is effective
for financial statements issued for reporting periods ending after December 15,
2008. The Company adopted ASC 860-10-65 as of the quarter ending December 31,
2008. ASC 860-10-65 affect only disclosures and did not have a material impact
on the Company’s consolidated financial statements.
  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 will have no
impact on financial condition, results of operations or cash flows of the
Company.
  14
 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)
  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.
  3.
              ACCOUNTS
      RECEIVABLE
  Trade
receivables are presented net of an allowance for doubtful
accounts.  The allowance was $168 as of September 30, 2009 and $146 as
of March 31, 2009. The allowance for doubtful accounts reflects estimates of
probable losses in trade receivables.  The Company manages and
evaluates the collectability of its trade receivables as
follows:  Management reviews aged accounts receivable listings and
contact is made with customers that have extended beyond agreed upon credit
terms. Senior management and operations are notified such that when they are
contacted by such customers for a future delivery, the customer can be requested
to pay any past amounts, before any future cargo is booked for shipment.
Customer credit risk is also managed by reviewing the history of payments by the
customer, the size and credit quality of the customer, the period of time
remaining in the shipping season and the demand for future cargos.
  4.
              PREPAID
      EXPENSES AND OTHER CURRENT ASSETS
  Prepaid
expenses and other current assets are comprised of the following:
  September
      30,
              
              
              March
      31,2009
              
              
              2009Prepaid
      insurance
              
              $
              561
              
              
              $
              861Fuel
      and lubricants
              
              
              2,578
              
              
              
              1,481Deposits
      and other prepaids
              
              
              377
              
              
              
              666$
              3,516
              
              
              $
              3,008
  5.
              INCOME
      TAXES
  The
Company's effective tax rate was 25.1% for the six months ended September 30,
2009 compared to 40.3% for the six months ended September 30, 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 due to the change in management compensation from cash to stock which
changed its characterization from deductible to non-deductible on the Company’s
Canadian tax return which resulted in an additional $677 of income tax
expense.
  15
 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:
  September
      30,
              
              
              March
      31,2009
              
              
              2009CostVessels
              
              $
              109,013
              
              
              $
              96,240Leasehold
      improvements
              
              
              2,138
              
              
              
              2,110Furniture
      and equipment
              
              
              246
              
              
              
              209Vehicles
              
              
              21
              
              
              
              18Computer,
      communication equipment and purchased software
              
              
              2,244
              
              
              
              1,978$
              113,662
              
              
              $
              100,555Accumulated
      depreciationVessels
              
              $
              18,888
              
              
              $
              13,537Leasehold
      improvements
              
              
              520
              
              
              
              425Furniture
      and equipment
              
              
              58
              
              
              
              49Vehicles
              
              
              5
              
              
              
              3Computer,
      communication equipment and purchased software
              
              
              562
              
              
              
              30820,033
              
              
              
              14,322$
              93,629
              
              
              $
              86,233
  7.
              DEFERRED
      DRYDOCK COSTS
  Deferred
drydock costs are comprised of the following:
  September
      30,
              
              
              March
      31,2009
              
              
              2009Drydock
      expenditures
              
              $
              12,259
              
              
              $
              10,935Accumulated
      amortization
              
              
              5,290
              
              
              
              3,661$
              6,969
              
              
              $
              7,274
  The
following table shows periodic deferrals of drydock cost and
amortization.
  Balance
      as of March 31, 2008
              
              $
              9,082Drydock
      expenditure paid and accrued
              
              
              1,400Amortization
      of drydock cost
              
              
              (2,141
              )Foreign
      currency translation adjustment
              
              
              (1,067
              )Balance
      as of March 31, 2009
              
              $
              7,274Amortization
      of drydock cost
              
              
              (578
              )Foreign
      currency translation adjustment
              
              
              437Balance
      as of June 30, 2009
              
              $
              7,133Amortization
      of drydock cost
              
              
              (602
              )Foreign
      currency translation adjustment
              
              
              438Balance
      as of September 30, 2009
              
              $
              6,969
  16
 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:
  September
      30,
                  2009
              
              
              March
      31,
                  2009Intangible
      assetsDeferred financing
      costs
              
              $
              2,079
              
              
              $
              1,886Trademarks and trade
      names
              
              
              973
              
              
              
              868Non-competition
      agreements
              
              
              2,229
              
              
              
              1,989Customer relationships and
      contracts
              
              
              15,433
              
              
              
              13,585Total identifiable
      intangibles
              
              $
              20,714
              
              
              $
              18,328Accumulated
      amortizationDeferred financing
      costs
              
              $
              671
              
              
              $
              426Trademarks and trade
      names
              
              
              348
              
              
              
              267Non-competition
      agreements
              
              
              2,215
              
              
              
              1,700Customer relationships and
      contracts
              
              
              3,268
              
              
              
              2,4386,502
              
              
              
              4,831Total
      intangible assets
              
              $
              14,212
              
              
              $
              13,497Goodwill
              
              $
              10,193
              
              
              $
              10,193
  Intangible
asset amortization over the next five years is estimated as
follows:
  Period
      ending September 30, 2010
              
              $
              1,543Period
      ending September 30, 2011
              
              
              1,529Period
      ending September 30, 2012
              
              
              1,528Period
      ending September 30, 2013
              
              
              1,327Period
      ending September 30, 2014
              
              
              1,126$
              7,053
  9.
              BANK
      INDEBTEDNESS
  As
discussed in detail in Note 11, the Company amended and restated the Credit
Agreement with its senior lender on February 13, 2008.  At September
30, 2009 and March 31, 2009, the Company had authorized operating lines of
credit under its amended and restated credit agreement in the amounts of CDN
$13,500 and US $13,500 with its senior lender, and was utilizing CDN $7,005 at
September 30, 2009 (CDN $2,359 at March 31, 2009) and US $4,882 at September 30,
2009 (US $916 at March 31, 2009), and maintained letters of credit of CDN
$1,397.  The line of credit bears interest at Canadian Prime Rate plus
2.75% or Canadian 30 day BA rate plus 3.75% on Canadian dollar borrowings, and
U.S. Base rate plus 2.75% or LIBOR plus 3.75% on U.S. Dollar borrowings and is
secured under the same terms and has the same financial covenants as described
in Note 11.  The effective interest rates on the operating lines of
credit at September 30, 2009 were 4.15% and March 31, 2009 were 4.41% on the
Canadian line of credit and 4.02% and 5.06% respectively on the U.S. operating
line of credit.  Available collateral for borrowings and letters of
credit are based on eligible accounts receivable, which are limited to 85% of
those receivables that are not over 90 days old, not in excess of 20% for one
customer in each line and certain other standard limitations. As of September
30, 2009 the Company had additional credit availability of $399 based on
eligible receivables.
  17
 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:
  September
      30,
              
              
              March
      31,2009
              
              
              2009Payroll
      compensation and benefits
              
              $
              2,740
              
              
              $
              1,879Preferred
      stock dividends
              
              
              4,101
              
              
              
              3,180Professional
      fees
              
              
              571
              
              
              
              749Interest
              
              
              445
              
              
              
              401Winter
      work and capital expenditures
              
              
              328
              
              
              
              2,731Capital
      and franchise taxes
              
              
              274
              
              
              
              307Other
              
              
              2,347
              
              
              
              1,840$
              10,806
              
              
              $
              11,087
 
 11.
              LONG-TERM
      DEBT
  On
February 13, 2008, Lower Lakes Towing, Lower Lakes Transportation and Grand
River, as borrowers, Rand LL Holdings, Rand Finance and Rand Logistics, Inc., as
guarantors, General Electric Capital Corporation, as agent and lender, and
certain other lenders, entered into an Amended and Restated Credit Agreement
which (i) amended and restated the Credit Agreement to which the borrowers are a
party, dated as of March 3, 2006, in its entirety, (ii) restructured the
tranches of loans provided for under the 2006 Credit Agreement and advanced
certain new loans, (iii) financed, in part, the acquisition of the three vessels
by Grand River from WMS, and (iv) provided working capital financing, funds for
other general corporate purposes and funds for other permitted
purposes.  The Amended and Restated Credit Agreement provided for (i)
a revolving credit facility under which Lower Lakes Towing may borrow up to CDN
$13,500 with a seasonal overadvance facility of US $8,000 (US $10,000 for
calendar year 2008 only), and a swing line facility of CDN $4,000 subject to
limitations, (ii) a revolving credit facility under which Lower Lakes
Transportation may borrow up to US $13,500 with a seasonal overadvance facility
of US $8,000 (US $10,000 for calendar year 2008 only), and a swing line facility
of US $4,000 subject to limitations, (iii) a Canadian dollar denominated
term loan facility under which Lower Lakes Towing borrowed CDN $41,700 (iv)
a US dollar denominated term loan facility under which Grand River borrowed US
$22,000 (v) a Canadian dollar denominated “Engine” term loan facility under
which Lower Lakes Towing borrowed CDN $8,000.
  Under the
Amended and Restated Credit Agreement, the revolving credit facilities and swing
line loans expire on April 1, 2013.  The outstanding principal amount
of the Canadian term loan borrowings are repayable as follows: (i) quarterly
payments of CDN $695 commencing September 1, 2008 and ending March 1, 2013 and
(ii) a final payment in the outstanding principal amount of the Canadian term
loan shall be payable upon the Canadian term loan facility’s maturity on April
1, 2013.  The outstanding principal amount of the US term loan
borrowings are repayable as follows: (i) quarterly payments of US $367
commencing September 1, 2008 and ending on March 1, 2013 and (iii) a final
payment in the outstanding principal amount of the US term loan shall be payable
upon the US term loan facility’s maturity on April 1, 2013.  The
outstanding principal amount of the Canadian “Engine” term loan borrowings are
repayable as follows: (i) quarterly payments of CDN $133 commencing quarterly
September 1, 2008 and ending March 1, 2013 and (iii) a final payment in the
outstanding principal amount of the Engine term loan shall be payable upon the
Engine term loan facility’s maturity on April 1, 2013.
  
 18
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 11.
              LONG-TERM
      DEBT (continued)
  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 those covenants as of September
30, 2009.
  
 19
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 11.
              LONG-TERM
      DEBT (continued)
  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 September 30, 2009, including the
effect from interest rate swap contracts, were 7.84% (7.84% at March 31, 2009)
on the Canadian term loan, 9.09% (9.09% at March 31, 2009) on the Canadian
engine loan and 7.40% (7.40% at March 31, 2009) on the US term loan. The actual
interest rate charged without the effect of interest rate swap contracts were
4.18% (4.59% at March 31, 2009) on the Canadian term loan, 5.43% (5.84% at March
31, 2009) on the Canadian engine loan and 4.42% (5.01% at March 31, 2009) on the
US term loan.
  September
      30,
                  2009
              
              
              March
      31,
                  2009a)
              Canadian
      term loan bearing interest at Canadian Prime rate plus 2.75% or Canadian
      BA rate plus 3.75% at the Company’s option.  The loan is
      repayable over a five-year term until April 1, 2013 with current quarterly
      payments of CDN $695 commencing September 1, 2008 until March 1, 2013 and
      the balance due April 1, 2013.  The term loan is collateralized
      by the existing and newly acquired assets of the Company.
              
              $
              35,701
              
              
              $
              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.
              
              
              6,849
              
              
              
              6,026c)
              US
      term loan bearing interest at LIBOR rate plus 3.75% or US base rate plus
      2.75% at the Company’s option. The loan is repayable over a five-year term
      until April 1, 2013 with current quarterly payments of US $367 commencing
      September 1, 2008 until March 1, 2013 and the balance due April 1,
      2013.  The term loan is collateralized by the existing and newly
      acquired assets of the Company.
              
              
              20,167
              
              
              
              20,900$
              62,717
              
              
              $
              58,334Less
      amounts due within 12 months
              
              
              4,561
              
              
              
              4,094$
              58,156
              
              
              $
              54,240
 
 20
 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 September 30, 2010
              
              $
              4,561Period
      ending September 30, 2011
              
              
              4,561Period
      ending September 30, 2012
              
              
              4,562Period
      ending September 30, 2013
              
              
              49,033$
              62,717
 
  12.
              COMMITMENTS
  The
Company did not have any leases which met the criteria of a capital
lease.  Leases which do not qualify as a capital lease are classified
as operating leases.  Operating lease rental and sublease rental
payments included in general and administrative expenses are as
follows:
  Three
      months ended
                September
      30, 2009
              
              
              Three
      months ended
                September
      30, 2008
              
              
              Six
      months ended
                September
      30, 2009
              
              
              Six
      months ended
                September
      30, 2008Operating
      lease
              
              $
              59
              
              
              $
              63
              
              
              $
              117
              
              
              $
              121Operating
      sublease
              
              
              36
              
              
              
              36
              
              
              
              72
              
              
              
              72$
              95
              
              
              $
              99
              
              
              $
              189
              
              
              $
              193
 
  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 September 30, 2009
and 2008, $464 for six months period ended September 30, 2009 and $463 for six
months period ended September 30, 2008. The lease was amended on February 22,
2008 to provide a lease payment deferment in return for leasehold improvements.
Total charter commitments for the McKee vessel for the term of the lease before
inflation adjustment are given below.  The lease contains a clause
whereby annual payments escalate at the Consumer Price Index, capped at a
maximum annual increase of 3%.
  Period
      ending September 30, 2010
              
              $
              696Period
      ending September 30, 2011
              
              
              696Period
      ending September 30, 2012
              
              
              696Period
      ending September 30, 2013
              
              
              696Period
      ending September 30, 2014
              
              
              696Thereafter
              
              
              3,015$
              6,495
 
  The
Company’s future minimum rental commitments under other operating leases are as
follows.
  Period
      ending September 30, 2010
              
              $
              218Period
      ending September 30, 2011
              
              
              177Period
      ending September 30, 2012
              
              
              115Period
      ending September 30, 2013
              
              
              73Period
      ending September 30, 2014
              
              
              65Thereafter
              
              
              296$
              944
  21
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 13.
              CONTINGENCIES
  Rand is
not involved in any legal proceedings which are expected to have a significant
effect on its business, financial position, results of operations or liquidity,
nor is the Company aware of any proceedings that are pending or threatened which
may have a significant effect on the Company’s business, financial position, and
results of operations or liquidity.  From time to time, Lower Lakes
may be subject to legal proceedings and claims in the ordinary course of
business, involving principally commercial charter party disputes.  It
is expected that larger claims would be covered by insurance if they involve
liabilities that may arise from collision, other marine casualty, damage to
cargoes, oil pollution, death or personal injuries to crew, subject to customary
deductibles.  Those claims, even if lacking merit, could result in the
expenditure of significant financial and managerial resources.  Most
of these claims are for insignificant amounts.  Given Management’s
assessment that losses were probable and reasonably estimable, and based on
advice from the Company’s outside counsel, a provision of $654 as of September
30, 2009 and $604 as of March 31, 2009 has been recorded for various
claims.  Management does not anticipate material variations in actual
losses from the amounts accrued related to these claims.
  On August
27, 2007, in connection with the COA and Option Agreement (see Note 21) with
Voyageur, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE
Canada.  Lower Lakes’ maximum future payments under the Guarantee are
limited to the Guaranteed Obligations plus the costs and expenses GE Canada
incurs while enforcing its rights under the Guarantee.  Lower Lakes’
obligations under the Guarantee shall become due should Voyageur fail to meet
certain financial covenants under the terms of its loan from GE Canada or if
Voyageur breaches certain of its obligations under the COA.  Lower
Lakes has several options available to it in the event that GE Canada intends to
draw under the Guarantee, including (i) the right to exercise its option for the
Trader under the Option Agreement and (ii) the right to make a subordinated
secured loan to Voyageur in an amount at least equal to the amount intended to
be drawn by GE Canada on terms as are reasonably satisfactory to GE Canada and
Voyageur.
  The
Company has determined that there is no carrying amount of the liability, for
the guarantor’s obligations under the guarantees under ASC 460-10-05 “Guarantees” (formerly FIN 45).
  22
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 14.
              STOCKHOLDERS’
      EQUITY
  At
December 31, 2005, 10,100,000 shares of common stock were reserved for issuance
upon exercise of redeemable warrants and the underwriter’s unit purchase
option.  Each redeemable warrant allowed its holder to purchase one
fully paid and non-assessable share of the Company’s common stock at the price
of $5.00 per share.  The redeemable warrants expired on October 26,
2008. The underwriter’s options and redeemable warrants issued in conjunction
with the Company’s initial public offering are equity linked derivatives and
accordingly represent off-balance sheet arrangements.  The
underwriter’s options and redeemable warrants meet the scope exception in ASC
815-10-15 “Derivatives and
Hedging” (formerly paragraph 11(a) of SFAS 133) 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 is net of $0.50 stock warrant inducement discount per stock
warrant from May 4, 2007 until July 13, 2007 and $5.00 at all other
periods.
  
 23
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 14.
              STOCKHOLDERS’
      EQUITY (continued)
  EarlyBirdCapital,
who acted as the representative to the underwriters in connection with the
Company’s initial public offering, holds an underwriter’s option to purchase up
to 300,000 units at a purchase price of $9.90 per unit.  Each unit
consists of one share of common stock and two warrants. Each warrant entitles
the holder to purchase one share of common stock at an exercise price of
$6.25.  If the option is exercised in full, the Company would receive
gross proceeds of $2,970 and issue an additional 300,000 units consisting of
300,000 shares of the Company’s common stock and 600,000 warrants. If all of
these warrants are exercised, the Company would issue an additional 600,000
shares of common stock and receive additional gross proceeds of
$3,750.  The Company estimated that the fair value of this option at
the date of grant was approximately $558 ($1.86 per Unit) using a Black-Scholes
option-pricing model. The fair value of the option has been estimated as of the
date of grant using the following assumptions: (1) expected volatility of
47.79%, (2) risk-free interest rate of 3.34% and (3) expected life of 5
years.  The option may be exercised by the holder for cash or on a
“cashless” basis, at the holder’s option, such that the holder may use the
appreciated value of the option (the difference between the exercise prices of
the option and the underlying warrants and the market price of the units and
underlying securities) to exercise the option without the payment of any
cash.
  EarlyBirdCapital’s
option was purchased for a de minimus amount and became exercisable in March,
2006, upon the consummation of the acquisition of Lower Lakes Towing Ltd. The
underwriter’s option 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 September 30, 2009 was $4,101 and at March 31, 2009 was
$3,180. As of September 30, 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 as per the
covenant in the Amended and Restated Credit Agreement.
  
 24
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 14.
              STOCKHOLDERS’
      EQUITY (continued)
  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 has recorded expense
of $361 in both 2008 and 2009. Pursuant to the Award Agreements: 44% of the
Restricted Shares vested on the date of the award; 6% of the Restricted Shares
vested on March 31, 2007; 25% of the Restricted Shares vested on March
31, 2008; and 25% of the Restricted Shares vested on March 31, 2009. However, in
order to facilitate the Company’s federal and state tax withholding obligations
in respect of the Restricted Stock awards, some of the Restricted Shares which
vested on the date of the award were withheld by the Company which paid the
withholding taxes, resulting in 120,400 shares actually issued. No new grants of
restricted shares have been issued to Management since January
2007.
  Since
January 2007, share-based compensation has been granted to Management and
directors from time to time.  The Company had no surviving,
outstanding share-based compensation agreements with employees or directors
prior to that date except as described above.  The Company has
reserved 2,500,000 shares for grants to management and directors under the
Company’s 2007 Long Term Incentive Plan (“LTIP”) for Employees, Officers,
Directors and Consultants.  At September 30, 2009, a total of
1,466,605 shares were available under the LTIP for future awards.
  For all
share-based compensation, as employees and directors render service over the
vesting periods, expense is recorded to the same line items used for cash
compensation. Generally this expense is for the straight-line amortization of
the grant date fair market value adjusted for expected forfeitures. Other
capital is correspondingly increased as the compensation is recorded. Grant date
fair market value for all non-option share-based compensation is the closing
market value on the date of grant.
  The
general characteristics of issued types of share-based awards granted under the
LTIP through September 30, 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.  The second award in the amount of 4,384 shares for the
services through June 30, 2008 was made on August 7, 2008.  The third
award in the amount of 4,976 shares for the services through September 30, 2008
was made on October 21, 2008.  The fourth award in the amount of 6,588
shares for the services though December 31, 2008 was made on January 12,
2009.
 
 On July
31, 2008, Rand’s Board of Directors authorized management to make payments
effective as of that date to the participants of the management bonus program as
discussed in detail in Note 20. Pursuant to the terms of the management bonus
program, Rand issued 478,232 shares of common stock to such employee
participants.
  25
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 14.
              STOCKHOLDERS’
      EQUITY (continued)
  Stock Options — Stock options
granted to management employees vest over three years in equal annual
installments. All options issued through March 31, 2009, expire ten years from
the date of grant. Stock option grant date fair values are determined at the
date of grant using a Black-Scholes option pricing model, a closed-form fair
value model, based on market prices at the date of grant. At each grant date the
Company has estimated a dividend yield of 0%.  The weighted average
risk free interest rate within the contractual life of the option is based on
the U.S. Treasury yield curve in effect at the time of the grant. This was 3.76%
for the fiscal 2008 (February 2008) grants and 4.14% for the fiscal 2009 (July
2008) grants.  The expected term represents the period of time the
grants are expected to be outstanding, generally six years and has been computed
using the “simplified method” per the Securities and Exchange Commission Staff
Accounting Bulletin 107.  This method was allowed until December 31,
2007.  However, on December 21, 2007, the SEC’s Staff issued
Accounting Bulletin No. 110 “SAB 110”, which will allow a company to continue to
use the “simplified method” under certain circumstances. We will continue to use
the simplified method as we do not have sufficient historical data to estimate
the expected term of share based award.  Expected volatility for
grants is based on implied volatility of the Company’s closing stock price in
the period of time from the registration and listing of the stock until the time
of each grant since that period is currently shorter than the expected life of
the options.  Expected volatility was 36.99% for the 2008 grants and
39.49% for the 2009 grants. Options outstanding (479,785) at
September 30, 2009, had a remaining weighted average contractual life
of approximately eight years and five months. The Company has recorded
compensation expenses of $262 for the six month period ended September 30, 2009
($196 for the six month period ended September 30, 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 September 30,
2009.
 Shares issued under employees’
retirement savings plan-As of September 30, 2009, the Company had issued
an aggregate of 59,430 shares to the individual retirement plans of all eligible
Canadian employees for the period of June 1, 2009 through August 31,
2009.  The Canadian employees’ plans are managed by an independent
brokerage. The shares were issued under the LTIP. These shares are unrestricted
but subject to the Company’s Insider Trading Policy, and vest immediately. 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. For three month and six month ended September 30, 2009 the Company had
granted $170 of equity ($ Nil for 2008) of such accrued compensation
expense.
  15.
              OUTSIDE
      VOYAGE CHARTER FEES
  Outside
voyage charter fees relate to the subcontracting of external vessels chartered
to service the Company’s customers to supplement the existing shipments made by
the Company’s operated vessels.
  16.
              INTEREST
      EXPENSE
  Interest
expense is comprised of the following:
  Three
      months
                ended
                September
      30, 2009
              
              
              Three
      months
                ended
                September
      30, 2008
              
              
              Six
      months
                ended
                September
      30, 2009
              
              
              Six
      months
                ended
                September
      30, 2008Bank
      indebtedness
              
              $
              145
              
              
              $
              263
              
              
              $
              279
              
              
              $
              443Amortization
      of deferred financing costs
              
              
              99
              
              
              
              106
              
              
              
              195
              
              
              
              214Long-term
      debt – senior
              
              
              689
              
              
              
              1,217
              
              
              
              1,409
              
              
              
              2,534Interest
      rate swap
              
              
              549
              
              
              
              213
              
              
              
              1,028
              
              
              
              282$
              1,482
              
              
              $
              1,799
              
              
              $
              2,911
              
              
              $
              3,473
  26
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
  17.
              SEGMENT
      INFORMATION
  The
Company has identified only one reportable segment under ASC 280, “Segment Reporting” (formerly
Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an
Enterprise and Related Information”).
  Information
about geographic operations is as follows:
  Three
      months ended
                September 30,
      2009
              
              
              Three
      months ended
                September
      30, 2008
              
              
              Six
      months ended
                September
      30, 2009
              
              
              Six
      months ended
                September
      30, 2008Revenue
      by countryCanada
              
              $
              22,985
              
              
              $
              35,163
              
              
              $
              42,354
              
              
              $
              62,533United
      States
              
              
              13,258
              
              
              
              17,126
              
              
              
              23,140
              
              
              
              33,162$
              36,243
              
              
              $
              52,289
              
              
              $
              65,494
              
              
              $
              95,695
  Revenues
from external customers are allocated based on the country of the legal entity
of the Company in which the revenues were recognized.
  September
      30,
                2009
              
              
              March
      31,
                2009Property
      and equipment by countryCanada
              
              $
              66,193
              
              
              $
              56,962United
      States
              
              
              27,436
              
              
              
              29,271$
              93,629
              
              
              $
              86,233Intangible
      assets by countryCanada
              
              $
              11,049
              
              
              $
              10,047United
      States
              
              
              3,163
              
              
              
              3,450$
              14,212
              
              
              $
              13,497Goodwill
      by countryCanada
              
              $
              8,284
              
              
              $
              8,284United
      States
              
              
              1,909
              
              
              
              1,909$
              10,193
              
              
              $
              10,193Total
      assets by countryCanada
              
              $
              116,221
              
              
              $
              92,052United
      States
              
              
              47,995
              
              
              
              43,852$
              164,216
              
              
              $
              135,904
 
 27
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 18.
              FINANCIAL
      INSTRUMENTS
  Fair
Value of Financial Instruments
  Financial
instruments comprise cash and cash equivalents, accounts receivable, accounts
payable, long-term debts and accrued liabilities and bank
indebtedness.  The estimated fair values of cash, accounts receivable,
accounts payable and accrued liabilities approximate book values because of the
short-term maturities of these instruments.  The estimated fair value
of senior debt approximates the carrying value as the debt bears interest at
variable interest rates, which are based on rates for similar debt with similar
credit rates in the open market.
  The
Company adopted ASC 820 “Fair
Value Measurements and Disclosures” (formerly SFAS No. 157, “Fair Value Measurements”),
as of April 1, 2008. On April 1, 2009, we adopted the requirements of ASC 820
for non-recurring non-financial assets and liabilities, which had been deferred
for one year under ASC 820-10-65 (formerly FSP FAS 157-2, “Effective Date of FASB Statement
No. 157.”)
  ASC 820
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 September 30, 2009:
  Fair
      Value Measurements at September 30, 2009Carrying
      value at
                  September
      30, 2009
                Quoted
      prices in
                  active
      markets
                  (Level
      1)
                Significant
      other
                  Observable
                  Inputs
                  (Level
      2)Interest
      rate swap contracts liability
                $       2,714
                $         -
                $       2,714
  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 $2,714 as of September 30, 2009 ($3,899 as
of March 31, 2009) for two interest rate swap contracts on the Company’s term
debt. For the six months ended September 30, 2009, the fair value adjustment of
the interest rate swap contracts has resulted in a gain of $1,569 ($572 for six
months ended September 30, 2008).  This gain is included in the
earnings and the fair value of settlement cost to terminate the contracts is
included in current liabilities on the Consolidated Balance Sheet.
  28
 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 September 30, 2009
              Fair
      Value as at March 31, 2009Interest
      rate swap contracts liability
              Current
      liability
              $         2,714
              $       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
                September 30,
      2009
              Three
      months ended
                September
      30, 2008
              Six
      months ended
                September
      30, 2009
              Six
      months ended
                September
      30, 2008Interest
      rate swap contracts liability
              Other
      (income) and expenses
              $    (296)
              $     662
              $  (1,569)
              $   (572)
 
 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.
  29
 RAND
LOGISTICS, INC.
 Notes
to the Consolidated Financial Statements (Unaudited)
 (U.S.
Dollars 000’s except for Shares and Per Share
data)
 
 19.
              EARNINGS
      PER SHARE
  The
Company has a total of 12,950,357 common shares issued and outstanding, out of
an authorized total of 50,000,000 shares.  The fully diluted total of
15,328,369 shares for the quarter ended September 30, 2009 and 15,345,199 shares
for the quarter ended September 30, 2008 are based on the following
calculations. There are no warrants outstanding as of September 30, 2009. For
the quarter ended September 30, 2008, warrants issued from the initial
prospectus and over allotment converted to 489,336 based on the average
quarterly share price of $5.52. 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 are identical to those issued in the
Company’s initial public offering except that the warrants included in the units
underlying the option have an exercise price of $6.25 per share.  The
option 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 as the exercise price of $9.90
exceeded the estimated market value.
  Three
      months ended
                September
      30, 2009
              
              
              Three
      months ended
                September
      30, 2008
              
              
              Six
      months ended
                September
      30, 2009
              
              
              Six
      months ended
                September
      30, 2008Numerator:Net
      income before preferred stock dividend
              
              $
              5,897
              
              
              $
              5,193
              
              
              $
              8,182
              
              
              $
              7,872Preferred
      stock dividends
              
              
              (477
              )
              
              
              (411
              )
              
              
              (920
              )
              
              
              (774
              )Net
      income available to common stockholders
              
              $
              5,420
              
              
              $
              4,782
              
              
              $
              7,262
              
              
              $
              7,098Denominator:Weighted
      average common shares for basic EPS
              
              
              12,909,014
              
              
              
              12,436,508
              
              
              
              12,900,020
              
              
              
              12,271,685Effect
      of dilutive securities:Total
      outstanding warrants
              
              
              -
              
              
              
              5,194,489
              
              
              
              -
              
              
              
              5,194,489Average
      exercise price
              
              
              -
              
              
              
              5.00
              
              
              
              -
              
              
              
              5.00Average
      price during period
              
              
              2.98
              
              
              
              5.52
              
              
              
              3.29
              
              
              
              5.40Shares
      that could be acquired with the proceeds of warrants
              
              
              -
              
              
              
              4,705,153
              
              
              
              -
              
              
              
              4,809,712Dilutive
      share due to warrants
              
              
              -
              
              
              
              489,336
              
              
              
              -
              
              
              
              384,777Long-term
      incentive stock option plan
              
              
              479,785
              
              
              
              425,782
              
              
              
              479,785
              
              
              
              334,989Average
      exercise price of stock options
              
              
              5.66
              
              
              
              5.66
              
              
              
              5.66
              
              
              
              5.66Share
      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
              
              
              15,328,369
              
              
              
              15,345,199
              
              
              
              15,319,375
              
              
              
              15,075,817Basic
      EPS
              
              $
              0.42
              
              
              $
              0.38
              
              
              $
              0.56
              
              
              $
              0.58Diluted
      EPS
              
              $
              0.38
              
              
              $
              0.34
              
              
              $
              0.53
              
              
              $
              0.52
  30
 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 $107 for the
Program.
  21.
              VARIABLE
      INTEREST ENTITIES
  In the
normal course of business, the Company interacts with various entities that may
be variable interest entities (VIEs) under the subjective guidelines of ASC
810-10-05 “Consolidation”(formerlyFIN-46(R))
  On August
27, 2007, Lower Lakes entered into and consummated the transactions under a
Memorandum of Agreement with Voyageur Marine Transport Limited and Voyageur
Pioneer Marine Inc. (“Voyageur”) pursuant to which Lower Lakes purchased
VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER from the Sellers.
  Certain
customer contracts were also assigned to the Company under a Contract of
Assignment.
  In
addition, on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
with Voyageur pursuant to which Voyageur agreed to staff the Vessels with
qualified crew members in accordance with sound crew management
practices.  Under the Crew Manning Agreement, Voyageur was responsible
for selecting and training the Vessels’ crews, payroll, tax and pension
administration, union negotiations and disputes and ensuring compliance with
applicable requirements of Canadian maritime law. Under the Crew Manning
Agreement, Lower Lakes was obligated to pay Voyageur an annual fee of $175 and
pay or reimburse Voyageur for its reasonable crew payroll expenses. The Company
terminated the Crew Manning Agreement in March 2008.
  Also on
August 27, 2007, Lower Lakes entered into a Contract of
Affreightment  (“COA”) with Voyageur and Voyageur Maritime Trading Inc
(“VMT”) pursuant to which Voyageur and VMT made a Canadian flagged vessel owned
by VMT, the MARITIME TRADER (the “Trader”), available exclusively to Lower Lakes
for its use in providing transportation and storage services for its
customers.
  In
connection with the COA, on August 27, 2007, Lower Lakes entered into an Option
Agreement (the “Option Agreement”) with VMT pursuant to which Lower Lakes
obtained the option to acquire the Trader for CDN $5,000 subject to certain
adjustments. The option is exercisable between January 1, 2012 and December 31,
2017, subject to certain early exercise provisions. If, at any time prior to
expiration of the option, VMT receives a bona fide offer from a third party to
purchase the Trader which VMT wishes to accept, Lower Lakes shall have the right
to acquire the Trader at the option price.
  On August
27, 2007, Lower Lakes entered into a Guarantee (the “Guarantee”) with GE Canada,
pursuant to which Lower Lakes agreed to guarantee up to CDN $1,250 (the
“Guaranteed Obligations”) of Voyageur’s  indebtedness to GE Canada.
Under the Guarantee, Lower Lakes has several options available to it in the
event that GE Canada intends to draw under the Guarantee, including (i) the
right to exercise its option for the Trader under the Option Agreement and (ii)
the right to make a subordinated secured loan to Voyageur in an amount at least
equal to the amount intended to be drawn by GE Canada on terms as are reasonably
satisfactory to GE Canada and Voyageur.
  31
 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 ASC 810-10-05 (formerly FIN 46(R)) and
regularly reviews all existing entities in connection with any reconsideration
events (as defined in ASC 810-10-05) that may result in an entity becoming a VIE
or in the Company becoming the primary beneficiary of an existing VIE. There is
no change in a previous conclusion about whether a VIE should be consolidated.
The Company has not provided support to the VIE when it was not contractually
obliged to do so.
  22.
              SUBSEQUENT
      EVENTS
 
 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. The common stock will be issued to such
individuals during the third quarter and will reduce the amount of available
stock grants under the LTIP.  After a comprehensive review of the
Company’s actual results through September 30, 2009 and an analysis of the
Company’s liquidity position at September 30, 2009, the Compensation Committee
concluded that commencing in the third quarter of the current fiscal year,
compensation to the three executive officers and its outside directors will
revert to cash.    In addition, since September 30, 2009,
the Company granted an aggregate of 68,760 shares to the individual retirement
plans of all eligible Canadian employees in lieu of cash contributions and
recorded compensation expenses of $211 in September and October
2009.
 
 The
Company has evaluated subsequent events through November 11, 2009 and no
event other than mentioned above has occurred from the balance sheet date
through that date that would impact the consolidated financial
statements.
  32


Item2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations.




All
dollar amounts below $500,000 presented herein are in thousands, values greater
than $500,000 are presented in millions except share, per share and per day
amounts.




The
following MD&A is written to help the reader understand our company. The
MD&A is provided as a supplement to, and should be read in conjunction with,
the Consolidated Financial Statements and the accompanying financial statement
notes of the Company appearing elsewhere in this Quarterly Report on Form 10-Q
for the three and six month periods ended September 30, 2009.




Cautionary
Note Regarding Forward-Looking Statements




This
quarterly report on Form 10-Q contains forward-looking statements, including
those relating to our capital needs, business strategy, expectations and
intentions. Statements that use the terms “believe”, “anticipate”, “expect”,
“plan”, “estimate”, “intend” and similar expressions of a future or
forward-looking nature identify forward-looking statements for purposes of the
U.S. federal securities laws or otherwise. For these statements and all other
forward-looking statements, we claim the protection of the Safe Harbor for
Forward-Looking Statements contained in the Private Securities Litigation Reform
Act of 1995.




Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy or are otherwise beyond our control and some
of which might not even be anticipated.  Forward-looking statements
reflect our current views with respect to future events and because our business
is subject to such risks and uncertainties, actual results, our strategic plan,
our financial position, results of operations and cash flows could differ
materially from those described in or contemplated by the forward-looking
statements contained in this report.




Important
factors that contribute to such risks include, but are not limited to, those
factors set forth under “Risk Factors” on our Form 10-K filed with the
Securities and Exchange Commission on June 25, 2009 as well as the following:
the effect of the economic downturn in our markets; the weather conditions on
the Great Lakes; and our ability to maintain and replace our vessels as they
age.  The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with other cautionary
statements that are included in this report. We undertake no obligation to
publicly update or review any forward-looking statements, whether as a result of
new information, future developments or otherwise.




Overview




Business




Rand
Logistics, Inc. (formerly Rand Acquisition Corporation) was incorporated in the
State of Delaware on June 2, 2004 as a blank check company to effect a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating business.




On March
3, 2006, we acquired all of the outstanding shares of capital stock of Lower
Lakes Towing Ltd., a Canadian corporation which, with its subsidiary Lower Lakes
Transportation Company, provides bulk freight shipping services throughout the
Great Lakes region. As part of the acquisition of Lower Lakes, we also acquired
Lower Lakes’ affiliate, Grand River Navigation Company, Inc. Prior to the
acquisition we did not conduct, or have any investment in, any operating
business. In this discussion of our business, unless the context otherwise
requires, references to Rand, we, us and the Company include Rand and its direct
and indirect subsidiaries, and references to Lower Lakes’ business or the
business of Lower Lakes mean the combined businesses of Lower Lakes Towing,
Lower Lakes Transportation and Grand River.




33




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 September 30, 2009 compared to the three month period ended
September 30, 2008:




The
three month period ended September 30, 2009 was highlighted by several
significant changes as compared to the three month period ended September 30,
2008:




(1)
            There
      was a significant reduction in demand in the three month period ended
      September 30, 2009 compared to the three month period ended September 30,
      2008 due to the weakened economy, which reduced our vessel scheduling
      flexibility and decreased the overall operating efficiency of our
      fleet.  The decline in customer demand in the three month period
      ended September 30, 2009 reduced revenues from both our own vessels and
      outside charter revenues as compared to the three month period ended
      September 30, 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, coal and salt cargos.




(3)
            Primarily
      as a result of the net reduced demand from our customers, our total
      Sailing Days, which we define as days a vessel is crewed and available for
      sailing, decreased 92 days, or 8.4%, to 1,000 Sailing Days during the
      three month period ended September 30, 2009 from 1,092 Sailing Days during
      the three month period ended September 30,
2008.




(4)
            Due
      to reduced demand from our customers, we sailed the McKee Sons for only 45
      Sailing Days during the three month period ended September 30,
      2009.  We operated the McKee Sons for 92 Sailing Days during the
      three month period ended September 30,
2008.




(5)
            Excluding
      the McKee Sons, we operated our remaining eleven vessels for 47 fewer
      Sailing Days in the three month period ended September 30, 2009 than in
      the three month period ended September 30,
2008.




(6)
            We
      benefited from additional new business and contractual rate increases from
      existing customers during the three month period ended September 30, 2009
      compared to the three month period ended September 30,
    2008.




(7)
            All
      of our customer contracts have fuel surcharge provisions whereby the
      increases in our fuel costs are passed on to customers.  Such
      increases in fuel surcharges impact our margin percentages, but do not
      significantly impact our margin dollars.  Due to reduced fuel
      prices during the three month period ended September 30, 2009, fuel
      surcharge revenues declined sharply as compared to the three month period
      ended September 30, 2008.




(8)
            The
      Canadian dollar weakened by approximately 5.1% versus the U.S. dollar,
      averaging approximately $0.911 USD per CAD during the three month period
      ended at September 30, 2009 compared to approximately $0.960 USD per CAD
      during the three month period ended September 30, 2008.  The
      Company’s balance sheet translation rate increased from $0.793 USD per CAD
      at March 31, 2009 to $0.934 USD per CAD at September 30,
    2009.




34




Selected
Financial Information




(USD
      in 000’s)
            
            Three
      month period ended September 30, 2009
            
            
            Three
      month period ended September 30, 2008
            
            
            $
      Change
            
            
            %
      ChangeRevenue:Freight
      and related revenue
            
            $
            28,136
            
            
            $
            32,325
            
            
            $
            (4,189
            )
            
            
            (13.0
            )%Fuel
      and other surcharges
            
            
            5,467
            
            
            
            13,161
            
            
            
            (7,694
            )
            
            
            (58.5
            )%Outside
      voyage charter revenue
            
            
            2,640
            
            
            
            6,803
            
            
            
            (4,163
            )
            
            
            (61.2
            )%Total
            
            $
            36,243
            
            
            $
            52,289
            
            
            $
            (16,046
            )
            
            
            (30.7
            )%Expenses:Outside
      voyage charter fees
            
            $
            2,634
            
            
            $
            6,062
            
            
            $
            (3,428
            )
            
            
            (56.5
            )%Vessel
      operating expenses
            
            $
            19,608
            
            
            $
            30,356
            
            
            $
            (10,748
            )
            
            
            (35.4
            )%Repairs
      and maintenance
            
            $
            63
            
            
            $
            0
            
            
            $
            63
            
            
            
            N/A
            %Sailing Days:
            
            
            1,000
            
            
            
            1,092
            
            
            
            (92
            )
            
            
            (8.4
            )%Per Day in Whole USD:Revenue per Sailing Day:Freight
      and related revenue
            
            $
            28,136
            
            
            $
            29,602
            
            
            $
            (1,466
            )
            
            
            (5.0
            )%Fuel
      and other surcharges
            
            $
            5,467
            
            
            $
            12,052
            
            
            $
            (6,585
            )
            
            
            (54.6
            )%Expenses per Sailing Day:Vessel
      operating expenses
            
            $
            19,608
            
            
            $
            27,799
            
            
            $
            (8,191
            )
            
            
            (29.5
            )%Repairs
      and maintenance
            
            $
            63
            
            
            $
            0
            
            
            $
            63
            
            
            
            N/A
            %




Management
believes that each of our vessels should achieve approximately 92 Sailing Days
in an average second fiscal quarter, assuming no major repairs or incidents and
normal dry-docking cycle times performed during the winter lay-up
period.




35




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 September 30, 2009 compared to the three month period ended
September 30, 2008:




(USD
      in 000’s)
            
            Sailing
      Days
            
            
            Freight
      and Related Revenue
            
            
            Fuel
      and Other Surcharges
            
            
            Outside
      Voyage Charter
            
            
            Total
      Revenue
            
            
            Vessel
      Operating ExpensesThree
      month period ended September 30, 2008
            
            
            1,092
            
            
            $
            32,325
            
            
            $
            13,161
            
            
            $
            6,803
            
            
            $
            52,289
            
            
            $
            30,356Changes
      in the three month period ended September 30, 2009:Decrease
      attributable to weaker Canadian dollar
            
            
            -
            
            
            $
            (875
            )
            
            $
            (175
            )
            
            $
            (142
            )
            
            $
            (1,192
            )
            
            $
            (580
            )Net
      decrease attributable to reduced customer demand (excluding currency
      impact)
            
            
            (92
            )
            
            $
            (3,314
            )
            
            $
            (7,519
            )
            
            $
            -
            
            
            $
            (10,833
            )
            
            $
            (10,168
            )Changes
      in outside charter revenue (excluding currency impact)
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (4,021
            )
            
            $
            (4,021
            )
            
            $
            -Sub-Total
            
            
            (92
            )
            
            $
            (4,189
            )
            
            $
            (7,694
            )
            
            $
            (4,163
            )
            
            $
            (16,046
            )
            
            $
            (10,748
            )Three
      month period ended September 30, 2009
            
            
            1,000
            
            
            $
            28,136
            
            
            $
            5,467
            
            
            $
            2,640
            
            
            $
            36,243
            
            
            $
            19,608


Total
revenue during the three month period ended September 30, 2009 was $36.2
million, a decrease of $16.1 million, or 30.7%, compared to $52.3 million during
the three month period ended September 30, 2008.  This decrease was
primarily attributable to reduced fuel surcharges, the weaker Canadian dollar
and reduced customer demand, which is further discussed below.




Freight
and related revenue generated from Company-operated vessels decreased $4.2
million, or 13.0%, to $28.1 million during the three month period ended
September 30, 2009 compared to $32.3 million during the three month period ended
September 30, 2008. Freight and related revenue per Sailing Day decreased
$1,466, or 5.0%, to $28,136 per Sailing Day in the three month period ended
September 30, 2009 compared to $29,602 in the three month period ended September
30, 2008.  This decrease was attributable to a weaker Canadian dollar
and less efficient trade patterns, slightly offset by higher pricing and
improved productivity.




Fuel
and other pass through surcharges decreased $7.7 million, or 58.5%, to $5.5
million during three month period ended September 30, 2009 compared to $13.2
million during the three month period ended September 30, 2008. Fuel and other
surcharges revenue per Sailing Day decreased $6,585 to $5,467 per Sailing Day in
the three month period ended September 30, 2009 compared to $12,052 in the three
month period ended September 30, 2008.




Outside
Voyage Charter revenues decreased $4.2 million, or 61.2%, to $2.6 million during
the three month period ended September 30, 2009 compared to $6.8 million during
the three month period ended September 30, 2008.  The decrease in
outside voyage charter revenue was attributable to a reduction in overall
customer demand and a shift of certain shipments shipped by outside charterers
in the three month period ended September 30, 2008 which were shipped by the
Company’s own vessels during the three month period ended September 30,
2009.




36




Vessel
Operating Expenses decreased $10.7 million, or 35.4%, to $19.6 million in the
three month period ended September 30, 2009 compared to $30.3 million in the
three month period ended September 30, 2008.  This decrease was
primarily attributable to reduced fuel costs, reduced vessel operating days and
a weaker Canadian dollar.  Vessel operating expenses per Sailing Day
decreased $8,191, or 29.5%, to $19,608 in the three month period ended September
30, 2009 compared to $27,799 in the three month period ended September 30,
2008.




Our
general and administrative expenses decreased $0.9 million to $1.8 million
during the three month period ended September 30, 2009 from $2.7 million in the
three month period ended September 30, 2008. The decrease in general and
administrative expenses was a result of cost reductions and the weaker Canadian
dollar during the three month period ending September 30, 2009.  Our
general and administrative expense represented 5.0% of revenues during the three
month period ended September 30, 2009, a decrease from 5.1% of revenues during
the three month period ended September 30, 2008.  During the three
month period ended September 30, 2009, $0.5 million of our general and
administrative expenses was attributable to our parent company and $1.3 million
was attributable to our operating companies.




Depreciation
expense increased $0.6 million to $2.4 million during the three month period
ended September 30, 2009 compared to $1.8 million during the three month period
ended September 30, 2008.  The increase was primarily attributable to
capital expenditures related to the repowering of the Saginaw and capital
expenditures during the 2009 winter lay-up period.




Amortization
of drydock costs increased $33 to $0.6 million during the three month period
ended September 30, 2009.  An increase in drydock expenses from the
winter 2009 drydock of the Mississagi was offset by the translation of the
weaker Canadian dollar.  During the three month period ended September
30, 2009, the Company amortized the deferred drydock costs of seven of its
twelve vessels compared to six vessels during the three month period ended
September 30, 2008.




Amortization
of intangibles decreased $11 to $429 during the three month period ended
September 30, 2009 from $440 during the three month period ended September 30,
2008 primarily due to the translation of the weaker Canadian dollar during the
three month period ended September 30, 2009.




As a
result of the items described above, during the three month period ended
September 30, 2009, the Company’s operating income decreased $1.7 million to
$8.8 million compared to $10.5 million during the three month period ended
September 30, 2008.




Interest
expense decreased $317 to $1.5 million during the three month period ended
September 30, 2009 from $1.8 million during the three month period ended
September 30, 2008. This decrease in interest expense was primarily a result of
the translation from the weaker Canadian dollar and, to a lesser extent, lower
interest rates on the Company’s revolving credit facility balances and slightly
lower average debt balances during the three month period ended September 30,
2009.




We
recorded a net gain on interest rate swap contracts of $296 during the three
month period ended September 30, 2009 compared to a loss of $0.7 million
incurred in the three month period ended September 30, 2008  due to
recording the fair value of our two interest rate swap agreements.  We
recorded a gain of $417 on our interest rate swap in Canada, offset by a loss of
$121 on our interest rate swap in the U.S.




Our
income before income taxes was $7.6 million in the three month period ended
September 30, 2009 compared to income before income taxes of $8.0 million in the
three month period ended September 30, 2008.




Our
provision for income tax expense was $1.7 million during the three month period
ended September 30, 2009 compared to an income tax expense of $2.8 million
during the three month period ended September 30, 2008.  The Company's
effective tax rate was 22.3% for the three month period ended September 30, 2009
compared to 35.1% for the three month period ended September 30,
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.





Our Net
Income increased $0.7 million to $5.9 million in the three month period ended
September 30, 2009 compared to Net Income of $5.2 million in the three month
period ended September 30, 2008.




We
accrued $477 for cash dividends on our preferred stock during the three month
period ended September 30, 2009 compared to $411 during the three month period
ended September 30, 2008.  The dividends accrued at a rate of 10.25%
for the three month period ended September 30, 2009 compared to a rate of 9.25%
for the three month period ended September 30, 2008.  When the
dividends are not paid in cash, the rate increases 0.5% every six months to a
cap of 12.0%, and will increase to 10.75% effective January 1,
2010.




37




Our net
income applicable to common stockholders increased $0.6 million, or 13.3%, to
$5.4 million during the three month period ended September 30, 2009 compared to
$4.8 million during the three month period ended September 30,
2008.




During
the three month period ended September 30, 2009, the Company operated about 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.  In addition, substantially all of
our tax provision was incurred in Canada during the three month period ended
September 30, 2009, because a valuation allowance was recorded in the U.S. since
the three month period ended March 31, 2009.  All of our preferred
stock dividends are accrued in the U.S.




Six
month period ended September 30, 2009 compared to the six month period ended
September 30, 2008:




The
six month period ended September 30, 2009 was highlighted by several significant
changes as compared to the six month period ended September 30,
2008:




(1)
            There
      was a significant reduction in demand from our customers in the six month
      period ended September 30, 2009 compared to the six month period ended
      September 30, 2008, due to the weakened economy.  Such factors
      reduced our vessel scheduling flexibility and decreased the overall
      operating efficiency of our fleet.  The decline in customer
      demand in the six month period ended September 30, 2009 reduced revenues
      from both our own vessels and outside charter revenues as compared to the
      six month period ended September 30, 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 135 days, or 6.6%, to 1,912 Sailing Days during the
      six month period ended September 30, 2009 from 2,047 Sailing Days during
      the six month period ended September 30,
2008.




(4)
            Due
      to the repowering and other upgrading of the Saginaw during the six month
      period ended September 30, 2008, we operated this vessel an additional 72
      Sailing Days during the six month period ended September 30,
      2009.




(5)
            Due
      to reduced demand from our customers, we operated the McKee Sons only 45
      Sailing Days during the six month period ended September 30,
      2009.  We operated the McKee Sons for all 183 Sailing Days
      during the six month period ended September 30,
  2008.




(6)
            Excluding
      the Saginaw and the McKee Sons, we operated our remaining ten vessels for
      69 fewer Sailing Days in the six month period ended September 30, 2009
      compared to the six month period ended September 30,
  2008.




(7)
            We
      benefited from additional new business and contractual rate increases from
      existing customers during the six month period ended September 30, 2009
      compared to the six month period ended September 30,
  2008.




(8)
            All
      of our customer contracts have fuel surcharge provisions whereby the
      increases in our fuel costs are passed on to customers.  Such
      increases in fuel surcharges impact our margin percentages, but do not
      significantly impact our margin dollars.  Due to reduced fuel
      prices during the six month period ended September 30, 2009, fuel
      surcharge revenues declined sharply as compared to the six month period
      ended September 30, 2008.




(9)
            The
      Canadian dollar weakened by approximately 9.4% versus the U.S. dollar,
      averaging approximately $0.883 USD per CAD during the six month period
      ended at September 30, 2009 compared to approximately $0.975 USD per CAD
      during the six month period ending September 30, 2008.  The
      Company’s balance sheet translation rate increased from $0.793 USD per CAD
      at March 31, 2009 to $0.934 USD per CAD at September 30,
    2009.




38




Selected
Financial Information




(USD
      in 000’s)
            
            Six
      month period ended September 30, 2009
            
            
            Six
      month period ended September 30, 2008
            
            
            $
      Change
            
            
            %
      ChangeRevenue:Freight
      and related revenue
            
            $
            52,281
            
            
            $
            59,626
            
            
            $
            (7,345
            )
            
            
            (12.3
            )%Fuel
      and other surcharges
            
            
            8,776
            
            
            
            22,579
            
            
            
            (13,803
            )
            
            
            (61.1
            )%Outside
      voyage charter revenue
            
            
            4,437
            
            
            
            13,490
            
            
            
            (9,053
            )
            
            
            (67.1
            )%Total
            
            $
            65,494
            
            
            $
            95,695
            
            
            $
            (30,201
            )
            
            
            (31.6
            )%Expenses:Outside
      voyage charter fees
            
            $
            4,420
            
            
            $
            12,308
            
            
            $
            (7,888
            )
            
            
            (64.1
            )%Vessel
      operating expenses
            
            $
            37,494
            
            
            $
            55,911
            
            
            $
            (18,417
            )
            
            
            (32.9
            )%Repairs
      and maintenance
            
            $
            717
            
            
            $
            888
            
            
            $
            (171
            )
            
            
            (19.3
            )%Sailing Days:
            
            
            1,912
            
            
            
            2,047
            
            
            
            (135
            )
            
            
            (6.6
            )%Per Day in Whole USD:Revenue per Sailing Day:Freight
      and related revenue
            
            $
            27,344
            
            
            $
            29,128
            
            
            $
            (1,784
            )
            
            
            (6.1
            )%Fuel
      and other surcharges
            
            $
            4,590
            
            
            $
            11,030
            
            
            $
            (6,440
            )
            
            
            (58.4
            )%Expenses per Sailing Day:Vessel
      operating expenses
            
            $
            19,610
            
            
            $
            27,314
            
            
            $
            (7,704
            )
            
            
            (28.2
            )%Repairs
      and maintenance
            
            $
            375
            
            
            $
            434
            
            
            $
            (59
            )
            
            
            (13.6
            )%




Management
believes that each of our vessels should achieve approximately 183 Sailing Days
in an average first two fiscal quarters, assuming no major repairs or incidents
and normal dry-docking cycle times performed during the winter lay
period.




39




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 six
month period ended September 30, 2009 compared to the six month period ended
September 30, 2008:




(USD
      in 000’s)
            
            Sailing
      Days
            
            
            Freight
      and Related Revenue
            
            
            Fuel
      and Other Surcharges
            
            
            Outside
      Voyage Charter
            
            
            Total
      Revenue
            
            
            Vessel
      Operating ExpensesSix
      month period ended September 30, 2008
            
            
            2,047
            
            
            $
            59,626
            
            
            $
            22,579
            
            
            $
            13,490
            
            
            $
            95,695
            
            
            $
            55,911Changes
      in the six month period ended September 30, 2009:Decrease
      attributable to weaker Canadian dollar
            
            
            -
            
            
            $
            (3,157
            )
            
            $
            (481
            )
            
            $
            (426
            )
            
            $
            (4,064
            )
            
            $
            (2,221
            )Net
      decrease attributable to reduced customer demand (excluding currency
      impact)
            
            
            (135
            )
            
            $
            (4,188
            )
            
            $
            (13,322
            )
            
            $
            -
            
            
            $
            (17,510
            )
            
            $
            (16,196
            )Changes
      in outside charter revenue (excluding currency impact)
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (8,627
            )
            
            $
            (8,627
            )
            
            $
            -Sub-Total
            
            
            (135
            )
            
            $
            (7,345
            )
            
            $
            (13,803
            )
            
            $
            (9,053
            )
            
            $
            (30,201
            )
            
            $
            (18,417
            )Six
      month period ended September 30, 2009
            
            
            1,912
            
            
            $
            52,281
            
            
            $
            8,776
            
            
            $
            4,437
            
            
            $
            65,494
            
            
            $
            37,494


Total
revenue during the six month period ended September 30, 2009 was $65.5 million,
a decrease of $30.2 million, or 31.6%, compared to $95.7 million during the six
month period ended September 30, 2008.  This decrease was primarily
attributable to reduced fuel surcharges, the weaker Canadian dollar, and reduced
customer demand, which is further discussed below.




Freight
and related revenue generated from Company-operated vessels decreased $7.3
million, or 12.3%, to $52.3 million during the six month period ended September
30, 2009 compared to $59.6 million during the six month period ended September
30, 2008. Freight and related revenue per Sailing Day decreased $1,784, or 6.1%,
to $27,344 per Sailing Day in the six month period ended September 30, 2009
compared to $29,128 in the six month period ended September 30,
2008.  This decrease was attributable to a weaker Canadian dollar and
less efficient trade patterns, slightly offset by higher pricing and improved
productivity.




Fuel
and other pass through surcharges decreased $13.8 million, or 61.1%, to $8.8
million during six month period ended September 30, 2009 compared to $22.6
million during the six month period ended September 30, 2008. Fuel and other
surcharges revenue per Sailing Day decreased $6,440 to $4,590 per Sailing Day in
the six month period ended September 30, 2009 compared to $11,030 in the six
month period ended September 30, 2008.




Outside
Voyage Charter revenues decreased $9.1 million, or 67.1%, to $4.4 million during
the six month period ended September 30, 2009 compared to $13.5 million during
the six month period ended September 30, 2008. The decrease in outside voyage
charter revenue was attributable to a reduction in overall customer demand and a
shift of certain shipments shipped by outside charterers in the six month period
ended September 30, 2008, which were shipped by the Company’s own vessels during
the six month period ended September 30, 2009.




Vessel
Operating Expenses decreased $18.4 million, or 32.9%, to $37.5 million in the
six month period ended September 30, 2009 compared to $55.9 million in the six
month period ended September 30, 2008.  This decrease was primarily
attributable to reduced fuel costs, reduced vessel operating days and a weaker
Canadian dollar.  Vessel operating expenses per Sailing Day decreased
$7,704, or 28.2%, to $19,610 in the six month period ended September 30, 2009
compared to $27,314 in the six month period ended September 30,
2008.




40




Repairs
and maintenance expenses, which consists of expensed winter work, decreased $171
to $0.7 million during the six month period ended September 30, 2009 from $0.9
million during the six month period ended September 30, 2008.  Repairs
and maintenance per Sailing Day decreased $59 to $375 per Sailing Day in the six
month period ended September 30, 2009 from $434 during the six month period
ended September 30, 2008.  This decrease was related to the timing of
completing the 2009 winter lay-up work in the six month period ended September
30, 2009 as compared to the timing of completing the 2008 winter lay-up work in
the six month period ended September 30, 2008.




Our
general and administrative expenses decreased $0.9 million to $4.2 million
during the six month period ended September 30, 2009 from $5.1 million in the
six month period ended September 30, 2008. The decrease in general and
administrative expenses was a result of cost reductions and the weaker Canadian
dollar offset by a loan amendment fee of $441 during the six month period ending
September 30, 2009.  Our general and administrative expenses
represented 6.4% of revenues during the six month period ended September 30,
2009, an increase from 5.4% of revenues during the six month period ended
September 30, 2008.  During the six month period ended September 30,
2009, $1.2 million of our general and administrative expenses was attributable
to our parent company and $3.0 million was attributable to our operating
companies, including the loan amendment fee.




Depreciation
expense rose $1.0 million to $4.4 million during the six month period ended
September 30, 2009 compared to $3.4 million during the six month period ended
September 30, 2008.  The increase was primarily attributable to
capital expenditures related to the repowering of the Saginaw and capital
expenditures during the 2009 winter lay-up period.




Amortization
of drydock costs increased $46 to $1.2 million during the six month period ended
September 30, 2009 due to an increase in drydock expenses from the winter 2009
drydock of the Mississagi, offset by the translation of the weaker Canadian
dollar.  During the six month period ended September 30, 2009, the
Company amortized the deferred drydock costs of seven of its twelve vessels
compared to six vessels during the six month period ended September 30,
2008.




Amortization
of intangibles decreased $33 to $0.8 million during the six month period ended
September 30, 2009 primarily due to the translation of the weaker Canadian
dollar during the six month period ended September 30, 2009.




As a
result of the items described above, during the six month period ended September
30, 2009, the Company’s operating income decreased $3.8 million to $12.3 million
compared to $16.1 million during the six month period ended September 30,
2008.




Interest
expense decreased $0.6 million to $2.9 million during the six month period ended
September 30, 2009 from $3.5 million during the six month period ended September
30, 2008. This decrease in interest expense was primarily a result of the
translation of the weaker Canadian dollar and to a lesser extent, lower interest
rates on the Company’s revolving credit facility balances and a slightly lower
average debt balance during the six month period ended September 30,
2009.




We
recorded a gain on interest rate swap contracts of $1.6 million during the six
month period ended September 30, 2009 compared to a gain of $0.6 million
incurred in the six month period ended September 30, 2008, due to recording the
fair value of our two interest rate swap agreements.




Our
income before income taxes was $10.9 million in the six month period ended
September 30, 2009 compared to income before income taxes of $13.2 million in
the six month period ended September 30, 2008.




Our
provision for income tax expense was $2.7 million during the six month period
ended September 30, 2009 compared to an income tax expense of $5.3 million
during the six month period ended September 30, 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 due
to the change in management compensation from cash to stock which changed its
characterization from deductible to non-deductible on the Company’s Canadian tax
return which resulted in an additional $0.7 million of income tax
expense.





Our Net
Income increased $310, or 3.9%, to $8.2 million in the six month period ended
September 30, 2009 compared to Net Income of $7.9 million in the six month
period ended September 30, 2008.




41




We
accrued $0.9 million for cash dividends on our preferred stock during the six
month period ended September 30, 2009 compared to $0.8 million during the six
month period ended September 30, 2008.  The dividends accrued at an
average rate of 10.0% for the six month period ended September 30, 2009 and at a
rate of 9.0% for the six month period ended September 30, 2008.  When
the dividends are not paid in cash, the rate increases 0.5% every six months to
a cap of 12.0%, and will increase to 10.75% effective January 1,
2010.




Our net
income applicable to common stockholders increased $164, or 2.3%, to $7.3
million during the six month period ended September 30, 2009 compared to $7.1
million during the six month period ended September 30, 2008.




During
the six month period ended September 30, 2009, the Company operated four 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 six month period ended September 30, 2009. In addition,
substantially all of our tax provision was incurred in Canada during the six
month period ended September 30, 2009, because a valuation allowance was
recorded in the U.S. since 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 six month period ended September 30, 2009, there were major reductions in
our fuel costs. Our contracts with our customers provide for recovery of fuel
costs over specified rates through fuel surcharges.  In addition,
there were major changes in the exchange rate between the 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
9.4%.




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 six month periods ended September 30, 2009 and September 30,
2008.  We believe cash generated from our operations and availability
of borrowing under our credit facility will provide sufficient cash availability
to cover our anticipated working capital needs, capital expenditures and debt
service requirements for the next twelve months.  However, if the
Company experiences a material shortfall to its financial forecasts or if the
Company’s customers materially delay their receivable payments due to further
deterioration of economic conditions, the Company may breach its financial
covenants and collateral thresholds and/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 six month period ended September 30,
2009 was $1.7 million, an increase of $5.8 million compared to net cash used of
$4.1 million of net cash used during the six month period ended September 30,
2008.  This increase was primarily attributable to the timing of the
payment of accounts payable and accrued liabilities offset by somewhat lower
cash earnings compared to the six month period ended September 30,
2008.




Cash used
in investing activities decreased by $3.3 million to $2.5 million during the six
month period ended September 30, 2009 compared to $5.8 million during the six
month period ended September 30, 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 six month period ended September 30,
2008.




Cash
flows provided from financing activities decreased $7.1 million to $6.0 million
during the six month period ended September 30, 2009 compared to $13.1 million
during the six month period ended September 30, 2008.  During the six
month period ended September 30, 2009, the Company made net borrowings under its
revolving credit facility of $8.3 million compared to net borrowings of $14.2
million during the six month period ended September 30, 2008, and made principal
payments on its term debt of $2.2 million during the six month period ended
September 30, 2009 compared to $1.1 million during the six month period ended
September 30, 2008.




42




During
the six month period ended September 30, 2009, long-term debt, including the
current portion, increased $4.4 million to $62.7 million from $58.3 million at
March 31, 2009, which reflected an increase of $6.6 million from a
strengthening Canadian dollar from its low point during the six month period
ended September 30, 2009, offset by the $2.2 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
six month period ended September 30, 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 September 30, 2009 was $4.1 million compared to $3.2 million
at March 31, 2009. During the three month period ended September 30, 2009, the
effective rate of preferred dividends was 10.25%. The dividend rate increased to
10.25% effective July 1, 2009 and will increase 0.5% every six months thereafter
until it reaches 12% or the accrued dividends are paid in cash. The Company is
limited in the payment of preferred stock dividends by the fixed charge coverage
ratio covenant in the Company’s Amended and Restated Credit Agreement. In
addition, the Company has made the decision to make its investments in vessels
before applying cash to pay preferred stock dividends. Under the terms of the
preferred stock, upon the conversion of the preferred stock to common stock, a
subordinated promissory note will be issued whereby the cash dividends will
accrue at the rates set for the preferred stock and the note must be paid at the
later of the second anniversary of the conversion, or seven years from the
initial issuance date of the preferred stock.




Investments
in Capital Expenditures and Drydockings




We
invested $1.6 million in paid and accrued capital expenditures and incurred no
drydock expenses during the six month period ended September 30, 2009 relating
to carryover from the 2009 winter season. Our capital expenditures and drydock
expenses paid and accrued for the 2009 winter season were approximately $6.3
million.




43




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
September 30, 2009, our liability for financial instruments with exposure to
foreign currency risk was approximately CDN $45.6 million of term borrowings in
Canada and CDN $7.0 million of revolving borrowings in
Canada.  Although we have tried to match our indebtedness and cash
flows 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 insulated against changes in currency
rates as operations in Canada and the United States have revenues and
expenditures denominated in local currencies and our operations are cash flow
positive. However, as stated above, the majority of our financial liabilities
are denominated in Canadian dollars which exposes us to currency risks related
to principal payments and interest payments on such financial liability
instruments.




Interest
Rate Risk




We are
exposed to changes in interest rates associated with revolving our indebtedness
under our Amended and Restated Credit Agreement, which carries interest rates
which vary with Canadian Prime Rates and B.A. Rates for Canadian borrowings, and
U.S. Prime Rates and Libor Rates on U.S. borrowings.




We
entered into two interest rate swap contracts for approximately 75% of our term
loans for the remaining term of such loans based on three month BA rates for the
Canadian term loans and three month U.S. Libor rates for the U.S. term
loans.  The rates on these instruments, prior to the addition of the
lender’s margin, are 4.09% on the Canadian term loans, and 3.65% on the 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. In accordance with Accounting Standards
Codification (“ASC”) 605-20-25,“Revenue
Recognition-Services-Recognition” (formerly Emerging Issues Task Force
(“EITF”) Issue No. 91-09, “Revenue and Expense Recognition for
Freight Services in Progress” Method 5), voyage revenue is recognized
ratably over the duration of a voyage based on the relative transit time in each
reporting period when the following conditions are met: the Company has a signed
contract of affreightment, the contract price is fixed or determinable and
collection is reasonably assured.  Included in freight billings are
other fees such as fuel surcharges and other freight surcharges, which represent
pass-through charges to customers for toll fees, lockage fees and ice breaking
fees paid to other parties.  Fuel surcharges are recognized ratably
over the duration of the voyage, while freight surcharges are recognized when
the associated costs are incurred. Freight surcharges are less than 5% of total
revenue.




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.




44




In
addition, all revenues are presented on a gross basis in accordance with the
guidance in ASC 605-45-05, “Revenue Recognition-Principal Agent
Considerations” (formerly EITF 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent.”).




Intangible
Assets and Goodwill




Intangible
assets consist primarily of goodwill, financing costs, trademarks, trade names,
non-competition agreements and customer relationships and
contracts.  The intangibles are amortized as follows:




Trademarks
      and trade names
            10
      years straight-lineNon-competition
      agreements
            4
      years straight-lineCustomer
      relationships and contracts
            15
      years straight-line




Non-competition
agreements are amortized over the period which consists of the remainder of the
employment contract and the non-compete period after its
expiration.




Although
customer contracts have a typical duration of only three to five years, the
Company has experienced a consistent track record of serial renewals by its
significant contract customers (and such customers comprise most of the
Company’s business).  The Company’s customer relationships are
fortified by the fact that there are a limited number of Great Lakes shipping
companies as well as a declining number of vessels operating on the Great
Lakes.  The Company has an additional advantage in that it operates
half of the vessels on the Great Lakes which are classified as “river-class
vessels” and capable of accessing docks and customers not accessible to larger
vessels.  Accordingly, customers have a substantial interest in
protecting their Great Lakes transportation relationships.  Based on
the foregoing, 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 six month period ended
September 30, 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 six month period ended September
30, 2009 that indicated that its carrying amount may not be
recoverable.




45




Income
Taxes




The
Company accounts for income taxes in accordance with ASC 740 “Income Taxes” (Formerly SFAS
No. 109, “Accounting for
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.




The
Company adopted the provisions of ASC 740-10-25 “Income Taxes”(formerly FASB
Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an Interpretation of FASB Statement No. 109”) 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 in accordance with ASC 740-10-25 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” (formerly SFAS No. 123(R), “Share-Based Payment”), using
the modified prospective method.  This method requires compensation
cost to be recognized beginning on the effective date based on the requirements
of 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 FASB issued ASC 105, “Generally Accepted Accounting
Principles” (formerly FASB Statement No. 168,“The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162”). The objective of ASC 105 is
to establish the FASB Accounting Standards Codification
as the source of authoritative accounting principles recognized by the FASB to
be applied by nongovernmental entities in the preparation of financial
statements in conformity with GAAP. The standard is effective for interim and
annual periods ending after September 15, 2009. 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” (formerly SFAS No. 157, “Fair Value Measurements”).
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.




46




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 issued ASC 820-10, “Fair Value Measurement and
Disclosures-Overall” (formerly FASB Staff Position No. FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”). 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” (formerly SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”). 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 FASB issued ASC 815 “Derivatives and Hedging”
(formerly SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”). 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.




47




Determination
of the Useful Life of Intangible Assets




In April
2008, the FASB issued ASC 350-30-50 “Intangibles—Goodwill and
Other” (formerly FASB Staff Position No. 142-3, “Determination of the Useful Life of
Intangible Assets”), which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under 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 issued ASC 805-20-25 “Business Combinations”
(formerly FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies”). 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.




Recognition
and Presentation of Other-Than-Temporary Impairments




In April
2009, the FASB issued ASC 320-10-65 “Investments-Debt and Equity
Securities” (formerly FASB Staff Position Nos. FAS 115-2 and FAS 124-2,
“Recognition and Presentation
of Other-Than-Temporary Impairments”). 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”
(formerly FAS 107-1 and Accounting Principles Board (“APB”) No. 28-1, “Interim Disclosures about Fair
Value of 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” (formerly
SFAS No. 165, “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” (formerly SFAS
167, “Amendments to FASB
Interpretation No. 46(R)”). 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.




48




In
December 2008, the FASB issued ASC 860-10-65, “Intangibles-Goodwill and
Other” (formerly FSP FAS No. 140-4 and FIN 46R-8 “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities”). ASC 860-10-65 require additional disclosure about
transfers of financial assets and involvement with variable interest entities.
The requirements apply to transferors, sponsors, servicers, primary
beneficiaries and holders of significant variable interests in a variable
interest entity or qualifying special purpose entity. ASC 860-10-65 is effective
for financial statements issued for reporting periods ending after December 15,
2008. The Company adopted ASC 860-10-65 as of the quarter ending December 31,
2008. ASC 860-10-65 affects only disclosures and did not have a material impact
on the Company’s consolidated financial statements.




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.




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 will have no
impact on financial condition, results of operations or cash flows 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.




Item4.  Controls and
Procedures.




As of
September 30, 2009, our management carried out an evaluation, with the
participation of our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.




In
designing and evaluating our disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934), management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the desired
control objectives, as ours are designed to do, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We believe that our disclosure controls and
procedures provide such reasonable assurance.




No change
occurred in our internal controls concerning financial reporting during the
three month period ended September 30, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.




49




PARTII. OTHER INFORMATION




Item
1.  Legal Proceedings.




The
nature of our business exposes us to the potential for legal proceedings related
to labor and employment, personal injury, property damage, and environmental
matters. Although the ultimate outcome of any legal matter cannot be predicted
with certainty, based on present information, including our assessment of the
merits of each particular claim, as well as our current reserves and insurance
coverage, we do not expect that any known legal proceeding will in the
foreseeable future have a material adverse impact on our financial condition or
the results of our operations.




Item1A.  Risk Factors.




There has
been no material change to our Risk Factors from those presented in our Form
10-K for the fiscal year ended March 31, 2009.




Item2.  Unregistered Sales of Equity Securities and Use
of Proceeds.




None.




Item3.  Defaults Upon Senior Securities.




None.




Item4.  Submission of Matters to a Vote of Security Holders.




On
September 23, 2009, the Company held its 2009 Annual Meeting of Stockholders
(the “Meeting”). In connection with the Meeting, the Company solicited proxies
from its stockholders pursuant to Regulation 14A of the Securities Exchange Act
of 1934, as amended.





The
matters voted upon by the stockholders and the votes cast with respect to such
matters are as follows:





1.
            To
      elect the following nominees as Class III directors to serve for a term of
      three years and until their successors have been duly elected and
      qualified.





Nominee
            
            For
            
            WithheldLaurence
      S. Levy
            
            9,413,204
            
            482,969H.
      Cabot Lodge III
            
            9,413,204
            
            482,969





2.
            To
      ratify the appointment of Grant Thornton LLP as the independent registered
      public accounting firm of the Company for the fiscal year ending March 31,
      2009.





For
            
            Against
            
            Abstain9,896,173
            
            0
            
            0





Item5.  Other Information.




None.




Item6.  Exhibits.




(a)
Exhibits




31.1
            Chief
      Executive Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            Chief
      Financial Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Chief
      Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            Chief
      Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





50




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





RAND
      LOGISTICS, INC.Date:
      November 12, 2009
            
            /s/
      Laurence
      S. LevyLaurence
      S. LevyChairman
      of the Board and ChiefExecutive
      Officer (Principal Executive Officer)Date:
      November 12, 2009
            
            /s/
      Joseph
      W. McHugh, Jr.Joseph
      W. McHugh, Jr.Chief
      Financial Officer (Principal Financial and Accounting
    Officer)




51




Exhibit
Index





31.1
            Chief
      Executive Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            Chief
      Financial Officer’s Certificate, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Chief
      Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            Chief
      Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.