Rand Logistics Corp - Recent Material Event
<![CDATA[DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement, to be filed with
the Securities and Exchange Commission within 120 days after the end of the
registrant's fiscal year covered by this Annual Report on Form 10-K, with
respect to the Annual Meeting of Stockholders to be held on September 23, 2008,
are incorporated by reference into Part III of this Annual Report on Form 10-K.
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RAND LOGISTICS, INC.
TABLE OF CONTENTS
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PART I
Item 1. Business..............................................................................................................1
Item 1A. Risk Factors..........................................................................................................3
Item 1B. Unresolved Staff Comments............................................................................................12
Item 2. Properties...........................................................................................................12
Item 3. Legal Proceedings....................................................................................................12
Item 4. Submission of Matters to a Vote of Security Holders..................................................................12
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities....................................................................................................12
Item 6. Selected Financial Data..............................................................................................13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction...................13
Item 7A. Quantitative and Qualitative Disclosure about Market Risk............................................................25
Item 8. Financial Statements and Supplementary Data..........................................................................25
Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure..................................25
Item 9A(T). Controls and Procedures..............................................................................................25
Item 9B. Other Information....................................................................................................26
PART III
Item 10. Directors, Executive Officers and Corporate Governance of the Registrant.............................................26
Item 11. Executive Compensation...............................................................................................27
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.......................27
Item 13. Certain Relationships and Related Transactions, and Director Independence............................................27
Item 14. Principal Accountant Fees and Services...............................................................................27
PART IV
Item 15. Exhibits and Financial Statement Schedules...........................................................................27
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PART I
Item 1. Business
Overview
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 November 2, 2004, we closed
our initial public offering of 4,000,000 units with each unit consisting of one
share of our common stock and two warrants, each to purchase one share of our
common stock at an exercise price of $5.00 per share. The units were sold at an
offering price of $6.00 per unit, generating gross proceeds of $24.0 million. On
November 3, 2004, we sold an additional 600,000 units pursuant to the
underwriters' over-allotment option raising additional gross proceeds of $3.6
million. After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
approximately $24.6 million.
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 and operated eight vessels (the "Core
Vessels"). 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 Rand's business, unless the context otherwise requires, references
to Rand 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.
Rand's 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, one of which is 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.
Lower Lakes' fleet consists of five self-unloading bulk carriers and three
conventional bulk carriers in Canada and five self-unloading bulk carriers in
the U.S., including an integrated tug and barge unit. Lower Lakes Towing owns
seven of the Canadian vessels and charters the eighth pursuant to the terms of a
Contract of Affreightment. Lower Lakes Transportation time charters five of the
U.S. vessels, including the tug and barge unit, from Grand River. With the
exception of the barge (which Grand River bareboat charters from an affiliate of
Wisconsin & Michigan Steamship Company ("WMS")), Grand River owns the vessels
that it time charters to Lower Lakes Transportation.
Lower Lakes is a leader in the provision of River Class bulk freight
shipping services throughout the Great Lakes, operating more than one-third of
all River Class vessels servicing the Great Lakes and the majority of
boom-forward equipped vessels in this category. Boom forward self-unloading
vessels - those with their booms located in front of the cargo holds - offer
greater accessibility for delivery of cargo to locations where only forward
access is possible. Six of the vessels used in Lower Lakes' operations are boom
forward self-unloaders and four vessels are boom aft self-unloaders. River Class
vessels - which represent the smaller end of Great Lakes vessels with maximum
dimensions of approximately 650 feet in length and 72 feet in beam and carrying
capacities of 15,000 to 20,000 tons - are ideal for customers seeking to move
significant quantities of dry bulk product to ports which restrict non-River
Class vessels due to size and capacity constraints.
Lower Lakes services approximately 50 customers in a diverse array of end
markets by shipping dry bulk commodities such as construction aggregates, coal,
grain, iron ore and salt. Lower Lakes' top ten customers accounted for
approximately 62% of its revenue during the twelve months ended March 31, 2008.
Lower Lakes is the sole-source shipping provider to several of its customers.
Many of Lower Lakes' customers are under long-term contracts with Lower Lakes,
which typically average three to five years in duration and provide for minimum
and maximum tonnage, annual price escalation features, and fuel surcharges.
Lower Lakes faces competition from other marine and land-based
transporters of dry bulk commodities in and around the Great Lakes area. In the
River Class market segment, Lower Lakes generally faces two primary competitors:
Seaway Marine Transport and American Steamship Company. Seaway Marine Transport
is a Canadian traffic and marketing partnership, which owns 22 self-unloading
vessels, four of which are River Class boom-forward vessels. American Steamship
Company operates in the U.S. and maintains a fleet of 18 vessels, four of which
are River Class vessels. We believe that industry participants compete on the
basis of customer relationships, price and service, and that the ability to meet
a customer's schedule and offer shipping flexibility is a key competitive
factor. Moreover, we believe that customers are generally willing to continue to
use the same carrier assuming such carrier provides satisfactory service with
competitive pricing.
We believe that demand now exceeds available shipping capacity on the
Great Lakes, which should cause prices and margins to increase steadily over
time. While freight carried is steadily increasing, the available capacity is
declining over the long term as the aging Great Lakes fleet is retired. We do
not believe that such retirements will be replaced with new or refurbished
capacity until freight rates are substantially increased to justify such capital
investments.
As of March 31, 2008, Lower Lakes had approximately 361 full-time
employees, 26 of whom were shoreside and management and 335 that were
operational. Approximately 42% of Lower Lakes' employees (all U.S. based Grand
River crews) are unionized with the International Organization of Masters, Mates
and Pilots, AFL-CIO. Lower Lakes has never experienced a work stoppage on its
crewed vessels as a result of labor issues, and we believe that our employee
relations are good.
Our executive officers are Laurence S. Levy, who serves as our chairman of
the board and chief executive officer; Edward Levy, who serves as our president;
and Joseph W. McHugh, Jr., who serves as our chief financial officer. Carol
Zelinski is the secretary of Rand.
Acquisitions in the year ending March 31, 2008
On August 27, 2007, Lower Lakes entered into and consummated the
transactions under a Memorandum of Agreement (the "Memorandum of Agreement"),
dated as of the same date, with Voyageur Marine Transport Limited ("Voyageur")
and Voyageur Pioneer Marine Inc. pursuant to which Lower Lakes purchased the
VOYAGEUR INDEPENDENT and the VOYAGEUR PIONEER (collectively, the "Vessels") for
an aggregate purchase price of CDN $25.0 million.
Also on August 27, 2007, Lower Lakes entered into a Crew Manning Agreement
(the "Crew Manning Agreement"), with Voyageur pursuant to which Voyageur agreed
to staff the Vessels with qualified crew members in accordance with sound crew
management practices. Under the Crew Manning Agreement, Voyageur is responsible
for selecting and training the Vessels' crews, payroll, tax and pension
administration, union negotiations and disputes and ensuring compliance with
applicable requirements of Canadian maritime law. Under the Crew Manning
Agreement, Lower Lakes is obligated to pay Voyageur an annual fee of CDN
$175,000 and pay or reimburse Voyageur for its reasonable crew payroll expenses.
Lower Lakes terminated the Crew Manning Agreement in March 2008 and now crews
the Vessels with its own employees.
On August 27, 2007, Lower Lakes entered into a Contract of Affreightment
(the "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. The COA expires
on December 31, 2011, and renews automatically annually thereafter unless Lower
Lakes provides Voyageur or VMT with notice of cancellation six months prior to
the end of the then-current term. Under the COA, Lower Lakes is obligated to pay
Voyageur and VMT substantially all of the freight rate it charges its customers,
subject to certain adjustments. Lower Lakes is also responsible for all taxes,
tolls, fees or tariffs levied against the Trader or its cargo, provided that it
can be recouped from its customers, otherwise, these costs will be for the
account of Voyageur and VMT. Pursuant to the COA, Voyageur and VMT are
responsible for ensuring the seaworthiness of the Trader and the compliance of
its crew with all safety, health and other applicable laws and regulations of
Canada. Voyageur, VMT and Voyageur's president also agreed not to compete with,
nor induce any employee to leave his employment with, Lower Lakes.
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 $5.0 million, 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.
2
In connection with the COA and Option Agreement, on August 27, 2007, Lower
Lakes entered into a Guarantee (the "Guarantee") with GE Canada. A description
of the Guarantee follows under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Off-Balance Sheet
Arrangements".
On February 13, 2008, Grand River and Rand LL Holdings entered into and
consummated a Vessel Purchase Agreement with Wisconsin & Michigan Steamship
Company ("WMS") providing for the purchase by Grand River of three United States
flagged vessels, the DAVID Z. NORTON, the EARL W. OGLEBAY and the WOLVERINE, for
an aggregate purchase price of $20.0 million plus transaction expenses. Lower
Lakes Transportation had time chartered these three vessels since August 1, 2006
pursuant to the terms of a Time Charter Agreement between Lower Lakes
Transportation and WMS, which also provided for an option to purchase the
vessels.
Prior to commencement of the 2008 sailing season, we transferred one of
the vessels acquired from United States to Canadian registry for deployment as
part of the Registrant's Canadian fleet.
In connection with the sale of vessels under the Vessel Purchase
Agreement:
- WMS repaid all amounts owed to Rand Finance under that certain Note
Purchase Agreement, dated as of August 1, 2006;
- WMS repaid all amounts owed to Oglebay Norton Marine Services Company,
under that certain Note Purchase Agreement, dated as of August 1, 2006;
- WMS repaid all of its obligations due to National City Commercial
Capital Company, LLC under WMS' financing arrangements with National City, the
principal and interest amounts of which were included in the hire payable by
Lower Lakes Transportation under the Time Charter Agreement and in parts
guaranteed by Rand LL Holdings; and
- Grand River and Rand LL Holdings agreed to bear certain wind-down costs
of WMS.
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. You
should carefully consider the following material risks before you decide to buy
our common stock. If any of the following risks actually occur, our business,
results of operations and financial condition would likely suffer. In these
circumstances, the market price of our common stock could decline and you may
lose all or part of your investment.
Our business is dependent upon key personnel whose loss may adversely impact our
business.
We depend on the expertise, experience and continued services of Lower
Lakes' senior management employees, especially Scott Bravener, its President.
Bravener has acquired specialized knowledge and skills with respect to Lower
Lakes and its operations and most decisions concerning the business of Lower
Lakes will be made or significantly influenced by him. Although Lower Lakes
maintains life insurance with respect to Bravener, the proceeds of such
insurance may not be adequate to compensate Lower Lakes in the event of
Bravener's death. The loss of Bravener or other senior management employees, or
an inability to attract or retain other key individuals, could materially
adversely affect our business. We seek to compensate and incentivize executives,
as well as other employees, through competitive salaries and bonus plans, but
there can be no assurance that these programs will allow us to retain key
employees or hire new key employees. As a result, if Bravener were to leave
Lower Lakes, we could face substantial difficulty in hiring a qualified
successor and could experience a loss in productivity while any such successor
obtains the necessary training and experience.
Our officers and directors may allocate their time to other businesses thereby
causing conflicts of interest in their determination as to how much time to
devote to our affairs.
Our officers and directors are not required to commit their full time to
our affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. Laurence S. Levy and Edward Levy
are each engaged in several other business endeavors and are not obligated to
contribute any specific number of hours per week to our affairs.
3
Some of our officers and directors may have conflicts of interest in business
opportunities.
Some of our officers and directors may become aware of business
opportunities which may be appropriate for presentation to us as well as the
other entities with which they are or may be affiliated. Due to our officers'
and directors' existing affiliations with other entities, they may have
fiduciary obligations to present potential business opportunities to those
entities in addition to presenting them to us which could cause additional
conflicts of interest. Accordingly, they may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented.
Capital expenditures and other costs necessary to operate and maintain Lower
Lakes' vessels tend to increase with the age of the vessel and may also increase
due to changes in governmental regulations, safety or other equipment standards.
Capital expenditures and other costs necessary to operate and maintain
Lower Lakes' vessels tend to increase with the age of each vessel. Accordingly,
it is likely that the operating costs of Lower Lakes' older vessels will
increase. In addition, changes in governmental regulations, safety or other
equipment standards, as well as compliance with standards imposed by maritime
self-regulatory organizations and customer requirements or competition, may
require Lower Lakes to make additional expenditures. For example, if the U.S.
Coast Guard, Transport Canada or the American Bureau of Shipping (an independent
classification society that inspects the hull and machinery of commercial ships
to assess compliance with minimum criteria as set by U.S., Canadian and
international regulations) enact new standards, Lower Lakes may be required to
incur significant costs for alterations to its fleet or the addition of new
equipment. In order to satisfy any such requirement, Lower Lakes may be required
to take its vessels out of service for extended periods of time, with
corresponding losses of revenues. In the future, market conditions may not
justify these expenditures or enable Lower Lakes to operate its older vessels
profitably during the remainder of their anticipated economic lives.
If Lower Lakes is unable to fund its capital expenditures and winter work
expenses, Lower Lakes may not be able to continue to operate some of its
vessels, which would have a material adverse effect on our business.
In order to fund Lower Lakes' capital expenditures and winter work
expenses, we may be required to incur borrowings or raise capital through the
sale of debt or equity securities. Our ability to access the capital markets for
future offerings may be limited by our financial condition at the time of any
such offering as well as by adverse market conditions resulting from, among
other things, general economic conditions and contingencies and uncertainties
that are beyond its control. Our failure to obtain the funds for necessary
future capital expenditures and winter work expenses would limit its ability to
continue to operate some of its vessels and could have a material adverse effect
on our business, results of operations and financial condition.
The climate in the Great Lakes region limits Lower Lakes' vessel operations to
approximately nine months per year.
Lower Lakes' operating business is seasonal, meaning that it experiences
higher levels of activity in some periods of the year than in others.
Ordinarily, Lower Lakes is able to operate its vessels on the Great Lakes for
approximately nine months per year beginning in late March or April and
continuing through December or mid-January. However, weather conditions and
customer demand cause increases and decreases in the number of days Lower Lakes
actually operates.
The shipping industry has inherent operational risks that may not be adequately
covered by Lower Lakes' insurance.
Lower Lakes maintains insurance on its fleet for risks commonly insured
against by vessel owners and operators, including hull and machinery insurance,
war risks insurance and protection and indemnity insurance (which includes
environmental damage and pollution insurance). We can give no assurance that
Lower Lakes will be adequately insured against all risks or that its insurers
will pay a particular claim. Even if its insurance coverage is adequate to cover
its losses, Lower Lakes may not be able to timely obtain a replacement vessel in
the event of a loss. Furthermore, in the future, Lower Lakes may not be able to
obtain adequate insurance coverage at reasonable rates for Lower Lakes' fleet.
Lower Lakes may also be subject to calls, or premiums, in amounts based not only
on its own claim record but also the claims record of all other members of the
protection and indemnity associations through which Lower Lakes may receive
indemnity insurance coverage. Lower Lakes' insurance policies will also contain
deductibles, limitations and exclusions which, although we believe are standard
in the shipping industry, may nevertheless increase its costs.
4
Lower Lakes is subject to certain credit risks with respect to its
counterparties on contracts and failure of such counterparties to meet their
obligations could cause us to suffer losses on such contracts decreasing
revenues and earnings.
Lower Lakes enters into Contracts of Affreightment (COAs) pursuant to
which Lower Lakes agrees to carry cargoes, typically for industrial customers,
who export or import dry bulk cargoes. Lower Lakes also enters into spot market
voyage contracts, where Lower Lakes is paid a rate per ton to carry a specified
cargo from point A to point B. All of these contracts subject Lower Lakes to
counterparty credit risk. As a result, we are subject to credit risks at various
levels, including with charterers, cargo interests, or terminal customers. If
the counterparties fail to meet their obligations, Lower Lakes could suffer
losses on such contracts which would decrease our revenues and earnings.
Lower Lakes may not be able to generate sufficient cash flows to meet its debt
service obligations.
Lower Lakes' ability to make payments on its indebtedness will depend on
its ability to generate cash from its future operations. Lower Lakes business
may not generate sufficient cash flow from operations or from other sources
sufficient to enable it to repay its indebtedness and to fund its other
liquidity needs, including capital expenditures and winter work expenses. The
indebtedness of Lower Lakes under its new senior credit facility bears interest
at floating rates, and therefore, if interest rates increase, Lower Lakes' debt
service requirements will increase. Lower Lakes may need to refinance or
restructure all or a portion of its indebtedness on or before maturity. Lower
Lakes may not be able to refinance any of its indebtedness, including the new
senior credit facility, on commercially reasonable terms, or at all. If Lower
Lakes cannot service or refinance its indebtedness, it may have to take actions
such as selling assets, seeking additional equity or reducing or delaying
capital expenditures, any of which could have a material adverse effect on our
operations. Additionally, Lower Lakes may not be able to effect such actions, if
necessary, on commercially reasonable terms, or at all.
A default under Lower Lakes' indebtedness may have a material adverse effect on
our financial condition.
In the event of a default under Lower Lakes' indebtedness, including the
indebtedness under its existing senior credit facility, the holders of the
indebtedness generally would be able to declare all of such indebtedness,
together with accrued interest, to be due and payable. In addition, borrowings
under the existing senior credit facility are secured by a first priority lien
on all of the assets of Lower Lakes, Lower Lakes Transportation and Grand River
and, in the event of a default under that facility, the lenders generally would
be entitled to seize the collateral. In addition, default under one debt
instrument could in turn permit lenders under other debt instruments to declare
borrowings outstanding under those other instruments to be due and payable
pursuant to cross default clauses. Moreover, upon the occurrence of an event of
default under the existing senior credit facility, the commitment of the lenders
to make any further loans to us would be terminated. Accordingly, the occurrence
of a default under any debt instrument, unless cured or waived, would likely
have a material adverse effect on our results of operations.
Servicing debt could limit funds available for other purposes, such as the
payment of dividends.
Lower Lakes will use cash to pay the principal and interest on its debt,
and to fund required reserves for future capital expenditures and winter work
expenses. These payments limit funds that would otherwise be available for other
purposes, including distributions of cash to our stockholders.
Lower Lakes' loan agreements contain restrictive covenants that will limit its
liquidity and corporate activities.
Lower Lakes' loan agreements impose operating and financial restrictions
that limit Lower Lakes' ability to:
o incur additional indebtedness;
o create additional liens on its assets;
o make investments;
o engage in mergers or acquisitions;
o pay dividends; and
o sell any of Lower Lakes' vessels or any other assets outside the
ordinary course of business.
5
Therefore, Lower Lakes will need to seek permission from its lender in
order for Lower Lakes to engage in some corporate actions. Lower Lakes' lender's
interests may be different from those of Lower Lakes, and no assurance can be
given that Lower Lakes will be able to obtain its lender's permission when
needed. This may prevent Lower Lakes from taking actions that are in its best
interest.
Because Lower Lakes generates approximately 60% of its revenues, and incurs
approximately 60% of its expenses, in Canadian dollars, exchange rate
fluctuations could cause us to suffer exchange rate losses thereby increasing
expenses and reducing income.
Lower Lakes generates a portion of its revenues in Canadian dollars.
Similarly, Lower Lakes incurs a portion of its expenses in Canadian dollars.
This could lead to fluctuations in our net income due to changes in the value of
the U.S. Dollar relative to the Canadian Dollar.
Lower Lakes depends upon unionized labor for its U.S. operations. Any work
stoppages or labor disturbances could disrupt its business.
Substantially all of Grand River's employees are unionized with the
International Organization of Masters, Mates and Pilots, AFL-CIO. Any work
stoppages or other labor disturbances could have a material adverse effect on
our business, results of operations and financial condition.
A labor union has attempted to unionize Lower Lakes' Canadian employees.
The Seafarers International Union of Canada, or SIU, has attempted without
success to organize Lower Lakes' unlicensed employees periodically over the past
several years. Although we believe that support for this union is low, if SIU is
successful in organizing a union among Lower Lakes' Canadian employees, it could
result in increased labor costs for Lower Lakes, which could have a material
adverse effect on our results of operations.
Lower Lakes employees are covered by U.S. Federal laws that may subject it to
job-related claims in addition to those provided by state laws.
All of Lower Lakes' U.S. seagoing employees are covered by provisions of
the Shipping Act, 1916, and the Merchant Marine Act, 1920, commonly referred to
as the Jones Act, and general maritime law. These laws typically operate to make
liability limits established by state workers' compensation laws inapplicable to
these employees and to permit these employees and their representatives to
pursue actions against employers for job-related injuries in Federal courts.
Because Lower Lakes is not generally protected by the limits imposed by state
workers' compensation statutes, Lower Lakes has greater exposure for claims made
by these employees as compared to employers whose employees are not covered by
these provisions.
Restriction on foreign ownership and possible required divestiture of stock.
Under U.S. maritime laws, in order for us to maintain our eligibility to
own and operate vessels in the U.S. domestic trade, 75% of our outstanding
capital stock and voting power is required to be held by U.S. citizens. Although
our amended and restated certificate of incorporation contains provisions
limiting non-citizenship ownership of our capital stock, we could lose its
ability to conduct operations in the U.S. domestic trade if such provisions
prove unsuccessful in maintaining the required level of citizen ownership. Such
loss would have a material adverse effect on our results of operations. If our
board of directors determines that persons who are not citizens of the U.S. own
more than 23% of our outstanding capital stock or more than 23% of our voting
power, we may redeem such stock or, if redemption is not permitted by applicable
law or if our board of directors, in its discretion, elects not to make such
redemption, we may require the non-citizens who most recently acquired shares to
divest such excess shares to persons who are U.S. citizens in such manner as our
board of directors directs. The required redemption would be at a price equal to
the average closing price during the preceding 30 trading days, which price
could be materially different from the current price of the common stock or the
price at which the non-citizen acquired the common stock. If a non-citizen
purchases the common stock, there can be no assurance that he will not be
required to divest the shares and such divestiture could result in a material
loss. Such restrictions and redemption rights may make Rand's equity securities
less attractive to potential investors, which may result in Rand's publicly
traded common stock having a lower market price than it might have in the
absence of such restrictions and redemption rights.
6
Our outstanding warrants may have an adverse effect on the market price of
common stock and make it more difficult to obtain future public financing.
We currently have outstanding warrants to purchase approximately 5,231,215
shares of common stock and an option to purchase 300,000 shares of common stock
and warrants to purchase an additional 600,000 shares of common stock. The sale,
or even the possibility of sale, of the shares underlying the warrants and
options could have an adverse effect on the market price for our securities or
on our ability to obtain future public financing. If and to the extent these
warrants and options are exercised, you may experience dilution to your
holdings.
The conversion of our series A convertible preferred stock will result in
significant and immediate dilution of our existing stockholders and the book
value of their common stock.
The shares of series A convertible preferred stock issued in connection
with the acquisition of Lower Lakes are convertible into 2,419,355 shares of our
common stock, which, on an "as converted" basis, represents approximately 20% of
our aggregate outstanding common stock. The registration statement of which this
prospectus forms a part registers the resale of these 2,419,355 shares of common
stock. The conversion price of our series A convertible preferred stock is
subject to weighted average anti-dilution provisions whereby, if Rand issues
shares in the future for consideration below the existing conversion price of
$6.20, then the conversion price of the series A convertible preferred stock
would automatically be decreased, allowing the holders of the series A
convertible preferred stock to receive additional shares of common stock upon
conversion. Upon any conversion of the series A convertible preferred stock, the
equity interests of our existing common stockholders, as a percentage of the
total number of the outstanding shares of our common stock, and the net book
value of the shares of our common stock will be significantly diluted.
If our founding officers and directors exercise their registration rights, it
may have an adverse effect on the market price of our common stock.
Our founding officers and directors and their affiliates and associates to
whom shares of our common stock were issued prior to our initial public offering
are entitled to demand that we register the resale of their shares of common
stock at any time after October 27, 2007, although they have not yet done so. If
our founders exercise their registration rights with respect to all of their
shares of common stock, then there will be an additional 1,000,000 shares of
common stock eligible for trading in the public market. The presence of this
additional number of shares of common stock eligible for trading in the public
market may have an adverse effect on the market price of our common stock.
Future acquisitions of vessels or businesses by Rand or Lower Lakes would
subject Rand and Lower Lakes to additional business, operating and industry
risks, the impact of which cannot presently be evaluated, and could adversely
impact Rand's or Lower Lakes' capital structure.
Rand intends to pursue other acquisition opportunities in an effort to
diversify its investments and/or grow Lower Lakes' business. While neither Rand
nor Lower Lakes is presently committed to any additional acquisition, Rand is
currently actively pursuing one or more potential acquisition opportunities.
Acquisitions may be of individual or groups of vessels or of businesses
operating in the shipping or other industries. Following the acquisition of
Lower Lakes, Rand will not be limited to any particular industry or type of
business that it may acquire. Accordingly, there is no current basis for you to
evaluate the possible merits or risks of the particular business or assets that
Rand may acquire, or of the industry in which such business operates. To the
extent Rand acquires a financially unstable business, we may be affected by
numerous risks inherent in the acquired business's operations. If Rand acquires
a business in an industry characterized by a high level of risk, we may be
affected by the currently unascertainable risks of that industry. Although
Rand's management will endeavor to evaluate the risks inherent in a particular
industry or target business, we cannot assure you that we will properly
ascertain or assess all of the significant risk factors.
In addition, the financing of any acquisition completed by Rand could
adversely impact Rand's capital structure as any such financing would likely
include the issuance of additional equity securities and/or the borrowing of
additional funds. The issuance of additional equity securities may significantly
reduce the equity interest of existing stockholders and/or adversely affect
prevailing market prices for Rand's common stock. Increasing Rand's indebtedness
could increase the risk of a default that would entitle the holder to declare
all of such indebtedness due and payable and/or to seize any collateral securing
the indebtedness. In addition, default under one debt instrument could in turn
permit lenders under other debt instruments to declare borrowings outstanding
under those other instruments to be due and payable pursuant to cross default
clauses. Accordingly, the financing of future acquisitions could adversely
impact our capital structure and your equity interest in Rand.
7
Except as required by law or the rules of any securities exchange on which
our securities might be listed at the time we seek to consummate an acquisition,
you will not be asked to vote on any proposed acquisition and you will not be
entitled to exercise conversion rights in connection with any such acquisition.
Risks Associated with the Shipping Industry
The cyclical nature of the Great Lakes dry bulk shipping industry may lead to
decreases in shipping rates, which may reduce Lower Lakes' revenue and earnings.
The shipping business, including the dry cargo market, has been cyclical
in varying degrees, experiencing fluctuations in charter rates, profitability
and, consequently, vessel values. Rand anticipates that the future demand for
Lower Lakes' dry bulk carriers and dry bulk charter rates will be dependent upon
continued demand for imported commodities, economic growth in the United States
and Canada, seasonal and regional changes in demand, and changes to the capacity
of the Great Lakes fleet which cannot be predicted. Adverse economic, political,
social or other developments could decrease demand and growth in the shipping
industry and thereby reduce revenue and earnings. Fluctuations, and the demand
for vessels, in general, have been influenced by, among other factors:
o global and regional economic conditions;
o developments in international and Great Lakes trade;
o changes in seaborne and other transportation patterns, such as port
congestion and canal closures;
o weather and crop yields;
o political developments; and
o embargoes and strikes.
The market values of Lower Lakes' vessels may decrease, which could cause Lower
Lakes to breach covenants in its credit facility and which could reduce earnings
and revenues as a result of potential foreclosures.
Vessel values are influenced by several factors, including:
o changes in environmental and other regulations that may limit the
useful life of vessels;
o changes in Great Lakes dry bulk commodity supply and demand;
o types and sizes of vessels;
o development of and increase in use of other modes of transportation;
o governmental or other regulations; and
o prevailing level of charter rates.
If the market values of Lower Lakes' owned vessels decrease, Lower Lakes
may breach some of the covenants contained in its new credit facility. If Lower
Lakes does breach such covenants and Lower Lakes is unable to remedy the
relevant breach, its lenders could accelerate its debt and foreclose on the
collateral, including Lower Lakes' vessels. Any loss of vessels would
significantly decrease the ability of Rand to generate revenue and income. In
addition, if the book value of a vessel is impaired due to unfavorable market
conditions, or a vessel is sold at a price below its book value, Rand would
incur a loss that would reduce earnings.
8
A failure to pass inspection by classification societies and regulators could
result in one or more vessels being unemployable unless and until they pass
inspection, resulting in a loss of revenues from such vessels for that period
and a corresponding decrease in earnings, which may be material.
The hull and machinery of every commercial vessel must be classed by a
classification society authorized by its country of registry, as well as being
subject to inspection by shipping regulatory bodies such as Transport Canada.
The classification society certifies that a vessel is safe and seaworthy in
accordance with the applicable rules and regulations of the country of registry
of the vessel and the United Nations Safety of Life at Sea Convention. Lower
Lakes' owned fleet is currently enrolled with the American Bureau of Shipping.
A vessel must undergo Annual Surveys, Intermediate Surveys, and Special
Surveys by its classification society, as well as periodic inspections by
shipping regulators. As regards classification surveys, in lieu of a Special
Survey, a vessel's machinery may be on a continuous survey cycle, under which
the machinery would be surveyed periodically over a five-year period. Lower
Lakes' vessels are on Special Survey cycles for hull inspection and continuous
survey cycles for machinery inspection. Every vessel is also required to be
drydocked every four to five years for inspection of the underwater parts of
such vessel.
Due to the age of several of the vessels, the repairs and remediations
required in connection with such classification society surveys and other
inspections may be extensive and require significant expenditures. Additionally,
until such time as certain repairs and remediations required in connection with
such surveys and inspections are completed (or if any vessel fails such a survey
or inspection), the vessel may be unable to trade between ports and, therefore,
would be unemployable. Any such loss of the use of a vessel could have an
adverse impact on Rand's revenues, results of operations and liquidity, and any
such impact may be material.
Lower Lakes' business would be adversely affected if Lower Lakes failed to
comply with U.S. maritime laws or the Coasting Trade Act (Canada) provisions on
coastwise trade, or if those provisions were modified or repealed.
Rand is subject to the Shipping Act, 1916, and the Merchant Marine Act,
1920, commonly referred to as the Jones Act, and other U.S. laws and the
Coasting Trade Act (Canada) that restrict domestic maritime transportation to
vessels operating under the flag of the subject state. In the case of the United
States, in addition, the vessels must have been built in the United States, be
at least 75% owned and operated by U.S. citizens and manned by U.S. crews.
Compliance with the foregoing legislation increases the operating costs of the
vessels. With respect to its U.S. flagged vessels, Rand will be responsible for
monitoring the ownership of its capital stock to ensure compliance with U.S.
maritime laws. If Rand does not comply with these restrictions, Rand will be
prohibited from operating its vessels in U.S. coastwise trade, and under certain
circumstances Rand will be deemed to have undertaken an unapproved foreign
transfer, resulting in severe penalties, including permanent loss of U.S.
coastwise trading rights for its vessels, and fines or forfeiture of the
vessels.
Over the past decade, interest groups have lobbied Congress to modify or
repeal U.S. maritime laws so as to facilitate foreign flag competition. Foreign
vessels generally have lower construction costs and generally operate at
significantly lower costs than vessels in the U.S. markets, which would likely
result in reduced charter rates. Rand believes that continued efforts will be
made to modify or repeal these laws. If these efforts are successful, it could
result in significantly increased competition and have a material adverse effect
on our business, results of operations and financial condition.
We may be unable to maintain or replace our vessels as they age.
As of March 31, 2008, the average age of the vessels operated by Lower
Lakes was approximately 50 years. The expense of maintaining, repairing and
upgrading Lower Lakes' vessels typically increases with age, and after a period
of time the cost necessary to satisfy required marine certification standards
may not be economically justifiable. There can be no assurance that Lower Lakes
will be able to maintain its fleet by extending the economic life of existing
vessels, or that our financial resources will be sufficient to enable us to make
expenditures necessary for these purposes. In addition, the supply of
replacement vessels is very limited and the costs associated with acquiring a
newly constructed vessel are prohibitively high. In the event that Lower Lakes
were to lose the use of any its vessels, our financial performance would be
adversely affected.
9
Lower Lakes is subject to environmental laws that could require significant
expenditures both to maintain compliance with such laws and to pay for any
uninsured environmental liabilities resulting from a spill or other
environmental disaster.
The shipping business and vessel operation are materially affected by
government regulation in the form of international conventions, United States
and Canadian treaties, national, state, provincial, and local laws, and
regulations in force in the jurisdictions in which vessels operate. Because such
conventions, treaties, laws and regulations are often revised, Rand cannot
predict the ultimate cost of compliance or its impact on the resale price or
useful life of Lower Lakes' vessels. Additional conventions, treaties, laws and
regulations may be adopted which could limit Rand's ability to do business or
increase the cost of its doing business, which may materially adversely affect
its operations, as well as the shipping industry generally. Lower Lakes is
required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses, and certificates with respect to its operations and
any increased cost in connection with obtaining such permits, licenses and
certificates, or the imposition on Lower Lakes of the obligation to obtain
additional permits, licenses and certificates, could adversely affect Rand's
results of operations.
Canada has adopted a regime of strict liability for oil pollution damage
coming out of ships (Part 6 of the Marine Liability Act). In case of non-tanker
vessels, such as Lower Lakes' vessels, a vessel's registered owner is strictly
liable for pollution damage caused on the Canadian territory, in Canadian
territorial waters or in Canada's exclusive economic zone by oil of any kind or
in any form including petroleum, fuel oil, sludge, oil refuse and oil mixed with
wastes, subject to certain defenses. The liability of the shipowner is, however,
limited in accordance with the provisions of the Convention on Limitation of
Liability for Maritime Claims, 1976, as amended by the Protocol of 1996.
Pursuant to this Convention, the shipowner can limit its liability to (i) 1
million Special Drawing Right, or SDR, as defined by the International Monetary
Fund for the first 2,000 tons of tonnage, (ii) 400 SDR for each additional ton
up to 30,000 tons of tonnage, (iii) 300 SDR for each additional ton up to 70,000
tons of tonnage and (iv) 200 SDR for each additional ton of tonnage. In addition
to the Marine Liability Act, Lower Lakes' vessels are also subject to other
Canadian laws and regulations that contain significant fine and penalty
provisions relating to the marine environment, pollution and discharges of
hazardous substances, including the Migratory Birds Convention Act, the Canadian
Environmental Protection Act, 1999, and the Fisheries Act.
The United States Oil Pollution Act of 1990, or OPA, established an
extensive regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA affects all owners and operators whose vessels
trade in United States waters, which includes the Great Lakes and their
connecting and tributary waterways. Under OPA, vessel owners, operators and
bareboat charterers are "responsible parties" and are jointly, severally and
strictly liable (unless the spill results solely from the act or omission of a
third party, an act of God or an act of war) for all containment and clean-up
costs and other damages arising from vessel discharges of oil of any kind or in
any form.
Lower Lakes currently maintains pollution liability coverage insurance.
However, if the damages from a catastrophic incident exceed this insurance
coverage, it could have a significant adverse impact on Rand's cash flow,
profitability and financial position.
Lower Lakes is subject to vessel security regulations and will incur costs to
comply with recently adopted regulations and may be subject to costs to comply
with similar regulations which may be adopted in the future in response to
terrorism.
Since the terrorist attacks of September 11, 2001, there have been a
variety of initiatives intended to enhance vessel security. On November 25,
2002, the Maritime Transportation Security Act of 2002, or MTSA, came into
effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast
Guard issued regulations requiring the implementation of certain security
requirements aboard vessels operating in waters subject to the jurisdiction of
the United States. Similarly, in December 2002, amendments to the International
Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the
convention dealing specifically with maritime security. The new chapter went
into effect in July 2004, and imposes various detailed security obligations on
vessels and port authorities, most of which are contained in the newly created
ISPS Code. Among the various requirements are:
o on-board installation of automatic information systems, or AIS, to
enhance vessel-to-vessel and vessel-to-shore communications;
o the development of vessel security plans; and
o compliance with flag state security certification requirements.
The U.S. Coast Guard regulations are intended to be aligned with these
international maritime security standards. Although Rand does not believe these
additional requirements will have a material financial impact on Lower Lakes'
operations, Rand cannot assure you that there will be no interruption in
operations to bring vessels into compliance with the applicable requirements and
any such interruption could cause a decrease in revenues.
10
The operation of Lower Lakes' vessels is dependent on the price and availability
of fuel. Continued periods of historically high fuel costs may materially
adversely affect Rand's operating results.
Rand's operating results may be significantly impacted by changes in the
availability or price of fuel for Lower Lakes' vessels. Fuel prices have
increased substantially since 2004. Although price escalation clauses form part
of substantially all of Lower Lakes' contracts of affreightment, which enable
Lower Lakes to pass the majority of its increased fuel costs on to its
customers, these measures may not be sufficient to enable Lower Lakes to fully
recoup increased fuel costs or assure the continued availability of its fuel
supplies. Although we are currently able to obtain adequate supplies of fuel, it
is impossible to predict the price of fuel. Political disruptions or wars
involving oil-producing countries, changes in government policy, changes in fuel
production capacity, environmental concerns and other unpredictable events may
result in fuel supply shortages and additional fuel price increases in the
future. There can be no assurance that Lower Lakes will be able to fully recover
its increased fuel costs by passing these costs on to its customers. In the
event that Lower Lakes is unable to do so, Rand's operating results will be
adversely affected.
Governments could requisition Lower Lakes' vessels during a period of war or
emergency, resulting in loss of revenues and earnings from such requisitioned
vessels.
The United States or Canada could requisition title or seize Lower Lakes'
vessels during a war or national emergency. Requisition of title occurs when a
government takes a vessel and becomes the owner. A government could also
requisition Lower Lakes vessels for hire, which would result in the government's
taking control of a vessel and effectively becoming the charterer at a dictated
charter rate. Requisition of one or more of Lower Lakes' vessels would have a
substantial negative effect on Rand, as Rand would potentially lose all or
substantially all revenues and earnings from the requisitioned vessels and
permanently lose the vessels. Such losses might be partially offset if the
requisitioning government compensated Rand for the requisition.
The operation of Great Lakes-going vessels entails the possibility of marine
disasters including damage or destruction of the vessel due to accident, the
loss of a vessel due to piracy or terrorism, damage or destruction of cargo and
similar events that may cause a loss of revenue from affected vessels and damage
Lower Lakes' business reputation, which may in turn, lead to loss of business.
The operation of Great Lakes-going vessels entails certain inherent risks
that may adversely affect Lower Lakes' business and reputation, including:
o damage or destruction of vessel due to marine disaster such as a
collision;
o the loss of a vessel due to piracy and terrorism;
o cargo and property losses or damage as a result of the foregoing or
less drastic causes such as human error, mechanical failure and bad
weather;
o environmental accidents as a result of the foregoing; and
o business interruptions and delivery delays caused by mechanical
failure, human error, war, terrorism, political action in various
countries, labor strikes or adverse weather conditions.
Any of these circumstances or events could substantially increase Lower
Lakes' costs, as for example, the costs of replacing a vessel or cleaning up a
spill, or lower its revenues by taking vessels out of operation permanently or
for periods of time. The involvement of Lower Lakes' vessels in a disaster or
delays in delivery or damages or loss of cargo may harm its reputation as a safe
and reliable vessel operator and cause it to lose business.
If Lower Lakes' vessels suffer damage, they may need to be repaired at
Lower Lakes' cost at a drydocking facility. The costs of drydock repairs are
unpredictable and can be substantial. Lower Lakes may have to pay drydocking
costs that insurance does not cover. The loss of earnings while these vessels
are being repaired and repositioned, as well as the actual cost of these
repairs, could decrease its revenues and earnings substantially, particularly if
a number of vessels are damaged or drydocked at the same time.
11
Maritime claimants could arrest Lower Lakes' vessels, which could interrupt its
cash flow.
Crew members, suppliers of goods and services to a vessel, shippers of
cargo, and other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages against such vessel. In many jurisdictions,
a maritime lienholder may enforce its lien by arresting a vessel through
foreclosure proceedings. The arrest or attachment of one or more of Lower Lakes'
vessels could interrupt its cash flow and require it to pay large sums of funds
to have the arrest lifted.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We maintain our executive offices at 461 Fifth Avenue, 25th Floor, New
York, New York 10017 pursuant to an agreement with ProChannel Management LLC, an
affiliate of Laurence S. Levy, our chairman of the board and chief executive
officer. We currently lease the following properties:
o Lower Lakes Towing leases approximately 4,500 square feet of
warehouse space at 207 Greenock Street, Port Dover, Ontario under a
lease that expires October 2012.
o Lower Lakes Towing leases approximately 3,075 square feet of office
space at 517 Main Street, Port Dover, Ontario under a lease that
expires March 2013.
o Grand River leases approximately 1,000 square feet of space at 515
Moore Road, Suite 2, Avon Lake, Ohio under a lease that expires July
31, 2008.
o Grand River leases approximately 300 square feet at 3301 Veterans
Drive. Suite 210, Traverse City, Michigan under a lease that expires
September 30, 2008.
o Rand Finance leases approximately 175 square feet at 17 Wilson Road,
Chelmsford, Massachusetts under a lease that expires on April 30,
2009.
We consider our current office space adequate for our current operations.
Item 3. Legal Proceedings
The nature of our business exposes us to the potential for legal
proceedings related to labor and employment, personal injury, property damage,
and environmental matters. Although the ultimate outcome of any legal matter
cannot be predicted with certainty, based on present information, including our
assessment of the merits of each particular claim, as well as our current
reserves and insurance coverage, we do not expect that any known legal
proceeding will in the foreseeable future have a material adverse impact on our
financial condition or the results of our operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our stockholders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Our units, common stock and warrants are currently traded on the NASDAQ
Capital Market under the symbols RLOGU, RLOG and RLOGW, respectively. Prior to
March 7, 2007, our units, common stock and warrants were traded on the OTC
12
Bulletin Board. The following table sets forth the range of high and low closing
bid prices for the units, common stock and warrants for the periods where such
securities were listed on the OTC Bulletin Board, and the high and low sales
prices for each period where such securities were listed on the NASDAQ Capital
Market. The over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily reflect
actual transactions.
<TABLE>
<CAPTION>
Common Stock Warrants Units
------------ -------- -----
Quarter Ended High Low High Low High Low
------------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
June 30, 2006 $6.25 $5.40 $1.27 $0.70 $ 8.70 $ 7.40
September 30, 2006 $5.88 $5.30 $1.01 $0.70 $ 8.00 $ 6.90
December 31, 2006 $7.10 $5.40 $2.18 $0.76 $11.75 $ 7.00
March 31, 2007* $7.20 $6.60 $2.30 $1.50 $11.47 $10.05
June 30, 2007 $7.35 $5.00 $2.76 $1.70 $11.90 $11.65
September 30, 2007 $6.50 $5.17 $2.13 $1.05 $** $**
December 31, 2007 $6.50 $5.11 $2.48 $1.45 $11.50 $ 6.00
March 31, 2008 $6.45 $4.90 $1.89 $0.30 $10.50 $ 5.00
</TABLE>
*Effective March 7, 2007, the Company's units, common stock and warrants
ceased trading on the OTC Bulletin Board and began trading on the NASDAQ Capital
Market.
**No trades of the Company's Units were made during the quarter ended
September 30, 2007.
Holders
As of June 24, 2008, there was one holder of record of our units, 33
holders of record of our common stock and two holders of record of our warrants.
Dividends
We have not paid any dividends on our common stock to date and do not
intend to pay dividends on our common stock in the near future. The payment of
dividends in the future will be contingent upon our revenues, earnings, capital
requirements and general financial condition. The payment of dividends is within
the discretion of our board of directors. Other than dividends which our board
of directors may determine to pay on our preferred stock, it is the present
intention of our board of directors to retain all earnings for future investment
and use in our business operations. Accordingly, our board of directors does not
anticipate declaring any dividends in the foreseeable future on our common
stock. In addition, no dividends may be declared or paid on our common stock
unless all accrued dividends on our preferred stock have been paid.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the information
under this item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations Introduction
All dollar amounts below $500,000 presented herein are in thousands,
values greater than $500,000 are presented in millions except share and per
share amounts.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements involve certain
risks and uncertainties, including statements regarding our strategic direction,
prospects and future results. Certain factors, including factors outside of our
control, may cause actual results to differ materially from those contained in
the forward-looking statements. All forward looking statements included in this
report are based on information available to us as of the date hereof, and we
assume no obligation to update or revise such forward-looking statements to
reflect events or circumstances that occur after such statements are made. Such
uncertainties include, among others, the following factors:
13
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 Rand's business, unless the
context otherwise requires, references to Rand 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.
Rand's 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 is 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
Year ended March 31, 2008.
The fiscal year ended March 31, 2008 was highlighted by several
significant events:
(1) The three WMS vessels did not sail from May through August of 2007 due to
a strike by its licensed officers. After WMS negotiated a contract
extension with its unlicensed officers and hired new licensed officers,
the three WMS vessels sailed over the last few months of the season with
reduced overall productivity due to new licensed officers operating the
vessels.
(2) As a result of the strike on the WMS vessels, we were required to voyage
charter some of our customer deliveries to other third party carriers, for
which we receive very small margins. In addition, the strike caused
inefficiencies in delivery routes and cargo carried by our Core Vessels
which negatively impacted our revenues and margins.
(3) We acquired two bulk carriers on August 27, 2007 which provided just over
four months of revenue for the company but required a full season of
winter work expense.
(4) We exercised our option to buy the three WMS vessels at the end of the
sailing season, which we believe will result in substantially increased
cash flow in future years. We transferred one of these vessels to our
Canadian subsidiary and the other two vessels will be operated by our U.S.
subsidiary.
14
(5) We retired and scrapped our oldest and smallest vessel at the end of the
season, which will result in a modest reduction of earnings in future
years.
(6) Increases in our fuel costs through the year were passed on to customers
through fuel surcharges which reduced our margin percentages, but not our
margin dollars.
(7) We experienced increased general and administrative costs stemming from
consulting, outsourcing, and staffing upgrades to our management
infrastructure and controls, particularly in the finance and IT functions.
The strengthening Canadian dollar and acquisition integration also
increased general and administrative expenses.
15
Year ended March 31, 2008 compared to year ended March 31, 2007.
The following table summarizes our Results of Operations in 2008 and 2007
<TABLE>
<CAPTION>
Reconciliation of GAAP to
Non-GAAP Measures
($ in 000's)
Year ended March 31, 2008 Year ended March 31, 2007
Rand Rand
Logistics Impact of Logistics Impact of
Inc. FIN-46R* Consolidated Inc. FIN-46R* Consolidated
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Revenue 94,769 -- 94,769 79,186 -- 79,186
Expenses
Outside voyage charter fees 9,436 0 9,436 4,935 0 4,935
Charter Hire 11,757 (11,757) 0 10,546 (10,546) 0
Vessel operating expenses 60,973 8,144 69,117 49,907 7,567 57,474
Repairs and maintenance 3,834 10 3,844 2,575 807 3,382
================================================================================== ============================================
86,000 (3,603) 82,397 67,963 (2,172) 65,791
================================================================================== ============================================
Income before general and 8,769 3,603 12,372 11,223 2,172 13,395
administrative, depreciation,
amortization of drydock costs and
intangibles, other income and
expenses and income taxes
("Vessel Margin")
================================================================================== ============================================
General and administrative 9,968 710 10,678 7,628 441 8,069
----------------------------------------------------------------------------------------------------------------------------------
EBITDA (Vessel Margin less
General and Administrative) (1,199) 2,893 1,694 3,595 1,731 5,326
Depreciation and amortization
of drydock costs, intangibles and
charter hire 9,101 1,052 10,153 6,456 651 7,107
Gain on sale of vessels by
variable interest entity 0 (667) (667) 0 0 0
Loss on retirement of owned
vessel 1,735 0 1,735 0 0 0
Loss (gain) on foreign exchange (163) 0 (163) 128 0 128
================================================================================== ============================================
================================================================================== ============================================
Income (loss) before other income
and expenses and income taxes (11,872) 2,508 (9,364) (2,989) 1,080 (1,909)
================================================================================== ============================================
</TABLE>
*For a discussion of FIN 46-R, see Note 2 to our Financial Statements.
Revenues for the year ended March 31, 2008 were $94.8 million, an increase
of 19.7% from $79.2 million during the year ended March 31, 2007. This increase
was primarily attributable to the acquisition of the Voyageur vessels and
increased revenues from our Core Vessels. In addition, revenues from the WMS
vessels declined from the prior year due to WMS' officers' strike, but were
offset by increased revenues from voyage chartered vessels.
In 2008, Sailing Days, defined as "vessels crewed and available for
sailing," increased 169 days to 2,883 days, including 285 days from the acquired
Voyageur vessels from 2,714 days in the year ended March 31, 2007. Excluding the
acquired Voyageur vessels, Sailing Days dropped 116 days from 2007, which
included 56 days lost from the strike-impacted WMS vessels, and 60 days lost
from the Core Vessels due to certain vessel incidents and sailing-season
repairs. Management believes that each of our vessels should achieve
approximately 275 sailing days per year in an average Great Lakes season,
assuming average winter weather and ice, as average winterwork, capital
expenditures and dry-docking cycle times performed during the winter lay-up
period.
Vessel Margins, which is revenue reduced for voyage charters, charter
hire, vessel operating expenses, and repairs and maintenance, decreased $1.0
million to $12.4 million in the year ended March 31, 2008 from $13.4 million in
the year ended March 31, 2007 . Vessel Margins, excluding the consolidated VIE,
decreased $2.4 million, or 21.4%, from $11.2 million in the year ended March 31,
2007 to $8.8 million in the year ended March 31, 2008. The decrease was
attributable to the $4.7 million increase in the loss from the strike-impacted
16
WMS vessels offset by increased Vessel Margins from our other vessels. The newly
acquired Voyageur vessels generated approximately $340 of Vessel Margins from
approximately four months of operations, but were offset by a full season of
winterwork expense. Vessel Margins on our Core Vessels increased approximately
$2.0 million, or 18%, to $13.8 million in the year ended March 31, 2008 from
$11.8 million in the year ended March 31, 2007. Vessel Margins for the
consolidated VIE increased $1.4 million to $3.6 million, which reflected a full
season of operating under the time charter contract. Management believes that
Vessel Margins are an important measure of the cashflow generated by individual
vessels to evaluate performance and to make investment decisions.
Repairs and maintenance expenses, which consist of expensed winterwork,
are a component of vessel operating cost and increased $462 to $3,844 in the
year ended March 31, 2008 compared to $3,382 in the year ended March 31, 2007.
The increase was primarily due to the acquisition of the two Voyageur vessels.
General and administrative expenses increased $2.6 million to $10.7
million in the year ended March 31, 2008 from $8.1 million in the year ended
March 31, 2007. The increase included $1.3 million of higher cash expenses, $0.6
million related to the increase in the Canadian dollar, $392 due to higher
non-cash equity compensation and $269 due to higher general and administrative
cost in the VIE. Most of the higher cash expenses were related to upgrading our
finance and IT infrastructure, as well as expensed legal costs related to the
Voyageur vessel acquisition.
General and Administrative expense represented 11.3% of revenues in the
year ended March 31, 2008, an increase from 10.2% of revenues in the year ended
March 31, 2007. Excluding the VIE, general and administrative expenses were
10.5% of revenues in the year ended March 31, 2008, compared to 9.6% in the year
ended March 31, 2007.
Depreciation expense rose $1.3 million to $6.4 million in the year ended
March 31, 2008 due to a stronger Canadian dollar, the acquisition of the two
Voyageur vessels, certain capital expenditures and the full year effect of
depreciation of the WMS vessels at the VIE.
Amortization of dry-dock costs increased $1.1 million to $1.5 million in
the year ended March 31, 2008, due to the amortization in the year ended March
31, 2008 of those dry-dockings completed for the winter 2007 season. Dry-docking
costs prior to March 3, 2006 were considered in the fair value valuation of the
vessels on the date of our acquisition of Lower Lakes. Amortization of
intangibles increased $0.5 million to $1.9 million in the year ended March 31,
2008, due to the acquisition of the Voyageur vessels and the conversion of
values amortized in Canadian dollars.
In the year ended March 31, 2008, we incurred a loss of $1.7 million with
the net book value write-off of our oldest vessel, which was retired at the end
the fiscal 2008 sailing season. The VIE recorded a gain of $0.7 million on the
sale of the WMS vessels to Rand in February 2008, which is consolidated under
FIN-46R.
As a result of the items listed above in the year ended March 31, 2008,
the Loss Before Other Income and Expenses and Income Taxes increased $7.5
million to a loss of $9.4 million as compared to a loss of $1.9 million for the
year ended March 31, 2007.
Interest expense increased $1.1 million to $4.9 million in the year ended
March 31, 2008 from $38 million in the year ended March 31, 2007 as a result of
the increase in term loans arising from financing the acquisitions of the
Voyager and WMS vessels, as well as the full year effect of loans to the VIE. We
wrote off $0.8 million in of deferred financing costs in fiscal 2008 as a result
of entering into a new Amended and Restated Credit Agreement with our lender.
We recorded a loss on interest rate swap contracts of $1.3 million in
fiscal 2008 as a result of writing such swap contracts down to fair value as of
March 31, 2008. Such swap contracts were entered in connection with the new term
loans in our Amended and Restated Credit Agreement.
The VIE was deconsolidated from Rand's financial statements effective
February 13, 2008 after the acquisition of the WMS vessels, which resulted in a
$302 loss.
The Loss before Income Taxes and Minority Interest was $16.4 million in
the year ended March 31, 2008 compared to a loss of $5.5 million in the year
ended March 31, 2007.
17
Our recovery from income tax represented a negative provision (income) of
$5.0 million in the year ended March 31, 2008 and $2.2 million in the year ended
March 31, 2007.
Our Net Loss increased $8.1 million to $11.2 million in the year ended
March 31, 2008 from a loss of $3.1 million in the year ended March 31, 2007.
We accrued $1.3 million for cash dividends on our preferred stock in the
year ended March 31, 2008 compared to $1.2 million in the year ended March 31,
2007. The VIE paid a cash dividend on its common stock of $250 in the year ended
March 31, 2007. We also recorded $2.0 million of Stock Warrant Inducement
Discount in connection with the $0.50 per warrant discount on the 3,964,965
warrants which were exercised during the 2008 fiscal year.
As a result of the items above, Rand's Net Loss Applicable to Common
Shareholders increased $10 million to $14.5 million in the year ended March 31,
2008 from $4.5 million in the year ended March 31, 2007.
Impact of Inflation and Changing Prices
For the fiscal year ended March 31, 2008 and March 31, 2007, the annual
inflation rates in Canada were 1.3% and 2.3%, respectively, based on the "Core
CPI" rate calculated by the Bank of Canada. During the same two years, the U.S.
key inflation rates were 4.0% and 2.8%, respectively, based on the "CPI-U" rate
calculated by the U.S. Department of Labor. During these periods, Rand sought
and achieved revenue increases from renewing customer contracts, which were
typically 3 to 5 years in length. Lower Lakes estimates that price increases
averaged at least 2.5% to 3% per year during these two periods as a result of
inflation. During the past two years, the impact of inflation on income from
continuing operations is estimated by Lower Lakes to be between 2.5% to 3% per
year, as both revenues and costs increased proportionately due to inflation
during such period.
Liquidity and Capital Resources
Rand's primary sources of liquidity are provided by operations, our Credit
Facility, the exercise of our outstanding warrants and the issuance of common
stock. Principal uses of cash are vessel acquisitions, capital expenditures,
drydock expenditures, operations, and principal payments on our Amended and
Restated Credit Facility. Information on Rand's consolidated cash flow is
presented in the consolidated statement of cash flows (categorized by operating,
financing and investing activities) which is included in Rand's audited
consolidated financial statements for the years ended March 31, 2007 and March
31, 2008. We believe cash generated from our operations and availability of
borrowing under our Amended and Restated Credit Facility will provide sufficient
cash availability to cover our anticipated working capital needs, capital
expenditures and debt service requirements for the next twelve months.
Investments in Capital Expenditures and Dry-Dockings
Rand expended $34.9 million in capital expenditures in fiscal 2008,
including $20.6 million related to the WMS acquisition and $14.3 million in
vessel upgrades. These fiscal 2008 vessel projects included repowering and
upgrading the Saginaw vessel in our Canadian fleet, upgrades associated with
reflagging a former WMS vessel in Canada, and investments in communications and
IT infrastructure and software. Total vessel capital expenditures related to the
winter 2008 season are estimated at approximately $20.5 million, including $6.2
million estimated to be incurred in the first quarter of fiscal 2009. Rand
invested $4.4 million in dry-docking expenses in fiscal 2008. Total vessel
dry-docking expenditures for fiscal 2008 and the first quarter of fiscal 2009
are estimated to be $5.1 million. These expenses include substantial one-time
steel work on one of the acquired Voyageur vessels which was exposed to salt
water and $0.7 million of winter 2007 carryover costs incurred in the first
quarter of fiscal 2008.
Rand invested $4.4 million in dry-docking expenses in fiscal 2008. Total
vessel dry-docking expenditures for winter 2008 are estimated to be $5.1
million. These expenses include substantial one-time steel work on one of the
acquired Voyageur vessels which was exposed to salt water and $0.7 million of
winter 2007 carryover costs incurred in the first quarter of fiscal 2008.
18
Warrant Exercises
To further ensure adequate liquidity, on April 30, 2007, the Company
entered into a Warrant Exercise Agreement with Knott Partners, LP; Knott
Partners Offshore Master Fund, LP; CommonFund Hedged Equity Company; Shoshone
Partners, LP; Finderne, LLC; Good Steward Trading Company SPC; and Leonard &
Margaret Frierman (the "Knott Entities"), pursuant to which the Knott Entities
agreed to exercise 1,504,000 of the Company's publicly traded warrants and the
Company agreed to accept $4.50, rather than the $5.00 exercise price provided in
the warrant, as the exercise price for each such warrant. On the same date, the
Company received $6.8 million of proceeds from the exercise of the subject
warrants and the Company authorized the issuance of the 1,504,000 shares of its
common stock issuable upon exercise of such warrants.
Following the Agreement with the Knott Entities, on May 4, 2007, the
Company announced a program by which the exercise price of its outstanding,
publicly traded warrants was reduced to $4.50 (from the $5.00 exercise price
provided by the original terms of the warrants). The reduced exercise price
under the program was in effect through July 13, 2007, as of which date
2,460,965 warrants were exercised under the program, generating cash of $11.0
million for the Company. None of the 1,571,349 warrants owned by our officers
and directors were exercised under the program. Following expiration of the
reduced exercise price period under the program, the original exercised price of
$5.00 was reinstituted for all remaining unexercised warrants. As of June 26,
2008, 5,231,215 warrants remain outstanding.
Credit Facility
On February 13, 2008, Lower Lakes Towing Ltd, Lower Lakes Transportation
and Grand River, as borrowers, Rand LL Holdings, Rand Finance and the Rand, as
guarantors, General Electric Capital Corporation, as agent and lender, and
certain other lenders, entered into an Amended and Restated Credit Agreement
which (i) amends and restates the Credit Agreement to which the borrowers are a
party, dated as of March 3, 2006, in its entirety, (ii) restructures the
tranches of loans provided for under the 2006 Credit Agreement and advances
certain new loans, (iii) finances, in part, the acquisition of the three vessels
by Grand River from WMS, and (iv) provides working capital financing, funds for
other general corporate purposes and funds for other permitted purposes. The
Amended and Restated Credit Agreement provides for (i) a revolving credit
facility under which Lower Lakes Towing may borrow up to CDN $13.5 million with
a seasonal overadvance facility of US $8.0 million (US $10.0 million for
calendar year 2008 only) and a swing line facility of CDN $4.0 million subject
to limitations, (ii) a revolving credit facility under which Lower Lakes
Transportation may borrow up to US $13.0 million with a seasonal over advance
facility of US $8.0 million (US $10.0 million for calendar year 2008 only) and a
swing line facility of US $4.0 million, subject to limitations, (iii) a Canadian
dollar denominated term loan facility under which Lower Lakes Towing may borrow
CDN $41.7 million, (iv) a US dollar denominated term loan facility under which
Grand River may borrow US $22.0 million and (v) a Canadian dollar denominated
"Engine" term loan facility under which Lower Lakes Towing may borrow CDN $8.0
million.
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 will be repayable as
follows: (i) quarterly payments of CDN $0.695 million 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 will be 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 will
be repayable as follows: (i) quarterly payments of CDN $133 commencing Quarterly
September 1, 2008 and ending March 1, 2013, and (iii) a final payment in the
outstanding principal amount of the Engine term loan shall be payable upon the
Engine term loan facility's maturity on April 1, 2013.
Borrowings under the Canadian revolving credit facility and the Canadian
term loan will 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. Borrowings under the
Canadian swing line facility will bear an interest rate per annum equal to the
Canadian Prime Rate (as defined in the Amended and Restated Credit Agreement),
plus 2.75% per annum. Borrowings under the US revolving credit facility and the
US term loan will bear interest, at the borrowers' 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 US swing line facility will bear an
interest rate per annum equal to 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 will bear an interest rate per annum, at the borrowers'
option, equal to (i) the Canadian Prime Rate (as defined in the Amended and
Restated Credit Agreement), plus 4.00% per annum or (ii) the BA Rate (as defined
in the Amended and Restated Credit Agreement) plus 5.00% per annum. The interest
rates shall be adjusted quarterly commencing on the second quarter of fiscal
year 2009 based upon the borrowers' senior debt to EBITDA ratio as calculated in
accordance with the Amended and Restated Credit Agreement.
19
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; and (iii) a pledge by the Registrant of all of
the outstanding capital stock of Rand LL Holdings and Rand Finance. The
indebtedness of each borrower under the Amended and Restated Credit Agreement is
unconditionally guarantied by each other borrower and by the guarantors, and
such guaranty is secured by a lien on substantially all of the assets of each
borrower and each guarantor.
Under the Amended and Restated Credit Agreement, the borrowers will be
required to make mandatory prepayments of principal on term loan borrowings (i)
if the outstanding balance of the term loans plus the outstanding balance of the
seasonal facilities exceeds the sum of 75% of the fair market value of the
vessels owned by the borrowers, less the amount of outstanding liens against the
vessels with priority over the lenders' liens, in an amount equal to such
excess, (ii) in the event of certain dispositions of assets and insurance
proceeds (all subject to certain exceptions), in an amount equal to 100% of the
net proceeds received by the borrowers there from, and (iii) in an amount equal
to 100% of the net proceeds to a borrower from any issuance of a Borrower's debt
or equity securities.
The Amended and Restated Credit Agreement contains certain covenants,
including those limiting the guarantors, the borrowers, and their subsidiaries'
ability to incur indebtedness, incur liens, sell or acquire assets or
businesses, change the nature of their businesses, engage in transactions with
related parties, make certain investments or pay dividends. In addition, the
Amended and Restated Credit Agreement requires the borrowers to maintain certain
financial ratios. Failure of the borrowers or the guarantors to comply with any
of these covenants or financial ratios could result in the loans under the
Amended and Restated Credit Agreement being accelerated.
Seasonality
Lower Lakes is subject to a cyclical industry, primarily due to the
typical cold weather patterns on the Great Lakes from December through March
which cause lock closures, waterway ice, and customer facility closings, which
typically shut down shipping for a period of up to 90 days commencing from late
December to mid-January, and continuing until late March to early April. Lower
Lakes also experiences a cyclical pattern for its capital spending cycle,
typically off-season from the shipping revenues, to permit annual maintenance
and investment in the vessels. This places additional adverse pressures on Lower
Lakes' liquidity and capital resources. Such winterwork, capital expenditure,
and dry-docking costs are incurred during a period when customer collections
have ended from the prior season, and fit-out and vessel operating costs will be
incurred at the beginning of the season as much as 45 to 60 days prior to the
receipt of significant customer collections. To counter these negative working
capital cycles, Lower Lakes' Amended and Restated Credit Facility includes a
revolver feature with a seasonal overadvance facility which provides working
capital from the March through June period, after which customer collections
typically exceed cash disbursements.
Foreign Exchange Rate Risk
Rand has foreign currency exposure related to the currency related
remeasurements of its 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
March 31, 2008, Rand's liability for financial instruments with exposure to
foreign currency risk was approximately CDN $49.7 million of Term Loans in
Canada, compared to a liability of CDN $19.5 million in Term Loans and CDN $2.5
million of Revolver borrowings in Canada at March 31, 2007. Although Rand has
tried to match its indebtedness by country with its cashflows, the sudden change
in exchange rates can increase the indebtedness converted to US dollars before
the operating cashflows can make up for such a currency conversion change.
From a cash flow perspective, Rand's 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 the operations are
cash flow positive. However, as stated above, the majority of the Rand's
financial liabilities are denominated in Canadian dollars which exposes the
Company to currency risks related to principal payments and interest payments on
such financial liability instruments.
20
Interest Rate Risk
Rand is subject to market risk from exposure to changes in interest rates
associated with its revolver debt. Lower Lakes' Amended and Restated Credit
Agreement carries interest rates which vary with Canadian Prime Rates and B.A.
Rates for Canadian borrowings, and US Prime Rates and Libor Rates on US
borrowings.
Rand has entered into two interest rate swap contracts for all of its term
loans for the full term of such term loans based on three month BA rates for the
Canadian term Loans and three month US Libor rates for the US Term Loans. The
rates on these instruments, prior to the addition of the Lender's margin, are
4.09% on the Canadian Term Loans, and 3.65% on the US Term Loans. Rand will be
exposed to risk under these contracts if they are required to be amended or
terminated earlier than contracted.
Off-Balance Sheet Arrangements
Options and warrants issued in conjunction with our initial public
offering are equity linked derivatives and accordingly represent off-balance
sheet arrangements. The options and warrants meet the scope exception in
paragraph 11(a) of FAS 133 and are accordingly not accounted for as derivatives
for purposes of FAS 133, but instead are accounted for as equity. See the notes
to the March 31, 2008 financial statements for a discussion of outstanding
options and warrants.
On August 27, 2007, in connection with the COA and Option Agreement, Lower
Lakes entered into a Guarantee with GE Canada (the "Guarantee"), pursuant to
which Lower Lakes agreed to guarantee up to CDN $1.25 million (the "Guaranteed
Obligations") of Voyageur's indebtedness to GE Canada. Lower Lakes' maximum
future payments under the Guarantee are limited to the Guaranteed Obligations
plus the costs and expenses GE Canada incurs while enforcing its rights under
the Guarantee. Lower Lakes' obligations under the Guarantee shall become due
should Voyageur fail to meet certain financial covenants under the terms of its
loan from GE Canada or if Voyageur breaches certain of its obligations under the
COA. Lower Lakes has several options available to it in the event that GE Canada
intends to draw under the Guarantee, including (i) the right to exercise its
option for the Trader under the Option Agreement and (ii) the right to make a
subordinated secured loan to Voyageur in an amount at least equal to the amount
intended to be drawn by GE Canada on terms as are reasonably satisfactory to GE
Canada and Voyageur.
In the event GE Canada makes a demand against Lower Lakes pursuant to the
terms of the Guarantee, through a Letter of Credit Agreement, dated August 27,
2007, an affiliate of Voyageur has agreed to contribute half of any amounts
drawn under the Guarantee through a CDN $0.6 million letter of credit provided
to Lower Lakes.
Voyageur has been determined to be a variable interest entity of the
Company under U.S. GAAP. Rand has determined that it is not a "Primary
Beneficiary" of Voyageur's remaining business and therefore Rand is not required
to consolidate Voyageur's financial statements.
Critical Accounting Policies
Rand's significant accounting policies are presented in Note 2 to its
fiscal 2008 audited consolidated financial statements, and the following
summaries should be read in conjunction with the financial statements and the
related notes included in this proxy statement. While all accounting policies
affect the financial statements, certain policies may be viewed as critical.
Critical accounting policies are those that are both most important to the
portrayal of the financial statements and results of operations and that require
management's most subjective or complex judgments and estimates.
Revenue recognition
The Company generates revenues from freight billings under contracts of
affreightment (voyage charters) generally on a rate per ton basis. Voyage
charter revenue is recognized ratably over the period from the departure of a
vessel from its original shipping point to its destination, when the following
conditions are met: the Company has a signed contract of affreightment, the
contract price is fixed or determinable and collection is reasonably assured.
Included in freight billings are other fees such as fuel surcharges and other
freight surcharges, which represent pass-through charges to customers for toll
fees, lockage fees and ice breaking fees paid to other parties. Fuel surcharges
are recognized ratably over the voyage, while freight surcharges are recognized
when the associated costs are incurred. Freight surcharges are insignificant and
amount to less than 1% of total revenues for the periods presented. The Company
subcontracts excess customer demand to other freight providers. Service to
21
customers under such arrangements is transparent to the customer and no
additional services are being provided to customers. Consequently, revenues
recognized for customers serviced by freight subcontractors are recognized on
the same basis as described above. In addition, revenues are presented on a
gross basis in accordance with the guidance in Emerging Issues Task Force 99-19
(EITF 99-19), "Reporting Revenue Gross as a Principal versus Net as an Agent."
Costs for subcontracted freight providers, presented as "Outside voyage charter
fees" on the statement of operations are recognized ratably over the voyage.
Intangible assets and goodwill
The Company adopted Statements of Financial Accounting Standards (SFAS)
No. 141, "Business Combinations"("SFAS 141") and SFAS No. 142, "Goodwill and
other Intangible Assets" ("SFAS 142"). SFAS No. 141 requires all business
combinations to be accounted for using the purchase method of accounting and
that certain intangible assets acquired in a business combination must be
recognized as assets separate from goodwill. SFAS No. 142 provides that
intangible assets with indefinite lives and goodwill will not be amortized, but
will be tested at least annually for impairment, and whenever events or changes
in circumstances indicate that the carrying value of the asset may not be
recovered. If the asset is impaired, it will be written down to its fair value.
Intangible assets consist primarily of goodwill, financing costs, trademarks,
trade names, non-competition agreements and customer relationships and
contracts. In accordance with SFAS 142, the Company reviews goodwill for
impairment at least annually using a two-step impairment test to first identify
potential impairment and then to measure the amount of the impairment, if any.
Chartering agreement costs are primarily legal costs of establishing the time
chartering agreements with the VIE, including loan and guaranty documentation.
These costs were amortized over the term of the time chartering agreement, and
related debt. Other intangibles are amortized as follows:
Trademarks and trade names 10 years straight-line
Non-competition agreements 4 years straight-line
Customer relationships and contracts 15 years straight-line
Chartering agreement costs Term of Chartering agreement
Property and equipment
Property and equipment are recorded at cost and have been valued as of the
date of acquisition. Depreciation methods for capital assets are as follows:
Vessels 4 - 25 years straight-line
Leasehold improvements 7 - 11 years straight-line
Furniture and equipment 20% declining-balance
Computer equipment 45% declining-balance
Deferred charges
Deferred charges include capitalized drydock expenditures and deferred
financing costs. Drydock costs incurred during statutory Canadian and United
States certification processes are capitalized and amortized on a straight-line
basis over the benefit period, which is 60 months. Drydock costs include costs
of work performed by third party shipyards, subcontractors and other direct
expenses to complete the mandatory certification process. Deferred financing
costs are amortized on a straight-line basis over the term of the related debt,
which approximates the effective interest method.
Repairs and maintenance
The Company's vessels require repairs and maintenance each year to ensure
the fleet is operating efficiently during the shipping season. The vast majority
of repairs and maintenance are completed in January, February and March of each
year when the vessels are inactive. The Company expenses such routine repairs
and maintenance costs. Significant repairs to the Company's vessels, whether
owned or available to the Company under a time charter, such as major engine
overhauls and hull repairs, are capitalized and amortized over the remaining
life of the asset repaired, or remaining lease term, whether it is engine
equipment, the vessel, or leasehold improvements to a vessel leased under time
charter agreement.
22
Impairment of long-lived assets
Long-lived assets include property, intangible assets subject to
amortization, and certain other assets. The carrying values of these assets are
periodically reviewed for impairment or whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable. The
Company evaluates impairment by comparing the fair value of the intangible
assets with indefinite lives and goodwill with their carrying values. The
Company determines fair value of goodwill by evaluating the fair value of the
acquired business as well as using the sum of the undiscounted cash flows
projected to be generated by the acquired business giving rise to that goodwill.
This requires the Company to make long-term forecasts of future revenues and
costs related to the assets subject to review. These forecasts require
assumptions about demand for the Company's services and future market
conditions. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to result from its use and eventual disposition. If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized for the amount by which the carrying value of
the asset exceeds its fair value. If a readily determinable market price does
not exist, fair value is estimated using undiscounted expected cash flows
attributable to the assets.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the determination
of deferred tax assets and liabilities based on the differences between the
financial statement and income tax bases of tax assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is recognized, if necessary, to measure tax
benefits to the extent that, based on available evidence, it is more likely than
not that they will be realized. Rand believes that such tax benefits will be
realized.
Accounting for uncertainty in income taxes
In July 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 addresses the determination of how tax benefits claimed or expected
to be claimed on a tax return should be recorded in the financial statements.
Under FIN 48, the Company may recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements
from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate
resolution. The impact of the Company's reassessment of its tax positions in
accordance with FIN 48 did not have a material effect on the results of
operations, financial condition or liquidity. The Company adopted the provisions
of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement No. 109" ("FIN 48") effective April 1, 2007.
The adoption of FIN 48 on April 1, 2008 did not result in a cumulative effect
adjustment to accumulated deficit. At April 1, 2007, the Company had no
unrecognized tax benefits which, if recognized, would favorably affect the
effective income tax rate in future periods. Consistent with its historical
financial reporting, the Company has elected to classify interest expense
related to income tax liabilities, when applicable, as part of the interest
expense in its Consolidated Statements of Operations rather than income tax
expense. The Company will continue to classify income tax penalties as part of
selling, general and administrative expense in its Consolidated Statements of
Operations. To date, the Company has not incurred material interest expenses or
penalties relating to assessed taxation years.
Stock-based compensation
Effective April 1, 2006, the Company adopted SFAS No. 123(R), Share-Based
Payment, using the modified prospective method. This method requires
compensation cost to be recognized beginning on the effective date based on the
requirements of SFAS 123(R) for all share-based payments granted or modified
after the effective date. Under this method, the Company recognizes compensation
expense for all newly granted awards and awards modified, repurchased, or
cancelled after April 1, 2007. Compensation expense for the unvested portion of
the awards that was outstanding on April 1, 2007 is recognized ratably over the
remaining vesting period based on the fair value at date of grant as calculated
under the Black-Scholes option pricing model.
23
Variable interest entities
The Company uses FASB Interpretation ("FIN") 46R, which requires the
Company to consolidate certain entities on the basis other than through
ownership of a voting interest of the entity . Two VIE's have been identified
and WMS had been consolidated in accordance with FIN 46R through the
deconsolidation date of February 13, 2008. Though the Voyageur group of
companies is a variable interest entity for Rand, it does not meet criteria for
consolidation and hence is not consolidated.
On February 13, 2008, the Company entered into an asset purchase agreement
with WMS (a VIE until that date) to buy the entire remaining assets of the VIE.
Based on this reconsideration event, the Company is no longer the primary
beneficiary under FIN 46R and is no longer required to consolidate WMS financial
statements. The March 31, 2008, statement of operations includes the results of
WMS through February 13, 2008, at which point WMS was deconsolidated from the
Company's balance sheet.
Recently Issued Pronouncements
Fair value measurement
In September 2006, the FASB issued FASB Statement 157, "Fair Value
Measurements", for fiscal years beginning after November 15, 2007. The Company
will be required to adopt this standard for the fiscal year ending March 31,
2009 and is presently evaluating the impact of adopting this standard on its
consolidated financial statements.
Fair value option for financial assets and financial liabilities
In February 2007, the FASB issued SFAS No. 159, "Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides all
companies the option to irrevocably elect to report recognized financial assets
and liabilities at fair value on a contract-by-contract basis. Effective as of
the beginning of the first fiscal year that begins after November 15, 2007, the
Company has the option of early adoption, provided the Company also elects to
apply the provisions of FASB Statement No. 157, "Fair Value Measurements". The
Company is presently evaluating the impact of adopting this standard on its
consolidated financial statements. The adoption of SFAS No. 159 is not expected
to have a material impact on the Company's consolidated financial statements.
Non-controlling interests in consolidated financial statements
On December 4, 2007, the FASB issued SFAS No. 160, "Non-controlling
Interests in Consolidated Financial Statements, an amendment of ARB No. 151.
SFAS 160 applies to all fiscal years beginning on or after December 15, 2008.
The Company will be required to adopt this standard for the fiscal year ending
March 31, 2009 and is presently evaluating the impact of adopting this standard
on its consolidated financial statements.
Business Combinations
On December 4, 2007, the FASB also issued SFAS No. 141(R), "Business
Combinations". This statement also applies to fiscal years beginning on or after
December 15, 2008. The Company will be required to adopt this standard for the
fiscal year ending March 31, 2009. The Company is presently evaluating the
impact of adopting this standard on its consolidated financial statements.
Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161"). FAS 161 amends SFAS 133 to
provide enhanced disclosure requirements surrounding how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133 and how derivative instruments and related hedged
items affect an entity's financial position, financial performance and cash
flows. SFAS 161 is effective for the Company as of the beginning of Fiscal 2010,
including interim periods thereafter. The implementation of SFAS 161 is not
expected to have a material impact on the Company's consolidated financial
statements.
24
The Hierarchy of Generally Accepted Accounting Principles
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles" ("SFAS 162"). The new standard is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles ("GAAP") for nongovernmental entities. SFAS 162 is effective 60 days
following SEC approval of the Public Company Accounting Oversight Board Auditing
amendments to AU Section 411, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles. We are currently evaluating the
impact, if any, of the adopting the SFAS 162, on our consolidated financial
statements.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the information
under this item.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data of Rand Logistics, Inc.
required by this Item are described in Item 15 of this Annual Report on Form
10-K and are presented beginning on page F-1.
Item 9. Changes in and Disagreements with Accountant on Accounting and Financial
Disclosure
None.
Item 9A(T). Controls and Procedures
As of March 31, 2008 (the end of the period covered by this report), 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.
Our senior management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f)
and Rule 15d-15(f) under the Securities Exchange Act of 1934), designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms.
Because of inherent limitations, a system of internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management has evaluated the effectiveness of its internal control over
financial reporting as of March 31, 2008 based on the criteria set forth in a
report entitled Internal Control--Integrated Framework, issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
evaluation, we have concluded that, as of March 31, 2008, our internal control
over financial reporting is effective based on those criteria.
This annual report on Form 10-K does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting of the Company. Our management report was not subject to attestation
by our registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management's report in this annual report.
25
No change occurred in our internal controls concerning financial reporting
during the fourth quarter ended March 31, 2008 that has materially affected, or
is reasonably likely to materially affect, our internal controls over financial
reporting.
Item 9B. Other Information
On June 24, 2008, Lower Lakes Towing Ltd., Lower Lakes Transportation
Company, Grand River Navigation Company and the other Credit Parties thereto
entered into a First Amendment (the "Amendment") to the Amended and Restated
Credit Agreement, dated as of February 13, 2008, with the Lenders signatory
thereto and General Electric Capital Corporation, as Agent. Under the Amendment,
the borrowers amended the definition of "Fixed Charge Coverage Ratio", modified
the maximum amounts outstanding under the Canadian and US Revolving Credit
Facilities and modified the measurement dates of the Maximum Capital
Expenditures (as defined therein). A copy of the Amendment is attached hereto as
Exhibit 10.36 and is incorporated by reference herein.
PART III
Item 10. Directors, Executive Officers and Corporate Governance of the
Registrant
Information with respect to this item is incorporated by reference from
our definitive Proxy Statement to be filed with the SEC not later than 120 days
after the end of our fiscal year.
26
Item 11. Executive Compensation
Information with respect to this item is incorporated by reference from
our definitive Proxy Statement to be filed with the SEC not later than 120 days
after the end of our fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Equity Compensation Plan Information
The following table provides certain information, as of June 25, 2008,
about our common stock that may be issued upon the exercise of options, warrants
and rights, as well as the issuance of restricted shares granted to employees,
consultants or members of our Board of Directors, under our existing equity
compensation plan, the Rand Logistics, Inc. 2007 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
Number of Securities
Number of Securities to Weighted-Average Remaining Available
be Issued Upon Exercise Exercise Price of for Future Issuance
of Outstanding Options, Outstanding Options, Under Equity
Plan Category Warrants and Rights Warrants and Rights Compensation Plan
------------- ----------------------- -------------------- --------------------
<S> <C> <C> <C>
Equity compensation plans approved by security holders........... 243,199 $5.81 2,243,892
Equity compensation plans not approved by security holders....... -- -- --
Total............................................................ 243,199 $5.81 2,243,892
</TABLE>
Item 13. Certain Relationships and Related Transactions, and Director
Independence
Information with respect to this item is incorporated by reference from
our definitive Proxy Statement to be filed with the SEC not later than 120 days
after the end of our fiscal year.
Item 14. Principal Accountant Fees and Services
Information with respect to this item is incorporated by reference from
our definitive Proxy Statement to be filed with the SEC not later than 120 days
after the end of our fiscal year.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. The financial statements listed in the "Index to Consolidated
Financial Statements" at page F-1 are filed as a part of this Annual
Report on Form 10-K.
2. Financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
3. Exhibits included or incorporated herein:
See Exhibit Index.
27
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1 Stock Purchase Agreement, dated as of September 2, 2005, among Rand
Acquisition Corporation, LL Acquisition Corp. and the stockholders
of Lower Lakes Towing Ltd. (Omitted: Appendices-Seller Disclosure
Schedule and Purchase Seller Disclosure Schedule; Exhibits - 1)
Allocation among Sellers, 2) Employment Agreement, 3) Escrow
Agreement, 4) Release, 5) Opinion of Sellers' Counsel, 6) Opinion of
Rand's and Purchaser's Counsel, 7) Section 116 Escrow Agreement, 8)
Company Indebtedness, 9) Seller's Addresses, 10) Working Capital
Statement, 11) Management Bonus Program, 12) Sellers Several
Liability Allocation, 13) Financing Commitments (filed separately),
14) Bonus Program Participant Agreement and 15) Redemption
Agreement). (1)
2.2 Amendment to Stock Purchase Agreement, dated December 29, 2005. (2)
2.3 Amendment to Stock Purchase Agreement, dated January 27, 2006. (3)
2.4 Amendment to Stock Purchase Agreement, dated February 27, 2006. (4)
3.1 Amended and Restated Certificate of Incorporation, filed with the
Secretary of State of the State of Delaware on March 3, 2006. (7)
3.1.1 Amended and Restated Certificate of Designations, filed with the
Secretary of State of the State of Delaware on August 8, 2006. (9)
3.2.1 Second Amended and Restated By-laws. (17)
4.1 Specimen Unit Certificate. (5)
4.2 Specimen Common Stock Certificate. (5)
4.3 Specimen Warrant Certificate. (5)
4.4 Form of Unit Purchase Option granted to EarlyBirdCapital, Inc. (5)
4.5 Form of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant. (5)
10.1 Registration Rights Agreement among the Registrant and the Founders.
(5)
10.2 Form of Warrant Purchase Agreements among each of Laurence S. Levy,
Isaac Kier and Sandeep D. Alva and EarlyBirdCapital, Inc. (5)
10.3 Preferred Stock Purchase Agreement, dated September 2, 2005, by and
between Knott Partners LP, Matterhorn Offshore Fund Ltd., Anno LP,
Good Steward Fund Ltd., Bay II Resources Partners, Bay Resource
Partners L.P., Bay Resource Partners Offshore Fund Ltd., Thomas E.
Claugus and Rand Acquisition Corporation. (1)
10.4 Employment Agreement, dated March 3, 2006, between Scott Bravener
and Lower Lakes Towing Ltd. (6)
10.5 Employment Agreement, dated March 3, 2006, between James Siddall and
Lower Lakes Towing Ltd. (6)
10.6 Management Bonus Plan, dated March 3, 2006. (6)
10.7 Stock Purchase Agreement, dated July 20, 2006, by and among Rand
Logistics, Inc. and Islandia L.P., Knott Partners L.P., Matterhorn
Offshore Fund Ltd., CommonFund Hedged Equity Company, Shoshone
Partners, LP, Finderne, LLC, Good Steward Trading Company SPC,
Mulsanne LP, The Hummingbird Value Fund LP, The Hummingbird Microcap
Value Fund LP, Terrier Partners L.P., Performance Partners, LP,
Performance Partners, Ltd., WTC-CIF Micro Cap Equity Portfolio,
WTC-CTF Micro Cap Equity Portfolio, WTC-CIF Global Infrastructure
Portfolio, Ratheon Master Pension Trust, Clariden-LUX Infrastructure
Fund, Wynnefield Partners Small Cap Value, LP, Wynnefield Partners
Small Cap Value, LP I, and Wynnefield Small Cap Value Offshore Fund,
Ltd. (7)
10.8 Time Charter Agreement, dated as of August 1, 2006, between Lower
Lakes Transportation Company and Wisconsin & Michigan Steamship
Company. (7)
10.9 Guaranty, dated as of August 1, 2006, by Rand Logistics, Inc. in
favor of Wisconsin & Michigan Steamship Company. (7)
10.10 Time Charter Guaranty, dated as of August 1, 2006, by Rand LL
Holdings Corp. in favor of Wisconsin & Michigan Steamship Company.
(7)
10.11 Senior Subordinated Note Purchase Agreement, dated August 1, 2006,
by and among Wisconsin & Michigan Steamship Company, Rand Finance
Corp. and Oglebay Norton Marine Services Company, LLC.(7)
10.12 Award Agreement, dated October 11, 2006, between Rand Logistics,
Inc. and Edward Levy. (9)
10.13 Award Agreement, dated October 11, 2006, between Rand Logistics,
Inc. and Edward Levy. (9)
28
10.14 Award Agreement, dated October 11, 2006, between Rand Logistics,
Inc. and Laurence S. Levy. (9)
10.15 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and Scott F. Bravener. (9)
10.16 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and Joseph W. McHugh, Jr. (9)
10.17 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and James W. Siddall. (9)
10.18 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and Jeffrey P. Botham. (9)
10.19 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and Isaac Kier. (9)
10.20 Award Agreement, dated October 18, 2006, between Rand Logistics,
Inc. and Jonathan Brodie. (9)
10.21 Award Agreement, dated October 18, 2006, between Rand Logist]]> |