EXECUTIVE SUMMARY

The Company earns revenue by the movement of freight by water to and from Puerto Rico, the Dominican Republic and the continental United States through its terminal facility in Jacksonville, Florida. Service to the Dominican Republic commenced in August 2007. The Company also earns revenue from the movement of freight within the continental United States when such movement complements its core business of moving freight to and from Puerto Rico and the Dominican Republic. The Company's operating expenses consist of the cost of the equipment, labor, facilities, fuel, inland transportation and administrative support necessary to move freight to and from Puerto Rico, the Dominican Republic and within the continental United States. During 2008, the Company experienced a decline in operating income and the resulting operating ratio compared to 2007, primarily due to increased fuel expense. Fuel expense increased due to higher fuel prices as well as increased consumption in connection with the Dominican Republic service.

RESULTS OF OPERATIONS

The following table sets forth the indicated items as a percentage of net revenues for the years ended December 31, 2008, 2007 and 2006.

                     Operating Statement - Margin Analysis

                           (% of Operating Revenues)



                                                              2008        2007        2006
Operating Revenues                                            100.0 %     100.0 %     100.0 %

Salaries, wages, and benefits                                  13.8        14.4        13.7
Purchased transportation and other rents                       25.2        24.4        23.6
Fuel                                                           21.4        16.2        13.3
Operating and maintenance (exclusive of depreciation shown
separately below)                                              19.7        19.8        20.5
Dry-Docking                                                     0.7         0.0        11.6
Taxes and licenses                                              0.4         0.4         0.4
Insurance and claims                                            2.4         2.8         3.3
Communications and utilities                                    0.6         0.6         0.5
Depreciation and amortization                                   4.6         4.9         4.8
Loss (gain) on sale of assets                                   0.2         0.0        (0.1 )
Other operating expenses                                        5.8         4.3         4.0

Total Operating Expenses                                       94.8        87.8        95.6

Operating income                                                5.2        12.2         4.4
Net interest expense                                           (7.6 )      (8.3 )      (8.9 )
(Provision) benefit for Income taxes                           (0.0 )      (4.1 )       4.5

Net (loss) income                                              (2.4 )%     (0.2 )%      0.0 %

Year ended December 31, 2008 Compared to Year ended December 31, 2007

The Company's operating ratio, or operating expenses expressed as a percentage of revenue, deteriorated from 87.8% in 2007 to 94.8% in 2008. This change is more fully explained under the operating expenses caption set forth below.

Revenues

The following table sets forth by percentage and dollar, the changes in the Company's revenue and volume, measured by equivalent units, by sailing route and freight carried:

                 Volume & Revenue Changes 2008 Compared to 2007



                                                     Overall
                    Volume Percent Change:
                    Total Equivalent Units                8.1 %

                    Revenue Change (in millions):
                    Core Service Revenue            $     7.0
                    Other Revenues                        9.9

                    Total Revenue Change            $    16.9

The increase in revenues is primarily due to increases in volume partially offset by lower average yields. The increase in other revenue is primarily due to increases in fuel surcharges as well as increased charterhire resulting from an improved vessel charter market.

Vessel capacity utilization southbound was 86.3% during 2008, compared to 80.0% during 2007.

The increase in other revenues is primarily attributable to an increase in fuel surcharge revenue during 2008, which increased to $26.1 million from $17.3 million in 2007. Net demurrage, a charge assessed for failure to return empty freight equipment on time less a demurrage related allowance for bad debt, is also included in the Company's revenues and amounted to $1.1 million in 2008 compared to $1.7 million in 2007. Total charterhire revenue amounted to $4.0 million in 2008 and $1.7 million in 2007. Charterhire is rental revenue for vessels not in use in a liner service. Security charges are charges to cover the Company's additional expenses required to ensure the safety of the shipper's cargo. These charges amounted to $2.1 million in 2008 and 2007.

Operating expenses

Operating expenses increased by $24.1 million, or 23.7% from $101.9 million for 2007 to $126.1 million for 2008. This increase was due primarily to fuel expenses in 2008, which increased $9.7 million, or 51.2%, due to increased consumption related to the Dominican Republic service that started in August of 2007 and increases in fuel prices. Most other operating expenses of the Company increased as well during 2008 as a result of additional volume and an additional bi-weekly sailing to the Dominican Republic during the first half of 2008. That extra TBC was removed from liner service in the second half

of 2008 due to increased fuel prices. Salaries and benefits increased by $1.6 million or 9.8% primarily due to salary increases and a one-time compensation charge of $0.8 million related to the departure of the Company's Chief Executive Officer John D. McCown. This increase in salaries and benefits was partially offset by a decrease in incentive based compensation. Rent and purchased transportation increased by $5.3 million or 18.7% due partially to tug charter related to the additional TBC in service during the first half of 2008 to service the Dominican Republic and increased inland purchased transportation related to increases in volume. Operating and maintenance expense increased $4.1 million or 18.0% primarily due to increased terminal costs related to the overall increase in volume and an increase in expenses related to the Company's stevedores. Depreciation and amortization expense increased by $0.5 million or 9.2% due to the Company's purchase of containers and chassis in 2007 that were depreciated for a full year in 2008. Other operating expenses increased $2.5 million due to an increase in legal fees and an increase in security expenses during 2008. The increase in legal fees was primarily the result of the DOJ investigation that began on April 22, 2008. During 2008, legal expenses related to this investigation were $1.5 million. As a result, the Company's operating ratio of expenses compared to revenue was higher during 2008, at 94.8% as compared to 87.8% during 2007.

Interest Expense

Interest expense increased slightly to $10.4 million in 2008 from $10.3 million in 2007 primarily due to additional draws on the Wachovia term loan that was established in the fourth quarter of 2007 to fund the purchase of containers and chassis to support the Dominican Republic service. In May 2008 and November 2008, the Company drew approximately $1.3 million and $4.1 million on this note, respectively. The Company began making principle payments on the November draw of $4.1 million in January of 2009.

As a result of the factors described above, the Company reported a net loss of $3.2 million or $0.27 per share, basic and diluted, for the year ended December 31, 2008 compared to a net loss of $0.3 million or $0.02 per share, basic and diluted, for the year ended December 31, 2007.

Income Taxes

The American Jobs Creation Act of 2004 instituted an elective tonnage tax regime whereby a corporation may elect to pay a tonnage tax based upon the net tonnage of its qualifying U.S. flag vessels rather than the traditional federal corporate income tax on the taxable income from such vessels and related inland service. The Company has determined that its marine operations and inland transportation related to marine operations qualify for the tonnage tax. In the second quarter of 2007, the Company completed its analysis of the impact of making the election to be taxed under the tonnage tax regime. The analysis illustrated that using the tonnage tax method would reduce the Company's cash outlay related to federal income taxes. For federal tax purposes, the Company can satisfy only 90% of its AMT (Alternative Minimum Taxable) income with its net operating loss carryforwards (NOL) and, therefore, results in a much larger cash outlay in comparison to the required payments associated with the tonnage tax regime. As a result of this analysis, the Company determined that it would be making the election to be taxed under the tonnage tax regime on its 2007 federal tax return. As a result, it was more likely than not that the Company would not be able to utilize its deferred tax asset. Therefore during the second quarter of 2007, the deferred tax asset was adjusted by approximately $4.6 million to reflect this limitation. The remaining deferred tax asset at December 31, 2008 and 2007 of approximately $279,000 and $202,000, respectively, represents primarily the state portion of the Company's deferred tax asset. The Company's research of the tonnage tax suggests that states do not recognize the tonnage tax and, therefore, NOL's related to state qualifying shipping income would not be suspended. The 2008 election of the tonnage tax was made in connection with the filing of the Company's 2007 federal corporate income tax return and will also apply to all subsequent federal income tax returns unless the Company revokes this tax treatment. The Company is accounting for this election as a change in status of its qualifying shipping activities. As a result of the change in status, federal deferred tax assets and liabilities, including approximately $85 million of federal NOL's, which were previously offset by a valuation allowance, have been suspended. It cannot be assured that there will not be future efforts to repeal all, or any portion of, the tonnage tax as it applies to our shipping activities. The federal tax expense related to the tonnage tax method is estimated to be $28,000 which could not be offset by the Company's existing NOL's under the tonnage tax regime.

Year ended December 31, 2007 Compared to Year ended December 31, 2006

The Company's operating ratio, or operating expenses expressed as a percentage of revenue, improved from 95.6% in 2006 to 87.8% in 2007. This improvement is more fully explained under the operating expenses caption set forth below.

Revenues

The following table sets forth by percentage and dollar, the changes in the Company's revenue and volume, measured by equivalent units, by sailing route and freight carried:

                 Volume & Revenue Changes 2007 Compared to 2006



                                                     Overall
                    Volume Percent Change:
                    Total Equivalent Units                6.1 %

                    Revenue Change (in millions):
                    Core Service Revenue            $     6.7
                    Other Revenues                       (0.8 )

                    Total Revenue Change            $     5.9

The increase in revenues is primarily due to increases in volume and average yields. The decrease in other revenue is primarily due to decreased charterhire.

Vessel capacity utilization southbound was 80.0% during 2007, compared to 87.1% during 2006. Southbound trailer and container volume increased slightly but vessel capacity utilization decreased due to the addition of one TBC vessel for use in the Dominican Republic service, which commenced in August 2007.

The decrease in other revenues is primarily attributable to a decrease in slot charter during 2007 to $0.4 million from $1.4 million in 2006. Slot charter is revenue related to the sale, to customers, of space on competitors vessels in the trade lanes served by the Company. The slot charter arrangement the Company had with a competitor ended in 2007. The Company's fuel surcharge is included in the Company's revenues and amounted to $17.3 million in 2007 and $16.9 million in 2006. Net demurrage, a charge assessed for failure to return empty freight equipment on time less a demurrage related allowance for bad debt, is also included in the Company's revenues and amounted to $1.7 million in 2007 compared to $1.6 million in 2006. Total charterhire revenue amounted to $1.7 million in 2007 and $1.8 million in 2006. Charterhire is rental revenue for vessels not in use in a liner service. Security charges are charges to cover the Company's additional expenses required to ensure the safety of the shipper's cargo. These charges amounted to $2.1 million in 2007 compared to $1.9 million in 2006. Revenue related to the Dominican Republic service, which commenced in August 2007, was approximately $0.5 million.

Operating expenses

Operating expenses decreased by $3.5 million, or 3.3% from $105.4 million in 2006 to $101.9 million for 2007. This decrease was due primarily to the expense associated with the required regulatory dry-docking of the Company's two ro/ro barges during 2006 totaling $12.8 million. The ro/ro vessels are not scheduled for another dry-docking until 2011. Most other operating expenses of the Company increased during 2007 as a result of additional volume and the implementation of an additional bi-weekly sailing. Salaries and benefits increased by $1.6 million or 10.4% primarily due to salary increases partially offset by a decrease in incentive based compensation. Rent and purchased transportation increased by $2.3 million or 8.8% due to tug charter related to the new Dominican Republic service and increased inland purchased transportation related to increases in volume. Fuel expense increased $4.1 million or 28.2% due to increased consumption related to the Dominican Republic service and increases in fuel prices. Operating and maintenance expense decreased $12.3 million or 34.9% primarily due to required regulatory dry-docking of the Company's two ro/ro barges during 2006. Depreciation and amortization expense increased by $0.4 million or 6.9% due to the Company's purchase of containers and chassis. Other operating expenses increased $0.6 million due to an increase in the period expenses related to the Company's allowance for doubtful accounts, an increase in advertising costs, legal fees and an increase in security expenses during 2007. As a result, the Company's operating ratio improved from 95.6% during 2006 to 87.8% during 2007.

Interest Expense

Interest expense increased to $10.3 million in 2007 from $10.2 million in 2006 primarily due to the draw on the Wachovia note payable in the fourth quarter of 2007. This note payable was established to fund the purchase of containers and chassis to support the Dominican Republic service. In November 2007, the Company drew approximately $4.6 million on this note.

As a result of the factors described above, the Company reported a net loss of $0.3 million or $0.02 per share, basic and diluted, for the year ended December 31, 2007 compared to a net loss of $18,093 or $0.00 per share, basic and diluted, for the year ended December 31, 2006.

Income Taxes

The American Jobs Creation Act of 2004 instituted an elective tonnage tax regime whereby a corporation may elect to pay a tonnage tax based upon the net tonnage of its qualifying U.S. flag vessels rather than the traditional U.S. corporate income tax on the taxable income from such vessels and related inland service. The Company has determined that its marine operations and inland transportation related to marine operations qualify for the tonnage tax. In the second quarter of 2007, the Company completed its analysis of the impact of making the election to be taxed under the tonnage tax regime. The analysis illustrated that using the tonnage tax method would reduce the Company's cash outlay related to federal income taxes; for federal tax purposes, the Company can satisfy only 90% of its AMT (Alternative Minimum Taxable) income with its net operating loss carryforwards (NOL) and, therefore, results in a much larger cash outlay in comparison to the required payments associated with the tonnage tax regime. As a result of this analysis, the Company made the election to be taxed under the tonnage tax regime on its 2007 federal tax return. The federal tax expense related to 2007 under the tonnage tax method was approximately $28,000 which could not be offset by the Company's existing NOL's because when the Company elected to be taxed under the tonnage tax regime its federal NOL's related to qualifying shipping activities were not available to offset any related tonnage tax. As a result it was more likely than not that the Company would not be able to utilize its deferred tax asset. Therefore during the second quarter of 2007, the deferred tax asset was adjusted by approximately $4.6 million to reflect this limitation. The remaining deferred tax asset of approximately $202,000, at December 31, 2007, represented the state portion of the company's deferred tax asset. The Company's research of the tonnage tax suggests that states do not recognize the tonnage tax and, therefore, NOL's related to state qualifying shipping income would not be suspended.

DIVIDENDS

The Company has not declared or paid dividends on its common stock during the past six years.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $4.4 million in 2008 compared to net cash provided by operating activities of $12.0 million in 2007. This represented a decrease of $7.6 million, which resulted partially from additional net losses in 2008 compared to 2007. Net cash used in investing activities was $2.0 million in 2008 compared to net cash used in investing activities in 2007 of $19.7 million. This $17.7 million decrease from 2007 was due to large cash outlays on purchases and upgrades of containers and chassis during 2007. Net cash provided by financing activities was $2.9 million in 2008 compared to net cash provided by financing activities of $2.8 million in 2007 representing an increase of $0.1 million. This change was primarily the result of drawing an additional $5.4 million on the Wachovia term loan to finance the purchase of new roll-door containers. This increase in borrowings was slightly offset by an increase in principle payments on debt made in 2008. At December 31, 2008, the Company had cash of $7.2 million, working capital of $10.0 million, and capital deficit of $1.8 million.

Net cash provided by operating activities was $12.0 million in 2007 compared to net cash provided by operating activities of $1.2 million in 2006. This represented an increase of $10.8 million from 2006 due primarily to the large cash outlays related to the dry-dockings during 2006. The increase in the accounts payable was related to higher operating expenses as a result of increased volume. Net cash used in

investing activities was $19.7 million in 2007 compared to net cash used in investing activities in 2006 of $3.6 million. The Company spent $19.8 million on purchases and upgrades of containers and chassis during 2007. Net cash provided by financing activities was $2.8 million in 2007 compared to net cash used in financing activities of $2.0 million in 2006 representing a change of $4.8 million primarily the result of borrowing approximately $4.6 million from Wachovia to finance the purchase of a portion of the new containers and chassis. At December 31, 2007, cash amounted to $1.9 million, working capital was at $5.3 million, and stockholders' equity was $1.4 million.

The Company's revolving credit facility with Wachovia, formerly Congress Financial Corporation, as amended, provides for a maximum availability of $10 million and expires April 2012. The facility provides for interest equal to the prime rate, as set by Wachovia. The revolving line of credit is subject to a borrowing base formula (approximately $10.0 million was available under this formula at December 31, 2008) based on a percentage of eligible accounts receivable. The revolving credit facility is secured by the Company's accounts receivable. At December 31, 2008, there were no advances drawn on this credit facility.

The Company's has access to a term loan that provides for a maximum availability of $10 million and expires April 2012. The term loan provides for interest equal to the prime rate. At December 31, 2008, approximately $9.1 million was drawn on this loan to fund equipment purchases. This term loan is collateralized by eligible equipment with a carrying value of $16.3 million at December 31, 2008.

During the fourth quarter of 2008, the Company and Wachovia amended the Revolving Credit Agreement to eliminate all financial covenants at any time the Company has at least $3.0 million in unused borrowing capacity under the revolving credit facility. As of December 31, 2008, the Company had $10.9 million available under this facility and therefore was not subject to any financial covenants. Additionally, the Company was in compliance with the financial covenant that would apply if the Company had less than $3.0 million in unused capacity under the facility.

The Company's $85 million 9 1/4 % Senior Secured Notes mature on November 15, 2011. Interest on the notes is payable semi-annually on each May 15 and November 15. Prior to November 15, 2008, the Company had the option to redeem some or all of the notes at a make-whole premium. After November 15, 2008, the Company may redeem the notes, in whole or in part, at its option at any time or from time to time at the redemption prices specified in the indenture governing the notes, plus accrued and unpaid interest thereon, if any, to the redemption date. Upon the occurrence of certain changes in control specified in the indenture governing the notes, the holders of the notes will have the right, subject to certain conditions, to require the Company to repurchase all or any part of their notes at a repurchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest thereon, if any, to the redemption date. The agreement among other things, places restrictions (as defined) on the Company's ability to (a) incur or guarantee additional debt
(b) to pay dividends, repurchase common stock or subordinated debt (c) create liens (d) transact with affiliates and (e) transfer or sell assets.

The Company has outstanding two series of Ship Financing Bonds designated as its 7.07% Sinking Fund Bonds Due September 30, 2022 and 6.52% Sinking Fund Bonds Due March 30, 2023. These bonds are guaranteed by the U.S. government under Title XI of the Merchant Marine Act of 1936, as amended. The aggregate principal amount of the Title XI Bonds outstanding at December 31, 2008 was $17.3 million. The Company is required to make deposits based on adjusted earnings of the Company. During 2008, the Company made no deposits into a reserve fund that secures the Title XI Bonds. As of December 31, 2008, the balance of this reserve fund was approximately $4.1 million.

As of December 31, 2008, the Company was restricted from performing certain financial activities due to it not being in compliance with Title XI debt covenants relating to certain leverage ratios. The provisions

of the Title XI covenants provide that, in the event of noncompliance with the covenants, the Company is restricted from conducting certain financial activities without obtaining the written permission of the Secretary of Transportation of the United States (the "Secretary"). If such permission is not obtained and the Company enters into any of the following actions it will be considered to be in default of the Title XI covenants and the lender will have the right to call the debt. These actions are as follows: (1) acquire any fixed assets other than those required for the normal maintenance and operation of its existing assets; (2) enter into or become liable under certain charters and leases (having a term of six months or more); (3) pay any debt subordinated to the Title XI Bonds; (4) incur any debt, except current liabilities or short term loans incurred in the ordinary course of business; (5) make investments in any person, other than obligations of U.S. government, bank deposits or investments in securities of the character permitted for money in the reserve fund; or
(6) create any lien on any of its assets, other than pursuant to loans guaranteed by the Secretary of Transportation of the United States under Title XI and liens incurred in ordinary course of business. However, none of the foregoing covenants will apply at any time if the Company meets certain financial tests provided for in the agreement and the Company has satisfied its obligation to make deposits into the reserve fund. As of December 31, 2008, the Company was in compliance with such restrictions.

The Company's projected cash flows from operating activities and the availability under the credit facility is expected to provide sufficient cash flows for future operations.

INFLATION

Inflation has had a minimal effect upon the Company's operating results in recent years. Most of the Company's operating expenses are inflation-sensitive, with inflation generally producing increased costs of operation. All transactions are denominated in United States Dollars. The Company expects that inflation will affect its costs no more than it affects those of other truckload and marine carriers.

SEASONALITY

The Company's liner service is subject to the seasonality of the Puerto Rico freight market where shipments are generally reduced during the first calendar quarter and increased during the third and fourth calendar quarters of each year. The fourth quarter typically has the highest revenue. In 2008, however, fourth quarter revenue was 5.9% below third quarter revenue, in contrast to the 11.7% increase in 2007 and the average increase of 10.5% from 2004 thru 2007.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements as of December 31, 2008.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the application of certain accounting policies, many of which require the Company to make estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and their impact . . .