##### 









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-Q

(MARK ONE)



|    |                                                        
|--- | -------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30,
2002

OR

|     |                                                         
|---- | --------------------------------------------------------
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from

to
.



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Commission file number 001-14299



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NATIONSRENT, INC.

(Debtor-In-Possession as of December 17,
2001)


(Exact name of registrant as specified in its
charter)


|                                                                                             |  |                                                   
|-------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other Jurisdiction of
    Incorporation or Organization)                   |  | 31-1570069(I.R.S. Employer
    Identification No.)
|                                                                                            
|450 East Las Olas Blvd.,
    Fort Lauderdale, FL(Address of principal executive
    offices) |  | 33301(Zip Code)                                   

(954) 760-6550


(Registrants telephone number, including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.  Yes x     No o

The number of shares of Common Stock, par value
$0.01 per share, outstanding on July 31, 2002 was
57,364,437.









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##### 



NATIONSRENT, INC.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2002

PART I

FINANCIAL INFORMATION


|                                                                                                      |                                                                                                                      |        |    |   | 
|----------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------ | -- | - | 
|                                                                                                      |                                                                                                                      | Page  
|                                                                                                      |                                                                                                                      | Number
|                                                                                                      |                                                                                                                      |       
|Item 1. Financial Statements                                                                          |                                                                                                                      |        |    |  
|                                                                                                      | Consolidated Balance Sheets as of June 30,
    2002 (Unaudited) and December 31, 2001                                |        |    | 1 | 
|                                                                                                      | Unaudited Consolidated Statements of Operations
    for the Three Months and Six Months Ended June 30, 2002 and 2001 |        |    | 2 | 
|                                                                                                      | Unaudited Consolidated Statements of Cash Flows
    for the Six Months Ended June 30, 2002 and 2001                  |        |    | 3 | 
|                                                                                                      | Notes to Unaudited Consolidated Financial
    Statements                                                             |        |    | 4 | 
|Item 2. Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations |                                                                                                                      |        | 13 |  
|Item 3. Quantitative and Qualitative
    Disclosures About Market Risk                                |                                                                                                                      |        | 22 |  
|PART II
    OTHER INFORMATION                                                                        
|Item 1. Legal Proceedings                                                                             |                                                                                                                      |        | 23 |  
|Item 3. Defaults Upon Senior Securities                                                               |                                                                                                                      |        | 23 |  
|Item 6. Exhibits and Reports on
    Form 8-K                                                          |                                                                                                                      |        | 24 |  
|Signatures                                                                                            |                                                                                                                      |        | 27 |  

In accordance with Temporary Note 2T to Article 3 of
Regulation S-X (Note 2T), NationsRent, Inc. (the
Company) elected not to have Arthur Andersen LLP review
its Quarterly Report on Form 10-Q for the three months ended
March 31, 2002. As disclosed in the Company's Current Report on
Form 8-K, filed on July 17, 2002, the Company has engaged
Ernst and Young LLP (E&Y), subject to the United
States Bankruptcy Court for the District of Delawares (the
Bankruptcy Court) approval, to replace Arthur Andersen LLP
as the independent auditors of the Company. On August 14, 2002,
the Company received the approval of the Bankruptcy Court to retain
E&Y. Pursuant to Note 2T, E&Y
subsequently reviewed our Quarterly Report on Form 10-Q for the three
months ended March 31, 2002 in accordance with Statement on
Auditing Standards No. 71, Interim Financial
Information. There were no material changes as a result of this
review.



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##### 



PART I  FINANCIAL
INFORMATION

Item 1. Financial
Statements

NATIONSRENT, INC.

(Debtor-In-Possession as of December 17,
2001)


CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |        |          |           |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | ---------- | --------- | --------- | ------ | -------- | --------- | -
|                                           |                                                                                                                                                                          | June 30,                                                                                                                                                  |                                             | December 31,
|                                           |                                                                                                                                                                          | 2002                                                                                                                                                      |                                             | 2001        
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |             
|                                           |                                                                                                                                                                          | (Unaudited)                                                                                                                                               |                                             |             
|ASSETS                                    
|Cash and cash equivalents                  |                                                                                                                                                                          | $                                                                                                                                                         | 13,050                                      |              |            | $         | 23,787    |       
|Accounts receivable, net                   |                                                                                                                                                                          |                                                                                                                                                           | 85,211                                      |              |            |           | 93,584    |       
|Inventories                                |                                                                                                                                                                          |                                                                                                                                                           | 22,869                                      |              |            |           | 20,801    |       
|Prepaid expenses and other assets          |                                                                                                                                                                          |                                                                                                                                                           | 13,845                                      |              |            |           | 15,524    |       
|Deferred financing costs, net              |                                                                                                                                                                          |                                                                                                                                                           | 15,643                                      |              |            |           | 15,696    |       
|Rental equipment, net                      |                                                                                                                                                                          |                                                                                                                                                           | 409,805                                     |              |            |           | 427,407   |       
|Property and equipment, net                |                                                                                                                                                                          |                                                                                                                                                           | 86,008                                      |              |            |           | 90,717    |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           | Total Assets                                |              | $          | 646,431   |           |        | $        | 687,516   |  
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|LIABILITIES AND STOCKHOLDERS
    DEFICIT 
|Liabilities Not Subject to Compromise:     |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           | Accounts payable                                                                                                                                                         |                                                                                                                                                           | $                                           | 12,596       |            |           | $         | 4,983  |         
|                                           | Accrued compensation and related taxes                                                                                                                                   |                                                                                                                                                           |                                             | 4,615        |            |           |           | 4,770  |         
|                                           | Accrued expenses and other liabilities                                                                                                                                   |                                                                                                                                                           |                                             | 30,394       |            |           |           | 16,150 |         
|                                           | Income taxes payable                                                                                                                                                     |                                                                                                                                                           |                                             | 74           |            |           |           | 100    |         
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           | Total liabilities not subject to compromise |              |            | 47,679    |           |        |          | 26,003    |  
|Liabilities Subject to Compromise (Note 5) |                                                                                                                                                                          |                                                                                                                                                           | 1,160,134                                   |              |            |           | 1,163,144 |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           | Total liabilities                           |              |            | 1,207,813 |           |        |          | 1,189,147 |  
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|Commitments and Contingencies (Note 2)     |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|Stockholders Deficit:                     |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           | Preferred stock  $0.01 par value,
    5,000,000 shares authorized:                                                                                                      |                                                                                                                                                           |                                             |              |            |           |           |        |         
|                                           |                                                                                                                                                                          | Series A convertible, $100,000 liquidation
    preference, 100,000 shares issued and outstanding at
    June 30, 2002 and December 31, 2001, respectively |                                             |              | 1          |           |           |        | 1        |          
|                                           |                                                                                                                                                                          | Series B convertible, $100,000 liquidation
    preference, 100,000 shares issued and outstanding at
    June 30, 2002 and December 31, 2001, respectively |                                             |              | 1          |           |           |        | 1        |          
|                                           | Common stock  $0.01 par value,
    250,000,000 shares authorized, 57,364,437 shares issued and
    outstanding at June 30, 2002 and December 31, 2001,
    respectively |                                                                                                                                                           |                                             | 584          |            |           |           | 584    |         
|                                           |                                                                                                                                                                          | Additional paid-in capital                                                                                                                                |                                             |              | 471,172    |           |           |        | 471,172  |          
|                                           |                                                                                                                                                                          | Accumulated deficit                                                                                                                                       |                                             |              | (1,030,260 | )         |           |        | (970,509 | )        
|                                           |                                                                                                                                                                          | Treasury stock, at cost, 1,065,200 shares at
    June 30, 2002 and December 31, 2001, respectively                                                        |                                             |              | (2,880     | )         |           |        | (2,880   | )        
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           | Total stockholders deficit                 |              |            | (561,382  | )         |        |          | (501,631  | )
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       
|                                           |                                                                                                                                                                          |                                                                                                                                                           | Total Liabilities and Stockholders Deficit |              | $          | 646,431   |           |        | $        | 687,516   |  
|                                           |                                                                                                                                                                          |                                                                                                                                                           |                                             |              |            |           |           |       

The accompanying notes are an integral part of
these

consolidated financial statements.


1



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##### 



NATIONSRENT, INC.

(Debtor-In-Possession as of December 17,
2001)


UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS

(In Thousands, Except Per Share
Data)


|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |         |         | 
|-------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | --------------------- | ------- | ---------------- | ------- | ---- | ------ | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                                           |                                                                          |                       |         |                 
|                                                                                                                           |                                                                          | Three Months Ended    |         | Six Months Ended
|                                                                                                                           |                                                                          | June 30,              |         | June 30,        
|                                                                                                                           |                                                                          |                       |         |                 
|                                                                                                                           |                                                                          | 2002                  |         | 2001             |         | 2002 |        | 2001   
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |        
|Revenue:                                                                                                                   |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Equipment rentals                                                        |                       | $       | 110,528          |         |      | $      | 134,418 |         |   | $       | 201,835 |         |   | $       | 243,712 |        
|                                                                                                                           | Sales of equipment, merchandise, service, parts
    and supplies         |                       |         | 8,300            |         |      |        | 23,410  |         |   |         | 15,631  |         |   |         | 62,902  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           |                                                                          | Total revenue         |         |                  | 118,828 |      |        |         | 157,828 |   |         |         | 217,466 |   |         |         | 306,614 | 
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Cost of revenue:                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Cost of equipment rentals                                                |                       |         | 56,324           |         |      |        | 49,066  |         |   |         | 107,786 |         |   |         | 99,351  |        
|                                                                                                                           | Rental equipment depreciation and lease expense                          |                       |         | 34,587           |         |      |        | 34,522  |         |   |         | 66,881  |         |   |         | 61,503  |        
|                                                                                                                           | Cost of sales of equipment, merchandise, service,
    parts and supplies |                       |         | 6,411            |         |      |        | 19,902  |         |   |         | 12,105  |         |   |         | 56,391  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           |                                                                          | Total cost of revenue |         |                  | 97,322  |      |        |         | 103,490 |   |         |         | 186,772 |   |         |         | 217,245 | 
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Gross profit                                                                                                               |                                                                          |                       | 21,506  |                  |         |      | 54,338 |         |         |   | 30,694  |         |         |   | 89,369  |        
|Operating expenses:                                                                                                        |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Selling, general and administrative expenses                             |                       |         | 25,091           |         |      |        | 24,281  |         |   |         | 46,164  |         |   |         | 48,492  |        
|                                                                                                                           | Restructuring charge                                                     |                       |         |                 |         |      |        | (186    | )       |   |         |        |         |   |         | 6,115   |        
|                                                                                                                           | Non-rental equipment depreciation and amortization                       |                       |         | 3,348            |         |      |        | 8,301   |         |   |         | 6,694   |         |   |         | 16,468  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Operating income (loss)                                                                                                    |                                                                          |                       | (6,933  | )                |         |      | 21,942 |         |         |   | (22,164 | )       |         |   | 18,294  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Other (income)/expense:                                                                                                    |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Interest expense                                                         |                       |         | 12,896           |         |      |        | 29,588  |         |   |         | 25,508  |         |   |         | 62,633  |        
|                                                                                                                           | Other, net                                                               |                       |         | (106             | )       |      |        | (560    | )       |   |         | (161    | )       |   |         | (1,085  | )      
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           |                                                                          |                       | 12,790  |                  |         |      | 29,028 |         |         |   | 25,347  |         |         |   | 61,548  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Loss before reorganization items, benefit for
    income taxes and cumulative effect of change in accounting
    principle |                                                                          |                       | (19,723 | )                |         |      | (7,086 | )       |         |   | (47,511 | )       |         |   | (43,254 | )      
|Reorganization items, net                                                                                                  |                                                                          |                       | 9,023   |                  |         |      |       |         |         |   | 12,240  |         |         |   |        |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Loss before benefit for
    income taxes and cumulative effect of change in accounting
    principle                       |                                                                          |                       | (28,746 | )                |         |      | (7,086 | )       |         |   | (59,751 | )       |         |   | (43,254 | )      
|Benefit for income taxes                                                                                                   |                                                                          |                       |        |                  |         |      | (1,984 | )       |         |   |        |         |         |   | (12,130 | )      
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Loss before cumulative effect of change in
    accounting principle                                                        |                                                                          |                       | (28,746 | )                |         |      | (5,102 | )       |         |   | (59,751 | )       |         |   | (31,124 | )      
|Cumulative effect of change in accounting
    principle net of income tax benefit                                          |                                                                          |                       |        |                  |         |      |       |         |         |   |        |         |         |   | 1,359   |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Net loss                                                                                                                   |                                                                          | $                     | (28,746 | )                |         | $    | (5,102 | )       |         | $ | (59,751 | )       |         | $ | (32,483 | )      
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Net loss per share:                                                                                                        |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Basic                                                                    |                       | $       | (0.50            | )       |      | $      | (0.09   | )       |   | $       | (1.04   | )       |   | $       | (0.57   | )      
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Diluted                                                                  |                       | $       | (0.50            | )       |      | $      | (0.09   | )       |   | $       | (1.04   | )       |   | $       | (0.57   | )      
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|Weighted average common shares outstanding:                                                                                |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Basic                                                                    |                       |         | 57,364           |         |      |        | 57,364  |         |   |         | 57,364  |         |   |         | 57,364  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        
|                                                                                                                           | Diluted                                                                  |                       |         | 57,364           |         |      |        | 57,364  |         |   |         | 57,364  |         |   |         | 57,364  |        
|                                                                                                                           |                                                                          |                       |         |                  |         |      |        |         |         |   |         |         |         |   |         |        

The accompanying notes are an integral part of
these

consolidated financial statements.


2



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##### 



NATIONSRENT, INC.

(Debtor-In-Possession as of December 17,
2001)


UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In Thousands)


|                                                                                              |                                                   |                                                         |         |         |         |   |         |          |         |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------- | ------- | ------- | ------- | - | ------- | -------- | ------- | -
|                                                                                              |                                                   |                                                        
|                                                                                              |                                                   | Six Months Ended                                       
|                                                                                              |                                                   | June 30,                                               
|                                                                                              |                                                   |                                                        
|                                                                                              |                                                   | 2002                                                    |         | 2001   
|                                                                                              |                                                   |                                                         |         |        
|CASH FLOWS FROM OPERATING
    ACTIVITIES:                                                     |                                                   |                                                         |         |         |         |   |         |         
|Net loss                                                                                      |                                                   | $                                                       | (59,751 | )       |         | $ | (32,483 | )       
|Adjustments to reconcile net loss to net cash
    provided by/(used in) operating activities: |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              | Depreciation and amortization                     |                                                         |         | 37,895  |         |   |         | 44,903   |        
|                                                                                              | Provision for allowance for doubtful accounts     |                                                         |         | 4,532   |         |   |         | 3,085    |        
|                                                                                              | Non-cash restructuring charge                     |                                                         |         |        |         |   |         | 6,115    |        
|                                                                                              | Gain on sale of non-rental equipment              |                                                         |         | (2      | )       |   |         | (169     | )      
|                                                                                              | Gain on sale of rental equipment                  |                                                         |         | (71     | )       |   |         | (2,570   | )      
|                                                                                              | Gain on sale of business                          |                                                         |         |        |         |   |         | (486     | )      
|                                                                                              | Deferred income tax benefit                       |                                                         |         |        |         |   |         | (13,184  | )      
|                                                                                              | Changes in operating assets and liabilities:      |                                                         |         |         |         |   |         |          |        
|                                                                                              |                                                   | Accounts receivable                                     |         |         | 3,840   |   |         |          | (2,520  | )
|                                                                                              |                                                   | Inventories                                             |         |         | (2,601  | ) |         |          | (1,032  | )
|                                                                                              |                                                   | Prepaid expenses and other assets                       |         |         | 1,696   |   |         |          | 4,343   |  
|                                                                                              |                                                   | Accounts payable                                        |         |         | 7,612   |   |         |          | (53,558 | )
|                                                                                              |                                                   | Accrued expenses and other liabilities                  |         |         | 14,028  |   |         |          | (4,820  | )
|                                                                                              |                                                   | Liabilities subject to compromise                       |         |         | (372    | ) |         |          |        |  
|                                                                                              |                                                   | Income taxes payable                                    |         |         | (24     | ) |         |          | (60     | )
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              |                                                   | Net cash provided by/(used in) operating
    activities |         |         | 6,782   |   |         |          | (52,436 | )
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                         |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              | Purchases of rental equipment                     |                                                         |         | (15,605 | )       |   |         | (13,057  | )      
|                                                                                              | Purchases of property and equipment               |                                                         |         | (2,048  | )       |   |         | (5,101   | )      
|                                                                                              | Proceeds from sale of rental equipment            |                                                         |         | 2,762   |         |   |         | 47,980   |        
|                                                                                              | Proceeds from sale of non-rental equipment        |                                                         |         | 10      |         |   |         | 1,033    |        
|                                                                                              | Proceeds from sale of business                    |                                                         |         |        |         |   |         | 900      |        
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              |                                                   | Net cash (used in)/provided by investing
    activities |         |         | (14,881 | ) |         |          | 31,755  |  
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|CASH FLOWS FROM FINANCING
    ACTIVITIES:                                                     |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              | Proceeds from debt                                |                                                         |         |        |         |   |         | 105,286  |        
|                                                                                              | Payment of deferred financing costs               |                                                         |         |        |         |   |         | (4,239   | )      
|                                                                                              | Repayments of debt subject to compromise          |                                                         |         | (2,638  | )       |   |         |         |        
|                                                                                              | Repayments of debt                                |                                                         |         |        |         |   |         | (140,831 | )      
|                                                                                              | Purchase of treasury stock                        |                                                         |         |        |         |   |         | (205     | )      
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              |                                                   | Net cash used in financing activities                   |         |         | (2,638  | ) |         |          | (39,989 | )
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|Net decrease in cash and cash
    equivalents                                                 |                                                   |                                                         | (10,737 | )       |         |   | (60,670 | )       
|Cash and cash equivalents, beginning of period                                                |                                                   |                                                         | 23,787  |         |         |   | 67,813  |         
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|Cash and cash equivalents, end of period                                                      |                                                   | $                                                       | 13,050  |         |         | $ | 7,143   |         
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:                                         |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              |                                                   | Cash paid for interest                                  |         | $       | 28,835  |   |         | $        | 33,930  |  
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              |                                                   | Cash paid for income taxes                              |         | $       | 20      |   |         | $        | 151     |  
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES:                     |                                                   |                                                         |         |         |         |   |         |         
|                                                                                              | Fixed assets acquired under financial obligations |                                                         | $       |        |         |   | $       | 4,371    |        
|                                                                                              |                                                   |                                                         |         |         |         |   |         |         

The accompanying notes are an integral part of
these

consolidated financial statements.


3



---



##### 



NATIONSRENT, INC.

(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS

June 30, 2002


Note 1  Description of the
Business

NationsRent, Inc. together with its subsidiaries
(the Company or the Debtors) was
incorporated in the state of Delaware on August 14, 1997
for the purpose of creating a nationally branded network of
equipment rental locations offering a broad selection of
equipment primarily to the construction, industrial and
homeowner segments of the equipment rental industry in the
United States. The Company also sells used and new equipment,
parts, merchandise and supplies, and provides maintenance and
repair services.

Note 2  Proceedings Under
Chapter 11 of the Bankruptcy Code

On December 17, 2001 (the Petition
Date), the Debtors filed voluntary petitions for
reorganization under chapter 11 of the United States Bankruptcy
Code (the Bankruptcy Code) in the United States
Bankruptcy Court for the District of Delaware (the
Bankruptcy Court). The chapter 11 cases pending for
the Debtors (the Chapter 11 Cases) are being
jointly administered for procedural purposes.

In conjunction with the commencement of the
Chapter 11 Cases, the Debtors sought and obtained several
orders from the Bankruptcy Court which were intended to enable
the Debtors to continue to operate in the normal course of
business during the Chapter 11 Cases, including orders to
(i) permit the Debtors to operate their consolidated cash
management system during the Chapter 11 Cases in
substantially the same manner as it was operated prior to the
commencement of the Chapter 11 Cases, (ii) authorize
payment of prepetition employee salaries, wages, and benefits
and reimbursement of prepetition employee business expenses,
(iii) authorize payment of prepetition sales, payroll, and use
taxes owed by the Debtors, (iv) authorize payment of
certain prepetition obligations to customers, (v) continue
workers compensation insurance programs and certain
prepetition claims, premiums and related expenses,
(vi) authorize payment of certain mechanics lien and
freight charges, (vii) determine adequate assurance of
payment for future utility services, (viii) authorize
payment of installments under insurance premium finance
agreements, (ix) authorize maintenance and continuation of
insurance programs and related relief, and (x) authorize
payment of certain other prepetition claims.

The Debtors filed their proposed Joint Plan of
Reorganization (the Proposed Plan) and related
disclosure statement with the Bankruptcy Court in June 2002.

The Bankruptcy Code provides that the Debtors
have the exclusive right for certain specified periods during
which only they may file and solicit acceptances of a plan of
reorganization. The exclusive period of the Debtors to file a
plan of reorganization, as extended, is set to expire on
August 16, 2002 and the exclusive period of the Debtors to solicit
acceptance of a plan of reorganization, as extended, is set to
expire on October 17, 2002. Although the Debtors filed a plan of
reorganization during this exclusive period, if the Debtors fail
to obtain acceptance of such plan from the requisite impaired
classes of creditors and equity holders during the exclusive
solicitation period, any party in interest, including a
creditor, an equity holder, a committee of creditors or equity
holders, or an indenture trustee, may file their own plan of
reorganization for the Debtors. In July 2002, the official committee
of unsecured creditors filed a motion to terminate the Debtors
exclusive period to file a plan of reorganization and to solicit
acceptances of such plan. The Debtors intend to file an objection to
such motion and believe that the motion is without merit. The Debtors
also intend to seek an extension of the current exclusive period to
file a plan of reorganization and to solicit acceptance thereof.

The confirmation of a plan of reorganization is
one of the Companys primary objectives. After a plan of
reorganization has been filed with the Bankruptcy Court and
after the completion of negotiations with various parties in
interest, the plan, along with a disclosure statement approved
by the Bankruptcy Court, will be sent to all creditors and
equity holders. Following the solicitation period, the
Bankruptcy Court will consider whether to confirm the plan. In
order to confirm a plan of reorganization, the Bankruptcy Court,
among other things, is required to find that (i) with
respect to each impaired class of creditors and equity holders,
each holder in such class has accepted the plan or will,
pursuant to the plan, receive at least as much as such holder
would receive in a liquidation, (ii) each impaired class of
creditors and equity holders has accepted the plan by the
requisite vote (except as described in the following sentence),
and (iii) confirmation of the plan is not

4



---



##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

likely to be followed by a liquidation or a need
for further financial reorganization of the Debtors or any
successors to the Debtors unless the plan proposes such
liquidation or reorganization. If any impaired class of
creditors or equity holders does not accept the plan and,
assuming that all of the other requirements of the Bankruptcy
Code are met, the proponent of the plan may invoke the
cram down provisions of the Bankruptcy Code. Under
these provisions, the Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity holders if certain requirements of
the Bankruptcy Code are met. These requirements may, among other
things, necessitate payment in full for senior classes of
creditors before payment to a junior class can be made. As a
result of the amount of the Companys prepetition
indebtedness, financial performance and the availability of the
cram down provisions under the Bankruptcy Code,
management believes that the Companys equity holders will
not receive any value or distribution for their interests under
a plan or plans of reorganization. The Proposed Plan filed by
the Company in June 2002 does not provide for any value or
distribution to equity holders or for any cash or debt
distribution to holders of general unsecured claims.

Under bankruptcy law, actions by creditors to
collect prepetition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against the
Debtors, are stayed and other prepetition contractual
obligations may not be enforced against the Debtors. In
addition, the Debtors have the right, subject to Bankruptcy
Court approval and other conditions, to assume or reject any
prepetition executory contracts and unexpired leases. Parties
affected by these rejections may file prepetition damage claims
with the Bankruptcy Court. The Company has prepared and
submitted the schedules setting forth the Debtors assets
and liabilities as of the date of the petition as reflected in
the Companys accounting records. The amounts of claims
filed by creditors could be significantly different from their
recorded amounts. Due to material uncertainties, it is not
possible to predict the length of time the Company will operate
under chapter 11 protection, the outcome of the proceedings
in general, whether the Company will continue to operate under
the current organizational structure, or the effect of the
proceedings on the Companys business or the recovery by
creditors and equity holders.

Note 3  Accounting
Policies

Basis of Presentation

The accompanying unaudited interim consolidated
financial statements have been prepared by the Company on a
going concern basis, which contemplates continuity of
operations, realization of assets, and payment of liabilities in
the ordinary course of business, and do not reflect adjustments
that might result if the Debtors are unable to continue as a
going concern. The Debtors history of significant losses,
the stockholders deficit of approximately $561,382,000 as
of June 30, 2002 and their Chapter 11 Cases raise
substantial doubt about the Debtors ability to continue as
a going concern. Continuing as a going concern is dependent
upon, among other things, the Debtors formulation of a
plan or plans of reorganization acceptable to the Bankruptcy
Court and creditors, the success of future business operations,
and the generation of sufficient cash from operations and
financing sources to meet the Companys obligations. The
consolidated financial statements do not reflect: (i) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (ii) aggregate
prepetition liability amounts that may be allowed for unrecorded
claims or contingencies, or their status or priority;
(iii) the effect of any changes to the Debtors
capital structure or in the Debtors business operations as
the result of an approved plan or plans of reorganization; or
(iv) adjustments to the carrying value of assets or
liability amounts that may be necessary as a result of actions
by the Bankruptcy Court. Adjustments necessitated by a plan of
reorganization could materially change the amounts reported in
the accompanying unaudited interim consolidated financial
statements.

These statements have been prepared in accordance
with the American Institute of Certified Public Accountants
(AICPA) Statement of Position
(SOP) 90-7, Financial Reporting by
Entities in

5



---



##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Reorganization under the Bankruptcy Code.
Pursuant to SOP 90-7, revenues and expenses, realized gains
and losses and provisions for losses resulting from the
reorganization of the business are to be reported in the
unaudited interim consolidated statements of operations
separately as reorganization items. Professional fees are
expensed as incurred. Interest expense is reported only to the
extent that it will be paid during the Chapter 11 Cases or
that it is probable that it will be an allowed claim.
Reorganization items are disclosed in the notes to unaudited
consolidated financial statements. See
 Note 6  Reorganization Items,
Net.

The unaudited consolidated financial statements
reflect all adjustments of a normal recurring nature which are,
in the opinion of management, necessary for a fair presentation
of financial results for the three and six months ended June 30,
2002 and 2001, in accordance with generally accepted accounting
principles for interim financial reporting and pursuant to
Article 10 of Regulation S-X. The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations. These unaudited interim consolidated financial
statements should be read in conjunction with the consolidated
financial statements for the year ended December 31, 2001
appearing in the Companys Annual Report on Form 10-K
filed with the Securities and Exchange Commission. Certain prior
year balances have been reclassified to conform to the 2002
presentation. The results of operations for the three and six months
ended June 30, 2002 are not necessarily indicative of the
results which may be reported for the year ending
December 31, 2002.

The unaudited interim consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.
The comprehensive loss of the Company was equal to net loss for
all periods presented.

Rental Equipment Depreciation

Rental equipment purchased by the Company is recorded
at cost and depreciated over its estimated service life using the
straight-line method. The range of service lives estimated by
management for rental equipment is 36 to 96 months. Rental equipment
is depreciated to a residual value ranging from zero to 69.0% of
cost.

As a result of the Companys current liquidity and
capital resource constraints the Companys ability to dispose of
and replace its rental fleet within the service lives set forth in its
depreciation policy has been restricted. Currently, approximately
ten percent of the Companys rental fleet has exceeded their
service lives as determined by the Companys depreciation policy.
As a result, the Company has extended the service lives and reduced
the related
residual values of such assets to record depreciation expense in the
periods beyond its service life. Such depreciation expense is
consistent with the annual depreciation for such assets before the
service life was extended. The Company is currently evaluating its
overall depreciation policy with regard to service lives and
residual values in light of its current liquidity and capital
resource constraints.

Impact of Recently Issued Accounting
Standards

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations. This pronouncement addresses
financial accounting and reporting for business combinations and
supercedes Accounting Principles Board Opinion (APB)
No. 16, Business Combinations and SFAS
No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises. All business combinations within
the scope of SFAS No. 141 are to be accounted for under the
purchase method. SFAS No. 141 is effective for business
combinations occurring after June 30, 2001. The Company
adopted the provisions of SFAS No. 141 as of the effective
date. Adoption of the provisions of this pronouncement had no
impact on the accompanying consolidated financial statements of
the Company.

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. This
pronouncement addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other
assets. SFAS No. 142 also addresses financial accounting
and reporting for goodwill and other intangible assets
subsequent to their acquisition. With the adoption of SFAS
No. 142, goodwill and certain other intangible assets are
no longer subject to amortization. Instead, goodwill will be
subject to at least an annual assessment for impairment in value
by applying a fair value based test. Any applicable impairment
loss is the amount, if any, by which the implied fair value of
goodwill is less than the carrying or book value. SFAS
No. 142 is effective for fiscal years beginning after
December 15, 2001. An impairment loss for goodwill arising
from the initial application of SFAS No. 142 is to be
reported as a cumulative effect of a change in accounting
principle. The Company adopted the provisions of SFAS
No. 142, as appropriate. The adoption did not have any
impact on the Companys consolidated financial statements
because the Companys entire goodwill balance was written-off as
of December 31, 2001 as a result of the Companys
significant historical and

6



---



##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

projected cash flow losses and the uncertainty
surrounding the Companys ability to restructure its
capital structure in a satisfactory manner under the
Chapter 11 Cases.

The following table compares actual results of operations for the three and six months
ended June 30, 2002 with pro forma results of operations
for the three and six months ended June 30, 2001 assuming that
the Company did not amortize goodwill in the 2001 period applying the
provisions of SFAS No. 142 to such periods (in thousands):

|                           |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |         |  
|-------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                           |  |                    |         |                 
|                           |  | Three Months Ended |         | Six Months Ended
|                           |  | June 30,           |         | June 30,        
|                           |  |                    |         |                 
|                           |  | 2002               |         | 2001             |  | 2002 |        | 2001
|                           |  |                    |         |                  |  |      |        |     
|Reported net loss          |  | $                  | (28,746 | )                |  | $    | (5,102 | )    |  | $ | (59,751 | ) |  | $ | (32,483 | )
|Add: Goodwill amortization |  |                    |        |                  |  |      | 5,190  |      |  |   |        |   |  |   | 10,382  |  
|                           |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Adjusted net income (loss) |  | $                  | (28,746 | )                |  | $    | 88     |      |  | $ | (59,751 | ) |  | $ | (22,101 | )
|                           |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |         |  

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This pronouncement addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets. This pronouncement supercedes SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and
the accounting and reporting provisions of APB No. 30,
Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of business
(as previously defined in that opinion). SFAS No. 144 is
effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods
within those fiscal years, with early application encouraged.
The adoption of SFAS No. 144 did not have a material impact
on the consolidated financial statements of the Company.

In May 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. This pronouncement requires gains and losses
from extinguishment of debt to be classified as an extraordinary
item only if the criteria in APB No. 30 have been met.
Further, lease modifications with economic effects similar to
sale-leaseback transactions must be accounted for in the same
manner as sale-leaseback transactions. While the technical
corrections to existing pronouncements are not substantive in
nature, in some instances they may change accounting practice.
The Company has adopted the provisions of SFAS No. 145.
This adoption had no impact on the Companys consolidated
financial statements.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).
SFAS No. 146 requires companies to recognize costs associated
with exit activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company is currently evaluating the
impact of this
pronouncement.

Note 4  DIP Financing
Facility

Under the terms of the debtor-in-possession
financing facility, as amended (the DIP Financing
Facility), a revolving credit facility of up to
$55,000,000, including up to $20,000,000 for postpetition
letters of credit, is available to the Company until the
earliest of (i) December 18, 2002, (ii) the date
on which the plan of reorganization becomes effective, (iii) any
material non-compliance with any of the terms of the order
entered by the Bankruptcy Court authorizing the Debtors to enter
into the DIP Financing Facility (the DIP Financing
Order), (iv) any event of default that shall have
occurred under the DIP Financing Facility, or
(v) consummation of a sale of substantially all of the
assets of the Company pursuant to an order of the Bankruptcy
Court shall have occurred. The terms of the DIP Financing
Facility provided for an initial facility of $20,000,000, which
increased to $30,000,000 upon satisfaction of certain
conditions. In addition, the DIP Financing Facility will
increase to $55,000,000 upon satisfaction of certain additional
conditions, including the earlier of (i) the agents
acceptance of the Debtors business plan which addresses
the restructuring of the Companys business operations and
(ii) the hiring of a permanent president and chief
executive officer

7



---



##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(reasonably acceptable to the agents) and
commencement of his/her duties. In any event, the availability
under the DIP Financing Facility will be reduced by $5,000,000
on November 30, 2002. Availability under the DIP Financing
Facility is also subject to a borrowing base based upon trade
accounts receivable. Amounts borrowed under the DIP Financing
Facility bear interest per annum equal to the prime rate plus
2.50%. In addition to a facility fee and an underwriting fee of
0.50% each, there is an unused commitment fee of 0.50%, a letter
of credit fee of 3.25%, and a letter of credit fronting fee of
..125%. The DIP Financing Facility is secured by super-priority
claims and liens on the real and personal assets of the Company
that also secure the prepetition senior credit facility. The DIP
Financing Facility contains financial covenants requiring
maintenance of an asset coverage ratio and a minimum operating
cash flow, as well as other covenants that limit, among other
things, indebtedness, liens, sales of assets, capital
expenditures, investments, and prohibit dividend payments. In addition, the DIP Financing Facility contains a covenant requiring that a
permanent president and chief executive officer be selected by July 18, 2002 and
be commencing his/her duties by July 31, 2002 (the CEO
Covenant). In
addition to containing defaults customary for similar DIP
facilities, a default is also triggered if the Companys
permanent president and chief executive officer ceases to serve
for any reason, unless a replacement acceptable to the agents
has been appointed and is serving within 30 days. The DIP
Financing Facility also provides that the net proceeds of any
asset sales in the ordinary course of business will reduce
prepetition indebtedness under the senior credit facility.

The Company currently is in default of the minimum adjusted
consolidated EBITDA (as defined in the DIP Financing Facility) covenant and the
CEO Covenant contained in the DIP Financing Facility (together the Current
Defaults). Prior to August 1, 2002, the Company had received waivers from the
DIP Financing Facilitys lending institutions related to the Current Defaults,
which expired on July 31, 2002. On August 1, 2002, such lending institutions
elected to forbear from exercising any remedies contained in the DIP Financing
Facility with respect to the Current Defaults and to limit the availability for
cash borrowings under the facility to no more than $5,000,000 in excess of
existing letters of credit. Such forbearance expires on August 23, 2002. The
Company is currently renegotiating the financial covenants in the DIP Financing
Facility to reflect its current forecasted results for 2002 and is actively
recruiting a permanent president and chief executive officer. The Company
believes that the forbearance will be extended
periodically
until such negotiations are complete and the permanent president and chief
executive officer has been hired.

In connection with the DIP Financing Facility,
the Companys prepetition senior credit facility was
amended to provide for subordination of the liens under such
facility to the liens under the DIP Financing Facility and use
of cash collateral in return for payment of interest on the
prepetition senior credit facility. As of June 30, 2002,
the Company had made no cash borrowings under the DIP Financing
Facility.

Note 5  Liabilities
Subject to Compromise

The principal categories of claims classified as
liabilities subject to compromise under the Chapter 11
Cases are identified below. All amounts may be subject to
adjustment depending on Bankruptcy Court action, further
developments with respect to disputed claims, or other events,
including the reconciliation of claims filed with the Bankruptcy
Court to amounts included in the Companys records.
Additional prepetition claims may arise from a rejection of
additional executory contracts or unexpired leases by the
Debtors. Under a confirmed plan or plans of reorganization, all
prepetition claims may be paid and discharged at amounts
substantially less than their allowed amounts.

As a result of the Chapter 11 Cases, no
principal or interest payments may be made on unsecured
prepetition debt without Bankruptcy Court approval or until a
plan or plans of reorganization providing for the repayment
terms has been confirmed by the Bankruptcy Court and becomes
effective. Therefore, interest on prepetition unsecured
obligations, as well as amortization of deferred financing costs
related to such debt, has not been accrued or recorded after the Petition
Date. Contractual interest expense not accrued or recorded on
certain prepetition debt totaled
$7,925,000 and $16,193,000 for the three and six months
ended June 30, 2002.

8



---



##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Liabilities subject to compromise consists of the
following:

|                                                              |                                         |                |           |              |  |   |           |           | 
|------------------------------------------------------------- | --------------------------------------- | -------------- | --------- | ------------ |  | - | --------- | --------- | 
|                                                              |                                         | June 30,       |           | December 31,
|                                                              |                                         | 2002           |           | 2001        
|                                                              |                                         |                |           |             
|                                                              |                                         |               
|                                                              |                                         | (in thousands)
|Debt                                                          |                                         | $              | 1,095,914 |              |  | $ | 1,098,552 |          
|Accounts payable                                              |                                         |                | 17,339    |              |  |   | 16,641    |          
|Accrued expenses                                              |                                         |                | 42,733    |              |  |   | 43,434    |          
|Personal property, real estate and other
    non-income taxes |                                         |                | 4,148     |              |  |   | 4,517     |          
|                                                              |                                         |                |           |              |  |   |           |          
|                                                              | Total liabilities subject to compromise |                | $         | 1,160,134    |  |   | $         | 1,163,144 | 
|                                                              |                                         |                |           |              |  |   |           |          

Debt subject to compromise consists of the
following:

|                                                                                                                                                                             |                                         |                |         |              |           |  |         |         |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | -------------- | ------- | ------------ | --------- |  | ------- | ------- | --------- | 
|                                                                                                                                                                             |                                         | June 30,       |         | December 31,
|                                                                                                                                                                             |                                         | 2002           |         | 2001        
|                                                                                                                                                                             |                                         |                |         |             
|                                                                                                                                                                             |                                         |               
|                                                                                                                                                                             |                                         | (in thousands)
|Notes payable to financial institutions:                                                                                                                                     |                                         |                |         |              |           |  |         |        
|                                                                                                                                                                             | Term loan due July 2006                 |                | $       | 394,732      |           |  | $       | 395,364 |          
|                                                                                                                                                                             | Revolving credit facility due July 2004 |                |         | 356,333      |           |  |         | 355,903 |          
|10.375% Senior Subordinated Notes due
    December 15, 2008 with interest due semi-annually each
    June 15 and December 15                                                 |                                         |                | 175,000 |              |           |  | 175,000 |        
|Subordinated promissory notes, bearing interest
    at 6.0% to 8.5%, interest payable quarterly and maturities
    through November 2002                                     |                                         |                | 625     |              |           |  | 625     |        
|Subordinated convertible promissory notes,
    bearing interest at 6.0% to 8.5%, interest payable quarterly and
    maturities through December 2006.                        |                                         |                | 99,782  |              |           |  | 99,782  |        
|Rental equipment financing obligations, secured
    by equipment, payable in monthly installments, through January
    2005                                                  |                                         |                | 20,530  |              |           |  | 21,770  |        
|Note payable, with interest at the commercial
    paper rate plus 2.05% to 2.25%, payable in monthly installments
    through September 2004, secured by equipment           |                                         |                | 7,083   |              |           |  | 7,083   |        
|Note payable, with interest at the London
    Interbank Offered Rate plus 2.75%, payable in monthly
    installments secured by equipment                                    |                                         |                | 7,824   |              |           |  | 7,909   |        
|Equipment notes, bearing interest at 6.2% to
    9.25% or at the Prime Rate less 0.25%, payable in various
    monthly installments through April 2003, secured by equipment |                                         |                | 33,994  |              |           |  | 34,105  |        
|Note payable to related party
    (See Note 13)                                                                                                                              |                                         |                |        |              |           |  | 1,000   |        
|Other                                                                                                                                                                        |                                         |                | 11      |              |           |  | 11      |        
|                                                                                                                                                                             |                                         |                |         |              |           |  |         |        
|                                                                                                                                                                             |                                         | Total debt     |         | $            | 1,095,914 |  |         | $       | 1,098,552 | 
|                                                                                                                                                                             |                                         |                |         |              |           |  |         |        

The Company is currently in default on
substantially all of its debt subject to compromise. Despite the Companys restructuring efforts in
late 2000 and early 2001 described below, in December 2001, the
Company failed to make a principal payment due on the term loan
portion of its senior credit facility, an interest payment due
on its 10.375% Senior Subordinated Notes due 2008 (the
Subordinated Notes), principal and interest payments
on certain subordinated notes issued in connection with
acquisitions (the Acquisition Notes) and certain
other scheduled payments.

Under the terms of the Companys senior
credit facility, upon an event of default, including the failure
to make a required interest payment, the senior lenders had
several rights and remedies available to them, including
declaring all amounts outstanding, together with accrued
interest, to be immediately due and

9



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##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

payable. The senior lenders had the right to
proceed against the collateral securing the facility, which
includes substantially all of the Companys assets.
Similarly, as a result of the Companys failure to make
interest and/or principal payments under the Acquisition Notes
and the Subordinated Notes, subject to the subordination and
cure provisions of such instruments, the trustee or holders of
those notes may have been able to declare those notes and
accrued interest immediately due and payable. The Companys
other debt and lease arrangements also contain cross-default
provisions, which gave the parties thereto various remedies,
including acceleration of all amounts outstanding, foreclosure
on collateral securing such obligations and termination rights.
As a result of filing the Chapter 11 Cases, the
Companys lenders and parties to various contracts and
agreements were prohibited from exercising the remedies that may
have been available to them upon the Companys default.

Note 6  Reorganization Items,
Net

Expenses directly incurred as a result of the
Chapter 11 Cases have been segregated from normal
operations and are disclosed separately. The major components
are as follows:

|                  |                            |                |       |              |  |   |       |        | 
|----------------- | -------------------------- | -------------- | ----- | ------------ |  | - | ----- | ------ | 
|                  |                            | Three          |       | Six         
|                  |                            | Months Ended   |       | Months Ended
|                  |                            | June 30,       |       | June 30,    
|                  |                            | 2002           |       | 2002        
|                  |                            |                |       |             
|                  |                            |               
|                  |                            | (In thousands)
|Professional fees |                            | $              | 6,878 |              |  | $ | 9,960 |       
|Employee expenses |                            |                | 2,134 |              |  |   | 2,401 |       
|Interest income   |                            |                | (102  | )            |  |   | (235  | )     
|Other             |                            |                | 113   |              |  |   | 114   |       
|                  |                            |                |       |              |  |   |       |       
|                  | Total reorganization items |                | $     | 9,023        |  |   | $     | 12,240 | 
|                  |                            |                |       |              |  |   |       |       

Professional fees consist of costs for financial
advisors, legal counsel, consulting and other costs related to
professional services incurred. Employee expenses primarily consist
of a severance and retention program approved by the Bankruptcy Court
to ensure the retention of certain key employees. Interest income consists of
interest earned on excess cash balances. Reorganization items
for the three and six months ended June 30, 2002 were cash charges.

Note 7  2000 Restructuring
Plan

During the fourth quarter of 2000, the Company
recorded a pre-tax restructuring charge of approximately
$72,005,000 and during 2001, the Company recorded an additional
net pre-tax restructuring charge of approximately $9,653,000.

The restructuring plan was comprised of the
following major components:



| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of excess rental equipment, which
    primarily relates to a portion of the Companys heavy
    earthmoving equipment that has the highest unit cost, requires
    the most expensive support infrastructure and has the lowest
    return on investment;
|
| |  | the abandonment of certain information system
    projects that were under development;                                                                                                                                                                           
|
| |  | the elimination of jobs company-wide and the
    consolidation of various departments within the organization; and                                                                                                                                                
|
| |  | the closure of certain rental and office
    locations.                                                                                                                                                                                                           

10



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##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The remaining components of these charges, along
with the activity for 2002 related to these charges, are
presented in the following table (in thousands).

|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 
|------------------------------------ |  | ------------ | ----- | ------------- |  | ---------- | - | ---------- |  | ---- | - |  |  | - | - |  |  | - | ----- | 
|                                     |  |              |       |               |  |           
|                                     |  |              |       | 2002 Activity |  |           
|                                     |  |              |       |               |  |           
|                                     |  | Reserve      |       |               |  |            |   | Reserve   
|                                     |  | Balance at   |       | Amounts       |  | Deductions |   | Balance at
|                                     |  | December 31, |       | Charged to    |  |            |   | June 30,  
|                                     |  | 2001         |       | Income        |  | Cash       |   | Non-Cash   |  | 2002
|                                     |  |              |       |               |  |            |   |            |  |     
|Employee termination severance costs |  | $            | 1,815 |               |  | $          |  |            |  | $    |  |  |  | $ |  |  |  | $ | 1,815 | 
|Facility closures                    |  |              | 324   |               |  |            |  |            |  |      |  |  |  |   |  |  |  |   | 324   | 
|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 
|                                     |  | $            | 2,139 |               |  | $          |  |            |  | $    |  |  |  | $ |  |  |  | $ | 2,139 | 
|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 

The remaining reserve balance at June 30,
2002 for employee termination severance costs relates to the
remaining severance payments due to employees terminated under
the 2000 restructuring plan.

The remaining reserve balance at June 30,
2002 for facility closures relates to certain office equipment
leases that the Company has not yet received Bankruptcy Court
approval to reject. Such approval is expected to occur prior to
December 31, 2002.

The timing and the amounts of all remaining
reserve balances related to the 2000 restructuring plan will be
determined by the resolution of the Chapter 11 Cases.

Note 8  Seasonality

The Companys revenue and results of operations are
dependent upon activity in the construction industry in the
markets it serves. Construction activity is dependent upon
weather and other seasonal factors affecting construction in the
geographic areas where the Company operates. Because of this
variability in demand, the Companys quarterly revenue and
results of operations may fluctuate. Accordingly, quarterly or other interim
results should not be considered indicative of results to be
expected for any other quarter or for a full year.

Note 9  Loss Per
Share

The following table sets forth the computation of
basic and diluted loss per share (in thousands, except per share
data):

|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |         |   | 
|----------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------------- | ------ | ---------------- | - | ---- | ------ | ------ | - | - | ------ | ------- | - | - | ------ | ------- | - | 
|                                                                              |                                                                            |                               |        |                 
|                                                                              |                                                                            | Three Months Ended            |        | Six Months Ended
|                                                                              |                                                                            | June 30,                      |        | June 30,        
|                                                                              |                                                                            |                               |        |                 
|                                                                              |                                                                            | 2002                          |        | 2001             |   | 2002 |        | 2001  
|                                                                              |                                                                            |                               |        |                  |   |      |        |       
|Numerator:                                                                    |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|                                                                              | Net loss                                                                   |                               | $      | (28,746          | ) |      | $      | (5,102 | ) |   | $      | (59,751 | ) |   | $      | (32,483 | )
|                                                                              | Interest expense on convertible subordinated
    debt, net of income taxes |                               |        |                 |   |      |        |       |   |   |        |        |   |   |        |        |  
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|                                                                              | Number  diluted loss per share                                            |                               | $      | (28,746          | ) |      | $      | (5,102 | ) |   | $      | (59,751 | ) |   | $      | (32,483 | )
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|Denominator:                                                                  |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|                                                                              | Denominator for basic loss per share 
    weighted-average shares         |                               |        | 57,364           |   |      |        | 57,364 |   |   |        | 57,364  |   |   |        | 57,364  |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Effect of dilutive securities:                                             |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |         |  
|                                                                              |                                                                            | Convertible subordinated debt |        |                  |  |      |        |        |  |   |        |         |  |   |        |         |  | 
|                                                                              |                                                                            | Convertible preferred stock   |        |                  |  |      |        |        |  |   |        |         |  |   |        |         |  | 
|                                                                              |                                                                            | Employee stock options        |        |                  |  |      |        |        |  |   |        |         |  |   |        |         |  | 
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|Denominator for diluted loss per
    share  adjusted weighted-average shares |                                                                            |                               | 57,364 |                  |   |      | 57,364 |        |   |   | 57,364 |         |   |   | 57,364 |        
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|Basic loss per share                                                          |                                                                            | $                             | (0.50  | )                |   | $    | (0.09  | )      |   | $ | (1.04  | )       |   | $ | (0.57  | )      
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        
|Diluted loss per share                                                        |                                                                            | $                             | (0.50  | )                |   | $    | (0.09  | )      |   | $ | (1.04  | )       |   | $ | (0.57  | )      
|                                                                              |                                                                            |                               |        |                  |   |      |        |        |   |   |        |         |   |   |        |        

11



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##### 



NATIONSRENT, INC.


(Debtor-In-Possession as of December 17,
2001)


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Options and warrants to purchase 9,153,792 and
9,322,186 shares of common stock were outstanding at
June 30, 2002 and 2001, respectively, but were not
included in the computation of diluted earnings per share
because the exercise prices of such options and warrants were
greater than the average fair value of the common shares and,
therefore, the effect would be antidilutive.

Weighted average shares of preferred stock and
subordinated debt convertible into 36,507,937 and 10,948,231
shares of common stock, respectively, were outstanding at
June 30, 2002 but were not included in the computation of
diluted earnings per share since their effect would be
antidilutive.

Weighted average shares of preferred stock and
subordinated debt convertible into 36,507,937 and 11,200,621
shares of common stock, respectively, were outstanding at
June 30, 2001 but were not included in the computation of
diluted earnings per share since their effect would be
antidilutive.

Note 10  Cumulative Effect of
Change in Accounting Principle

Effective January 1, 2001 the Company
adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. This
statement establishes accounting and reporting standards for
derivative instruments and hedging activities. This standard
requires that all derivative instruments be recorded in the
balance sheet as either an asset or liability measured at its
fair value.

In accordance with the transition provisions of
SFAS No. 133, the Company recorded a $1,359,000 charge net
of $968,000 of income tax benefits, or $0.02 per share, which is
recorded in the consolidated statement of operations for the
six months ended June 30, 2001 as a cumulative effect of
change in accounting principle. The financial statement impact
of adopting this standard subsequent to January 1, 2001, is
included in the Companys consolidated statements of
operations and balance sheets. All of the Companys interest
rate swap agreements had terminated or expired as of April 30, 2002.

Note 11  Capital
Stock

Through January 2001, an aggregate of 1,065,200
shares of common stock had been acquired under the
Companys $5,000,000 Board authorized cumulative share
repurchase program for an aggregate purchase price of
approximately $2,880,000. These shares have been recorded as
treasury stock in the accompanying consolidated financial
statements. Since January 2001, no additional shares have been
purchased.

In May 2002, the Company was notified by the
over-the-counter electronic bulletin board, commonly known as
the pink sheets (the OTCBB) that as a result of the
Companys late filings of required reports under the
Securities Exchange Act of 1934, the Companys common stock
would not be eligible for trading on the OTCBB beginning June
2002, unless all such required reports were filed. In June 2002,
the Companys common stock was removed from the OTCBB.

Note 12  Income
Taxes

The Company did not record a tax benefit for the three
and
six months ended June 30, 2002, respectively, due to the uncertainty
surrounding the income tax consequences of the Chapter 11
Cases.

Note 13  Related Party
Transactions

The Company entered into an executive transition
agreement in December 2001 with its former Chief Executive
Officer (CEO). Pursuant to the agreement, the former
CEO agreed to resign all of his director and officer positions
with the Company and its subsidiaries the earlier of (i) 60
days following the date of the agreement or (ii) the date
the Company appoints a new or interim chief executive officer.
The agreement provided a severance payment to the former CEO of
$2,000,000, of which $1,000,000 was paid in cash in December
2001 and $1,000,000 was paid in the form of a promissory note
(backed by a letter of credit) that was due and payable upon the
former CEOs resignation. The former CEO resigned in
February 2002. As a result of the Chapter 11 Cases, the
Company did not make any payment on account of the promissory
note described above and the former CEO drew upon the letter of
credit for payment.

12



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion and analysis of our
consolidated results of operations and financial condition
should be read in conjunction with the unaudited interim
consolidated financial statements and the related notes included
herein and the consolidated financial statements for the year
ended December 31, 2001 appearing in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission.

General

NationsRent, Inc. and all of its subsidiaries
(NationsRent, the Company, the
Debtors, we or us) is a
leading provider of rental equipment in the United States. We
offer a comprehensive line of equipment for rent primarily to a
broad range of construction, industrial and homeowner customers
including general contractors, subcontractors, highway
contractors, manufacturing plants, distribution centers and
other commercial businesses. We also sell used and new
equipment, merchandise, spare parts and supplies. As of
July 31, 2002, we operated 239 equipment rental locations in
26 states. We have become a leading provider of rental equipment
as a result of a combination of having acquired platform
companies in target markets, opened or acquired additional
locations concentrated around those businesses and expanded the
selection and availability of our rental fleet.

Proceedings Under Chapter 11 of the Bankruptcy
Code

On December 17, 2001 (the Petition
Date), the Debtors filed voluntary petitions for
reorganization under chapter 11 of the United States Bankruptcy
Code (the Bankruptcy Code) in the United States
Bankruptcy Court for the District of Delaware (the
Bankruptcy Court). The chapter 11 cases pending
for the Debtors (the Chapter 11 Cases) are
being jointly administered for procedural purposes.

The Debtors are currently operating their
business as debtors-in-possession pursuant to applicable
provisions of the Bankruptcy Code. Since the Petition Date, the
Debtors have continued to conduct business in the ordinary
course. Management is in the process of stabilizing the business
of the Debtors and evaluating their operations. The Debtors filed a
proposed plan of reorganization (the Proposed Plan) and
related disclosure statement in June 2002, and will seek the requisite
acceptance of the plan by impaired creditors and equity holders
and confirmation of the plan by the Bankruptcy Court in
accordance with the applicable provisions of the Bankruptcy Code. The confirmation of the Proposed Plan of reorganization is
one of our primary objectives.

During the pendency of the Chapter 11 Cases,
the Debtors may, with Bankruptcy Court approval, sell assets and
settle liabilities outside the ordinary course of business,
including for amounts other than those reflected on the
Debtors financial statements. The Debtors are in the
process of reviewing their operations and identifying assets for
disposition.

The administrative and reorganization expenses
resulting from the Chapter 11 Cases will unfavorably affect
the Debtors results of operations. Future results of
operations may also be affected by other factors related to the
Chapter 11 Cases. See  Factors That May
Affect Future Results.

The Proposed Plan sets forth the means
for treating claims, including liabilities subject to compromise
and interests in our Company. Such means may take a number of
different forms. The Proposed Plan or any other plan or plans of reorganization may result in, among
other things, significant dilution or elimination of certain
classes of existing interests as a result of the issuance of
equity securities to creditors or new investors. The
confirmation of any plan of reorganization will require creditor
acceptance as required under the Bankruptcy Code and approval of
the Bankruptcy Court.

Under the Bankruptcy Code, postpetition
liabilities and prepetition liabilities subject to compromise
must be satisfied before equity holders can receive any
distribution. The ultimate recovery to equity holders, if any,

13



---



##### 



will not be determined until the end of the case
when the fair value of our assets is compared to the liabilities
and claims against us. As a result of the amount of our
prepetition indebtedness, our financial performance and the
provisions of the Bankruptcy Code, we believe that the
Companys equity holders will not receive any value or
distribution for their interests under a plan or plans of
reorganization. The Proposed Plan filed by the Company in June
2002 does not provide for any value or distribution to equity
holders or any cash or debt distribution to holders of general
unsecured claims.


Under bankruptcy law, actions by creditors to
collect prepetition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against us, are
stayed and other prepetition contractual obligations may not be
enforced against the Debtors. In addition, the Debtors have the
right, subject to Bankruptcy Court approval and other
conditions, to assume or reject any prepetition executory
contracts and unexpired leases. Parties affected by these
rejections may file prepetition damage claims with the
Bankruptcy Court. We have prepared and submitted the schedules
setting forth the Debtors assets and liabilities as of the
date of the petition as reflected in our accounting records. The
amounts of claims filed by creditors could be significantly
different from their recorded amounts. Due to material
uncertainties, it is not possible to predict the length of time
we will operate under chapter 11 protection, the outcome of
the proceedings in general, whether we will continue to operate
under our current organizational structure, or the effect of the
proceedings on our business or the recovery by creditors and our
equity holders.

For further discussion of the Chapter 11 Cases,
see Part I  Item 1. Financial
Statements  Note 2  Proceedings Under
Chapter 11 of the Bankruptcy Code.

Basis of Presentation

The accompanying unaudited interim consolidated
financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization
of assets, and payment of liabilities in the ordinary course of
business, and do not reflect adjustments that might result if
the Debtors are unable to continue as a going concern. The
Debtors history of significant losses, their stockholder
deficit and their Chapter 11 Cases raise substantial doubt
regarding the Companys ability to continue as a going
concern. Continuing as a going concern is dependent upon, among
other things, the Debtors formulation of a plan or plans
of reorganization acceptable to the Bankruptcy Court and
creditors, the success of future business operations, and the
generation of sufficient cash from operations and financing
sources to meet the Companys obligations. The unaudited
consolidated financial statements do not reflect: (i) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (ii) aggregate
prepetition liability amounts that may be allowed for unrecorded
claims or contingencies, or their status or priority;
(iii) the effect of any changes to the Debtors
capital structure or in the Debtors business operations as
the result of an approved plan or plans of reorganization; or
(iv) adjustments to the carrying value of assets or
liability amounts that may be necessary as a result of actions
by the Bankruptcy Court. Adjustments necessitated by a plan of
reorganization could materially change the amounts reported in
the consolidated financial statements included elsewhere herein.

Liquidity and Capital Resources

Prepetition
Capital Resources

Historically, we funded our cash requirements
with borrowings under our senior credit facility, proceeds from
the issuance of debt and equity securities and cash from
operations. As of June 30, 2002, our senior credit
facility consisted of a $394.7 million term loan and a revolving
credit facility with an outstanding balance of $356.3 million.
The senior credit facility is secured by substantially all of
our assets.

As a result of our reliance on debt-based
financing facilities, we became highly leveraged. Our ability to
meet our financial obligations under these financing
arrangements was dependent on, among other things, our results
of operations and our ability to maintain compliance with our
debt covenants. Beginning in 2000, we experienced increased
financial stress and liquidity issues, as well as significant
losses from operations. At June 30, 2002, our accumulated
deficit reached approximately $1.0 billion.

Despite our restructuring efforts in late 2000
and early 2001 described below, in December 2001, we failed to
make a principal payment due on the term loan portion of our
senior credit facility, an interest payment due on our 10.375%
Senior Subordinated Notes due 2008 (the Subordinated
Notes), principal and

14



---



##### 



interest payments on certain subordinated notes
issued in connection with acquisitions (the Acquisition
Notes) and certain other scheduled payments.


Under the terms of our senior credit facility,
upon an event of default, including the failure to make a
required interest payment, the senior lenders had several rights
and remedies available to them, including declaring all amounts
outstanding, together with accrued interest, to be immediately
due and payable. The senior lenders had the right to proceed
against the collateral securing the facility, which includes
substantially all of our assets. Similarly, as a result of our
failure to make interest and/or principal payments under the
Acquisition Notes and the Subordinated Notes, subject to the
subordination and cure provisions of such instruments, the
trustee or holders of those notes may have been able to declare
those notes and accrued interest immediately due and payable.
Our other debt and lease arrangements also contain cross-default
provisions, which gave the parties thereto various remedies,
including acceleration of all amounts outstanding, foreclosure
on collateral securing such obligations and termination rights.

Our deteriorating financial condition, combined
with continuing economic weakness and heightened competition in
the construction and rental equipment industries contributed to
significant strain on our liquidity and compounded our
substantial earnings and cash flow pressures. Under these
circumstances, we determined that it was in the best interests
of our stakeholders to file the Chapter 11 Cases to allow
us the opportunity to restructure our financial obligations,
focus on our operations and develop and implement a new business
model.

As a result of filing the Chapter 11 Cases,
our lenders and parties to various contracts and agreements were
prohibited from exercising the remedies that may have been
available to them upon our default.

Pursuant to the Bankruptcy Code, our prepetition
obligations, including obligations under debt instruments,
generally may not be enforced against the Debtors, and any
actions to collect prepetition indebtedness are automatically
stayed, unless the stay is lifted by order of the Bankruptcy
Court. In addition, as debtors-in-possession, the Debtors have
the right, subject to Bankruptcy Court approval and certain
other limitations, to assume or reject executory contracts and
unexpired leases. In this context, assumption means
that the Debtors agree to perform their obligations and cure all
existing defaults under the contract or lease, and
rejection means that the Debtors are relieved from
their obligations to perform further under the contract or
lease, but are subject to a prepetition claim for damages for
the breach thereof. Any damages resulting from rejection of
executory contracts and unexpired leases will be treated as
general unsecured claims in the Chapter 11 Cases unless
such claims had been secured on a prepetition basis prior to the
Petition Date. To date, the Debtors have rejected certain
executory contracts and unexpired leases of nonresidential real
property and the Debtors continue to review their remaining
executory contracts and unexpired leases to determine which, if
any, they will reject in the future. The Debtors cannot
presently determine or reasonably estimate the ultimate
liability that may result from rejecting contracts or leases or
from the filing of claims for any rejected contracts or leases,
and no provisions have yet been made for the final resolution of
these items.

Adequacy
of Capital Resources

The Debtors are now operating their businesses as
debtors-in-possession under chapter 11 of the Bankruptcy
Code. In addition to the cash requirements necessary to fund
ongoing operations, the Company anticipates that it will incur
significant professional fees and other reorganization costs in
connection with the Chapter 11 Cases and the restructuring
of its business operations. As a result of the uncertainty
surrounding NationsRents current circumstances, it is
difficult to predict the Companys actual liquidity needs
or sources at this time. However, based on current and anticipated levels
of operations, and efforts to reduce accounts receivable, the
Company anticipates that its cash flow from operations, together
with amounts available under the DIP Financing Facility (as
defined below), will be adequate to meet its anticipated cash
requirements through the end of December 2002, subject to
successfully renegotiating certain financial and other covenants
in the DIP Financing Facility as described below. In the event
that cash flows and available borrowings under the DIP Financing
Facility are not sufficient to meet future cash requirements or
the Company is not successful at renegotiating certain financial
and other covenants in the DIP Financing Facility, the Company
may be required to reduce planned capital expenditures or seek
additional financing. The Company can

15



---



##### 



provide no assurances that reductions in planned
capital expenditures would be sufficient to cover shortfalls in
available cash or that additional financing would be available
or, if available, offered on acceptable terms. As a result of
the Chapter 11 Cases and the circumstances leading to the
filing thereof, NationsRents access to additional
financing is, and for the foreseeable future will likely
continue to be, very limited. The Companys long-term
liquidity requirements and the adequacy of the Companys
capital resources are difficult to predict at this time, and
ultimately cannot be determined until a plan of reorganization
has been confirmed by the Bankruptcy Court in connection with
the Chapter 11 Cases.


DIP
Financing Facility

In March 2002, the Bankruptcy Court entered an
order (the DIP Financing Order) authorizing the
Debtors to enter into a $55.0 million debtor-in-possession
financing facility dated December 18, 2001, as amended (the
DIP Financing Facility) with Fleet National Bank as
agent and certain other lending institutions described therein
and to grant first priority primary liens, mortgages, security
interests, liens (including priming liens), and superiority
claims on substantially all of the assets of the Debtors to
secure the DIP Financing Facility.

Under the terms of the DIP Financing Facility, a
revolving credit facility of up to $55.0 million, including up
to $20.0 million for postpetition letters of credit, is
available to the Company until the earliest of
(i) December 18, 2002, (ii) the date on which the
plan of reorganization becomes effective, (iii) any material
non-compliance with any of the terms of the DIP Financing Order,
(iv) any event of default that shall have occurred under
the DIP Financing Facility, or (v) consummation of a sale
of substantially all of the assets of the Company pursuant to an
order of the Bankruptcy Court shall have occurred. The terms of
the DIP Financing Facility provided for an initial facility of
$20.0 million, which increased to $30.0 million upon
satisfaction of certain conditions. In addition, the DIP
Financing Facility will increase to $55.0 million upon
satisfaction of certain additional conditions, including the
earlier of (i) the agents acceptance of our business
plan which addresses the restructuring of the Companys
business operations and (ii) the hiring of a permanent
president and chief executive officer (reasonably acceptable to
the agents) and commencement of his/her duties. In any event,
the availability under the DIP Financing Facility will be
reduced by $5.0 million on November 30, 2002.
Availability under the DIP Financing Facility is also subject to
a borrowing base based upon trade accounts receivable. Amounts
borrowed under the DIP Financing Facility bear interest per
annum equal to the prime rate plus 2.50%. In addition to a
facility fee and an underwriting fee of 0.50% each, there is an
unused commitment fee of 0.50%, a letter of credit fee of 3.25%,
and a letter of credit fronting fee of 0.125%. The DIP Financing
Facility is secured by super-priority claims and liens on the
real and personal assets of the Company that also secure the
prepetition senior credit facility. The DIP Financing Facility
contains financial covenants requiring maintenance of an asset
coverage ratio and a minimum operating cash flow, as well as
other covenants that limit, among other things, indebtedness,
liens, sales of assets, capital expenditures, investments, and
prohibit dividend payments. In addition, the DIP Financing Facility contains a covenant requiring that a
permanent president and chief executive officer be selected by July 18, 2002 and
be commencing his/her duties by July 31, 2002 (the CEO
Covenant). In
addition to containing defaults customary for similar DIP
facilities, a default is also triggered if the Companys
permanent president and chief executive officer ceases to serve
for any reason, unless a replacement acceptable to the agents
has been appointed and is serving within 30 days. The DIP
Financing Facility also provides that the net proceeds of any
asset sales in the ordinary course of business will reduce
prepetition indebtedness under the senior credit facility.

We are currently in default of the minimum adjusted consolidated EBITDA
(as defined in the DIP Financing Facility) covenant and the CEO Covenant
contained in the DIP Financing Facility (together the Current Defaults). Prior
to August 1, 2002, we had received waivers from the DIP Financing Facilitys
lending institutions related to the Current Defaults, which expired on July 31,
2002. On August 1, 2002, such lending institutions elected to temporarily
forbear from exercising any remedies contained in the DIP Financing Facility
with respect to the Current Defaults and limit the availability for cash
borrowings under the facility to no more than $5.0 million in excess of existing
letters of credit. Such forbearance expires on August 23, 2002. We are
currently renegotiating the financial covenants in the DIP Financing Facility to
reflect our current forecasted results for 2002 and are actively recruiting a
permanent president and chief executive officer. We believe
that the forbearance will be extended periodically until such negotiations
are complete and the permanent president and chief executive officer has been
hired.

16



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##### 



In connection with the DIP Financing Facility,
our prepetition senior credit facility was amended to provide
for subordination of the liens (to the liens under the DIP
Financing Facility) and use of cash collateral in return for
payment of interest on the prepetition senior credit facility.

As of August 13, 2002, the Company had made
$1.7 million in cash borrowings and had $11.9 million in letters of credit
outstanding under the DIP Financing Facility. Remaining
availability under the DIP Financing Facility as of August 13,
2002, was $3.3 million.

Liquidity
Requirements

Our net cash provided by operations was $6.7
million for the six months ended June 30, 2002 compared
to net cash used in operations of $52.4 million for the same
period in 2001. The increase in cash provided by operations was
primarily due to the stay of pre-petition liabilities subject to
compromise as a result of the Chapter 11 Cases and the stay
of obligations arising under unexpired leases of nonresidential
property during the 60 day period following the Petition Date.
Net cash used in investing activities was $14.9 million for the
six months ended June 30, 2002, primarily reflecting
$15.6 million for purchases of rental equipment, $2.1 million for
purchases of and improvements to property and equipment and $2.8
million of proceeds from the sale of both rental and non-rental
equipment. Cash used in financing activities was $2.6 million for the
six months ended June 30, 2002.

Our short-term cash requirements for our existing
operations consist primarily of expenditures to repair and
maintain our rental equipment fleet, working capital
requirements and purchase of merchandise inventory and other
operating activities. In addition, a substantial portion of our
cash generated will be used to make adequate protection payments
on our secured debt and to meet postpetition operating lease
obligations.

We estimate that equipment expenditures over the
next 12 months for our existing locations and for new store
openings will be in the range of $25.0 million to $35.0 million
and proceeds from sales of used equipment will be in the range
of $5.0 million to $10.0 million. Approximately two-thirds of
the estimated capital expenditures is to replace existing rental
equipment.

During the six months ended June 30,
2002, we opened 11 NationsRent stores within home
improvement stores of Lowes Companies, Inc.
(Lowes). As of June 30, 2002, we had
opened a total of 51 such stores within Lowes stores, and
expect to open 19 additional stores in 2002. We estimate that
the average capital costs associated with opening a Lowes
location to be in the range of $0.3 million to
$0.5 million.

We believe cash generated from operations and
borrowings under our DIP Financing Facility will be sufficient
to fund our cash requirements for existing operations, equipment
capital expenditures and new store openings through December
2002, subject to successfully renegotiating certain financial
and other covenants in the DIP Financing Facility described above. Our ability to fund existing operations, equipment capital expenditures and new
store openings in 2003 and beyond will depend on the ability to either enter
into a new, or extend our current, DIP Financing Facility and the outcome of the
Chapter 11 Cases.

2000 Restructuring Plan

During the fourth quarter of 2000, we recorded a
pre-tax restructuring charge of approximately $72.0 million
and during 2001, we recorded an additional pre-tax restructuring
charge of approximately $9.7 million. The restructuring
plan was comprised of the following major components:



| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of excess rental equipment, which
    primarily relates to a portion of our heavy earthmoving
    equipment that has the highest unit cost, requires the most
    expensive support infrastructure and has the lowest return on
    investment;
|
| |  | the abandonment of certain information system
    projects that were under development;                                                                                                                                                                 
|
| |  | the elimination of jobs company-wide and the
    consolidation of various departments within our organization; and                                                                                                                                      
|
| |  | the closure of certain rental and office
    locations.                                                                                                                                                                                                 

17



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The remaining components of these charges, along
with the activity for 2002 related to these charges, are
presented in the following table (in thousands):

|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 
|------------------------------------ |  | ------------ | ----- | ------------- |  | ---------- | - | ---------- |  | ---- | - |  |  | - | - |  |  | - | ----- | 
|                                     |  |              |       |               |  |           
|                                     |  |              |       | 2002 Activity |  |           
|                                     |  |              |       |               |  |           
|                                     |  | Reserve      |       |               |  |            |   | Reserve   
|                                     |  | Balance at   |       | Amounts       |  | Deductions |   | Balance at
|                                     |  | December 31, |       | Charged to    |  |            |   | June 30,  
|                                     |  | 2001         |       | Income        |  | Cash       |   | Non-Cash   |  | 2002
|                                     |  |              |       |               |  |            |   |            |  |     
|Employee termination severance costs |  | $            | 1,815 |               |  | $          |  |            |  | $    |  |  |  | $ |  |  |  | $ | 1,815 | 
|Facility closures                    |  |              | 324   |               |  |            |  |            |  |      |  |  |  |   |  |  |  |   | 324   | 
|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 
|                                     |  | $            | 2,139 |               |  | $          |  |            |  | $    |  |  |  | $ |  |  |  | $ | 2,139 | 
|                                     |  |              |       |               |  |            |   |            |  |      |   |  |  |   |   |  |  |   |       | 

The remaining reserve balance at June 30,
2002 for employee termination severance costs relates to the
remaining severance payments due to employees terminated under
the 2000 restructuring plan.

The remaining reserve balance at June 30,
2002 for office closures relates to certain office equipment
leases that we have not yet received Bankruptcy Court approval
to reject. Such approval is expected to occur prior to
December 31, 2002.

The timing and the amounts of all remaining
reserve balances related to the 2000 restructuring plan will be
determined by the resolution of the Chapter 11 Cases.

New Stores

In October 2000, we entered into an exclusive
multi-year strategic alliance with Lowes, the worlds
second largest home improvement retailer, to operate NationsRent
rental centers within select Lowes home improvement
stores. Operating as a store within a store adjacent to the
entrance of a Lowes store, the NationsRent stores will
rent our full line of construction tools and equipment to
Lowes customers. We will lease these rental centers from
Lowes for terms initially expiring in 2008 with two
five-year renewal options. The Lowes strategic alliance
has and will require us to accelerate investments in systems,
training, brand support and other store start-up costs. As of
June 2002, we operated 51 NationsRent rental centers at
Lowes locations. In April 2002, the Debtors obtained
approval from the Bankruptcy Court to continue the scheduled
opening of NationsRent rental centers within select Lowes
home improvement stores. Our new store growth during the next
several years will concentrate on our strategic alliance with
Lowes to open and operate NationsRent rental centers in
select Lowes locations. However, given our recent
financial performance, there can be no assurance that our
relationship with Lowes will not be impaired.

Historical Results of Operations

Three and Six Months Ended
June 30, 2002 and 2001

Revenue. Total revenue decreased $39.0 million, or 24.7% and $89.1 million,
or 29.1% for the three and six months ended June 30, 2002, respectively, when
compared to the same periods in 2001. Rental revenue decreased $23.9 million, or
17.8% and $41.9 million, or 17.2% for the three and six months ended June 30,
2002, respectively, when compared to the same periods in 2001. As discussed
above, during the fourth quarter of 2000, we implemented a plan to significantly
restructure our operations. The 2000 restructuring plan resulted in the disposal
of approximately 12.0% of our rental fleet and the repositioning of
approximately 27.0% of our remaining rental fleet amongst the markets we serve.
All markets were negatively impacted by the reduction of rental fleet and
certain markets were severely impacted by the shift in rental fleet mix from
heavy earth moving equipment to general rental equipment. The filing of the
Chapter 11 Cases on December 17, 2001, also caused significant disruptions.
These factors, coupled with the continuing weakness in the construction industry
and the heightened competition in the equipment rental industry have contributed
to the decrease in our rental revenue from the same periods in 2001. In addition
during 2001, we divested certain non-core businesses.

Sales of equipment, merchandise, service, parts and supplies decreased $15.1
million, or 64.5% and $47.3 million, or 75.2% for the three and six months ended
June 30, 2002, respectively, when compared to the same periods in 2001. This was primarily due
to the decrease in the sale of used equipment by $15.0 million, or 92.8% and
$45.2 million, or 94.2% for the three and six months ended
June 30, 2002, respectively, when
compared to the same periods in 2001. The decrease in used equipment sales was
due to the substantial completion of the fleet disposal component of the 2000
restructuring plan in the first quarter 2001.

18



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##### 



Gross Profit. Gross profit decreased $32.8 million, or 60.4% and $58.7
million, or 65.7% for the three and six months ended June 30,
2002, respectively, when compared
to the same periods in 2001. Gross profit as a percentage of total revenue was
18.1% and 14.1% for the three and six months ended June 30, 2002, respectively,
compared to 34.4% and 29.1% for the same periods in 2001.

Gross profit for the three and six months ended June 30, 2002 was negatively
impacted when compared to the same periods in 2001 by: (i) the decrease in
rental revenue discussed above, (ii) an increase in repairs and maintenance
expense over the same periods in 2001 as a result of an increase in the average
age of our fleet, (iii) an increase in costs associated with stores opened
during 2001 and (iv) an increase in rental equipment depreciation expense.

Operating
Expenses. Selling, general and administrative expenses increased
$0.8 and decreased $2.3 million for the three and six months ended June 30, 2002,
respectively, when compared to the same periods in 2001. Selling, general and
administrative expenses were positively impacted by cost reductions made
pursuant to our 2000 restructuring plan and the elimination of approximately
$1.4 million of charges related to the renegotiation of certain
contracts and professional fees incurred in the six months ended June 30, 2001.
Selling, general and administrative expenses as a percentage of total revenue
were 21.1% and 21.2% for the three and six months ended June 30, 2002,
respectively, compared to 15.4% and 15.8% for the same periods in 2001. The
primary reason for the increase in selling, general and administrative expenses
as a percentage of total revenue for the three and six months ended June 30,
2002 as compared to the same periods in 2001 was the decrease in total revenue
mentioned above.

Also included in operating expenses for the six months ended June 30, 2001 is
a $6.1 million charge related to the 2000 restructuring plan.

Non-rental equipment depreciation and amortization decreased $5.0 and $9.8
million for the three and six months ended June 30, 2002,
respectively, when compared to the
same periods in 2001. This decrease is primarily related to the write-off of our
entire balance of intangible assets related to acquired businesses as of
December 31, 2001 and the resulting decrease in amortization related to these
intangible assets.

Operating
Loss. Operating loss increased $28.9 and $40.5 million for the
three and six months ended June 30, 2002, respectively, when compared to the same periods in
2001. The increase in operating loss was primarily a result of the factors
discussed above.

Other Income and
Expense. Interest expense decreased $16.7 and $37.1 million
for the three and six months ended June 30, 2002, respectively, when compared to the same
periods in 2001. The decrease was due primarily to the fact that in accordance
with the American Institute of Certified Public Accountants (AICPA) Statement
of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization
under the Bankruptcy Code, interest expense is reported only to the extent that
it will be paid during the Chapter 11 Cases or that it is probable that it will
be an allowed claim. Interest expense reported during the three and six months
ended June 30, 2002 is primarily attributable to prepetition borrowings under
our senior credit facility while interest expense reported during the three and
six months ended June 30, 2001 is attributable to borrowings under our senior
credit facility, notes issued to finance the purchase of equipment, subordinated
convertible notes issued to sellers of businesses we acquired and our senior
subordinated notes. Contractual interest expense and amortization of deferred
financing costs not accrued or recorded on
certain prepetition debt totaled $7.9 and $16.2 million for the three and six months ended June 30, 2002,
respectively.

Reorganization
Items, net. We incurred $9.0 and $12.2 million of net expenses
resulting from the reorganization of our business as a result of the
filing of the Chapter 11 Cases for the three and six months ended June 30, 2002,
respectively. See Item 1. Financial Statements  Note 6  Reorganization
Items, Net.

Income Taxes. Our effective income tax rate was zero and 28% for the three
and six months ended June 30, 2002 and 2001, respectively. We did not record a
tax benefit for the three and six months ended June 30, 2002 due to the uncertainty
surrounding the income tax consequences of the Chapter 11 Cases.

Cumulative Effect
of Change in Accounting Principle. Effective January 1,
2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended. The
adoption of SFAS No. 133 resulted in an after tax charge of $1.4 million which
was reported as a cumulative effect of change in accounting principle for the
six months ended June 30, 2001. See Item 1.-Financial Statements  Note 10  Cumulative Effect of Change in Accounting
Principle.

Net Loss. Net
loss increased by $23.6 and $27.3 for the three and six months
ended June 31, 2002, respectively, when compared to the same periods in 2001.
The increase in net loss was primarily a result of the factors discussed above.

19



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Seasonality and Fluctuations in Operating
Results

Our revenue and income are dependent upon
activity in the construction industry in the markets we serve.
Construction activity is dependent upon weather and other
seasonal factors affecting construction in the geographic areas
where we have operations. Because of this variability in demand,
our quarterly revenue and income may fluctuate. Accordingly,
quarterly or other interim results should not be considered
indicative of results to be expected for any other quarter or
for a full year.

Operating results may fluctuate due to other
factors including, but not limited to:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | the impact of the Chapter 11 Cases;                                                                                                   
|
| |  | changes in general economic conditions including
    changes in national, regional or local construction or
    industrial activities;
|
| |  | the timing of opening new rental centers at
    Lowes locations;                                                                     
|
| |  | the timing of expenditures for new rental
    equipment and the disposition of used equipment;                                        
|
| |  | competitive pricing pressures; and                                                                                                    
|
| |  | changes in interest rates.                                                                                                            

We will incur significant expenses in opening new
locations, such as employee training, marketing and facility
set-up costs. Initially, new locations may generate lower
operating margins than established locations and may operate at
a loss for a period of time. Our new locations have, on average,
achieved profitability within approximately three to six months
of their opening. In addition, when we purchase new rental
equipment, the depreciation related to such equipment may
contribute to near-term margin decline, because such equipment
may not initially generate revenue at a rate that is sufficient
to match such increased depreciation expense. As such, the
opening of new rental locations and the purchase of new
equipment to expand our current rental equipment inventory may
reduce our operating margins during a start-up period.

Inflation

We do not believe that inflation has been a
significant factor to the cost of our operations.

Impact of Recently Issued Accounting
Standards

In June 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 141,
Business Combinations. This pronouncement addresses
financial accounting and reporting for business combinations and
supercedes Accounting Principles Board Opinion (APB)
No. 16, Business Combinations and SFAS
No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises. All business combinations within
the scope of SFAS No. 141 are to be accounted for under the
purchase method. SFAS No. 141 is effective for business
combinations occurring after June 30, 2001. We adopted the
provisions of SFAS No. 141 as of the effective date.
Adoption of the provisions of this pronouncement had no impact
on our consolidated financial statements.

In June 2001, the FASB issued SFAS
No. 142, Goodwill and Other Intangible Assets.
This pronouncement addresses financial accounting and reporting
for intangible assets acquired individually or with a group of
other assets. SFAS No. 142 also addresses financial
accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. With the adoption of
SFAS No. 142, goodwill and certain

20



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other intangible assets are no longer subject to
amortization. Instead, goodwill will be subject to at least an
annual assessment for impairment in value by applying a fair
value based test. Any applicable impairment loss is the amount,
if any, by which the implied fair value of goodwill is less than
the carrying or book value. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001. An
impairment loss for goodwill arising from the initial
application of SFAS No. 142 is to be reported as a
cumulative effect of a change in accounting principle. We
adopted the provisions of SFAS No. 142, as appropriate. The
adoption did not have any impact on our consolidated financial
statements because our entire goodwill balance was written off as of
December 31, 2001 as a result of our significant historical
and projected cash flow losses and the uncertainty surrounding
our ability to restructure our capital structure in a
satisfactory manner under the chapter 11 proceedings.


In August 2001, the FASB issued SFAS No.
144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This pronouncement addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets. This pronouncement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting
and reporting provisions of APB No. 30, Reporting the
Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business (as previously defined
in that opinion). SFAS No. 144 is effective for financial
statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The adoption of SFAS
No. 144 did not have a material impact on our consolidated
financial statements.

In May 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. This pronouncement requires gains and losses
from extinguishment of debt to be classified as an extraordinary
item only if the criteria in APB No. 30 have been met.
Further, lease modifications with economic effects similar to
sale-leaseback transactions must be accounted for in the same
manner as sale-leaseback transactions. While the technical
corrections to existing pronouncements are not substantive in
nature, in some instances they may change accounting practice.
We adopted the provisions of SFAS No. 145. This
adoption had no impact on our consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).
SFAS No. 146 requires companies to recognize costs associated
with exit activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated
after December 31, 2002. We are currently evaluating
the impact of this pronouncement.

Factors That May Affect Future
Results

Certain statements and information in this
Quarterly Report on Form 10-Q may include
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended, including in particular the statements about our plans,
strategies and prospects under the heading
Managements Discussion and Analysis of Financial
Condition and Results of Operations. These statements are
based on our current plans and expectations and involve risks
and uncertainties that could cause actual future activities and
results to be materially different from those set forth in these
forward-looking statements. Important factors that could cause
actual results to differ materially from our forward-looking
statements are set forth below and elsewhere in this Quarterly
Report on Form 10-Q. Such factors include, among others:



| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | There are significant uncertainties relating to
    our Chapter 11 Cases                                             
|
| |  | We face uncertainty with respect to treatment of
    our liabilities in connection with our Chapter 11 Cases         
|
| |  | Our status as a debtor-in-possession under
    chapter 11 of the Bankruptcy Code raises going
    concern questions
|
| |  | We have substantial debt and are highly leveraged                                                                    
|
| |  | We have experienced losses which may continue in
    future periods                                                  

21



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| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | We face uncertainty regarding the adequacy of our
    capital resources and have limited access to additional financing                     
|
| |  | We are subject to restrictions on the conduct of
    our business imposed by our financing facilities and the
    Chapter 11 Cases          
|
| |  | We believe our equity holders will not receive
    any value or distribution for their interests under a plan or
    plans of reorganization
|
| |  | Our rental fleet is subject to residual value
    risk upon disposition                                                                     
|
| |  | Our reorganization will require substantial
    effort by management                                                                        
|
| |  | Our business is dependent on changes in
    construction and industrial activities                                                          
|
| |  | We may not be able to execute our business
    strategy                                                                                     
|
| |  | We may not be able to recover the start-up costs
    of our strategic alliance with Lowes                                                  
|
| |  | The equipment rental industry is highly
    competitive and many of our competitors are financially stronger
than we are                    
|
| |  | Our revenue and operating results are likely to
    continue to fluctuate                                                                   
|
| |  | We must comply with various safety and
    environmental regulations that may increase our expenses and
    liabilities                     
|
| |  | Some of our liabilities may not be covered by
    insurance                                                                                 
|
| |  | Our operations are dependent on information
    systems                                                                                     

We make no commitment to disclose any revisions
to forward-looking statements, or any fact, events or
circumstances after the date hereof that may bear upon
forward-looking statements.

Item 3.  Quantitative and
Qualitative Disclosures About Market Risk

Our exposure to market risk is limited primarily
to the fluctuating interest rates associated with our variable
rate indebtedness. Our variable interest rates are subject to
interest rate changes in the United States and the Eurodollar
market. At June 30, 2002, we had $787.3 million of
variable rate indebtedness (all of which is subject to
compromise pursuant to our Chapter 11 Cases), representing
approximately 71.8% of our total debt outstanding, at an average
interest rate of 6.31%. We do not hold or issue derivative
financial instruments for trading or speculative purposes. As of
April 30, 2002, all of our interest rate swap agreements
had terminated or expired.

22



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##### 



PART II  OTHER
INFORMATION

Item 1.  Legal
Proceedings

On December 17, 2001, NationsRent and all of its
subsidiaries filed the Chapter 11 Cases in the United States
Bankruptcy Court for the District of Delaware in Wilmington,
Delaware. The cases were consolidated for procedural purposes and
designated as Case No. 01-11628 (PJW). On May 20, 2002, the
Bankruptcy Court approved the Debtors motion to establish a bar
date for filing proofs of claim. As a result, the Debtors selected
August 5, 2002 as the bar date (the Bar Date). In
connection with the Chapter 11 Cases, proofs of claim have been
and will be filed against the Debtors with the Bankruptcy Court or
with the Debtors claims and noticing agent, Logan &
Company, Inc. The Debtors will then be required to resolve proofs of
claim that differ in nature, classification or amount from the
Debtors books and records through negotiations with the applicable
claimants and the filing and prosecution of objections to such
claims. For a more detailed description of the Chapter 11 Cases,
see Part I  Item 2. Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Proceedings Under Chapter 11 of the
Bankruptcy Code.

Item 3.  Defaults Upon
Senior Securities

(a) For a detailed discussion of defaults on
senior securities, see Part I  Item 2.
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources.

23



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##### 



Item 6.  Exhibits and
Reports on Form 8-K

(a) Exhibits

|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ---- |  |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 3.1  |  |  |            |  | Amended and Restated Certificate of Incorporation
    of the Company.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.2  |  |  |            |  | Amended and Restated By-Laws of the Company.(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 3.3  |  |  |            |  | Certificate of Designation for Series A
    Convertible Preferred Stock.(6)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.4  |  |  |            |  | Certificate of Amendment to Certificate of
    Designation for Series A Convertible Preferred Stock.(5)                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3.5  |  |  |            |  | Certificate of Designation for Series B
    Convertible Preferred Stock.(7)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.1  |  |  |            |  | Unregistered 10 3/8% Global Senior
    Subordinated Notes due 2008.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.2  |  |  |            |  | Registered 10 3/8% Senior Subordinated Notes
    due 2008.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 4.3  |  |  |            |  | Senior Subordinated Guarantee dated
    December 11, 1998, of the Guarantors as defined therein.(4)                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 4.4  |  |  |            |  | Indenture, dated December 11, 1998, by and
    among Company, the Guarantors and The Bank of New York.(4)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4.5  |  |  |            |  | Registration Rights Agreement, dated
    December 11, 1998, by and among the Company, the Guarantors
    and the Initial Purchasers as defined therein.(4)                                                                                                                                                                                                                                                                                                                                                        
|        | 4.6  |  |  |            |  | Fifth Amended and Restated Revolving Credit and
    Term Loan Agreement, dated as of August 2, 2000, by and
    among the Company, certain of its subsidiaries, Fleet National
    Bank (f/k/a BankBoston, N.A.) and the other lending institutions
    party thereto, Fleet National Bank, as administrative agent,
    Bankers Trust Company, as syndication agent, and Scotiabanc
    Inc., as documentation agent.(7)                                                                                         
|        | 4.7  |  |  |            |  | Second Amended Restated Security Agreement, dated
    as of August 2, 2000, between the Company, certain of its
    subsidiaries, and Fleet National Bank (f/k/a BankBoston, N.A.),
    as administrative agent.(7)                                                                                                                                                                                                                                                                                               
|        | 4.8  |  |  |            |  | First Amendment to the Fifth Amended and Restated
    Revolving Credit and Term Loan Agreement and to the Second
    Amended and Restated Security Agreement, dated as of
    March 14, 2001, by and among the Company, certain of its
    subsidiaries, Fleet National Bank (f/k/a BankBoston, N.A.) and
    the other lending institutions party thereto, Fleet National
    Bank, as administrative agent, Bankers Trust Company, as
    syndication agent, and Scotiabanc Inc., as documentation
    agent.(8)
|        | 4.9  |  |  |            |  | Second Amendment to the Fifth Amended and
    Restated Revolving Credit Agreement and Term Loan Agreement,
    dated as of August 10, 2001, by and among the Company,
    certain of its subsidiaries, the lending institutions party
    thereto, Fleet National Bank (f/k/a BankBoston, N.A.), as
    administrative agent, Bankers Trust Company, as syndication
    agent, and The Bank of Nova Scotia, as documentation agent.(9)                                                                            
|        | 4.10 |  |  |            |  | Third Amendment to the Fifth Amended and Restated
    Revolving Credit and Term Loan Agreement, dated as of
    December 14, 2001, by and among the Company, certain of its
    subsidiaries, the lending institutions party thereto, Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative agent,
    Bankers Trust Company, as syndication agent, and The Bank of
    Nova Scotia, as documentation agent.(11)                                                                                    
|        | 4.11 |  |  |            |  | Debtor In Possession Revolving Credit Agreement,
    dated as of December 18, 2001, among NationsRent, Inc. and its
    subsidiaries party thereto, as debtors and debtors in possession
    and as joint and several Borrowers, and the lending institutions
    referred to therein as Banks and Fleet National Bank, as
    administrative agent, syndication agent, swing lender, and
    issuing bank, and Fleet Securities, Inc. as lead arranger and
    book manager.(11)                                 
|        | 4.12 |  |  |            |  | Security Agreement, dated as of December 18,
    2001, among the Company, certain of its subsidiaries, and Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative
    agent.(11)                                                                                                                                                                                                                                                                                                                     
|        | 4.13 |  |  |            |  | First Amendment to Debtor In Possession Revolving
    Credit Agreement and to Security Agreement, dated as of
    January 31, 2002, by and among the Company, certain of its
    subsidiaries, the financial institutions party thereto, Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative agent,
    and First Union National Bank, as syndication agent.(11)                                                                                                                                  

24



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##### 



|        |       |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |            
|Number  |       |  |  | Description
|        |       |  |  |            
|        | 4.14  |  |  |            |  | Second Amendment to Debtor In Possession
    Revolving Credit Agreement, dated as of June 28, 2002, by
    and among the Company, certain of its subsidiaries, the
    financial institutions party thereto, Fleet National Bank (f/k/a
    BankBoston, N.A.), as administrative agent, and First Union
    National Bank, as syndication agent.(12)
|        | 10.1  |  |  |            |  | Stock Purchase Agreement, dated August 15,
    1997, by and among the Company, Sams and the shareholders
    of Sams, together with Amendment Nos. 1-6.(1)                                                                                                                                                                                        
|        | 10.2  |  |  |            |  | Form of Unsecured Subordinated Promissory
    Note  Sams.(1)                                                                                                                                                                                                                                                                                      
|        | 10.3  |  |  |            |  | Form of Unsecured Convertible Promissory
    Note  Sams.(1)                                                                                                                                                                                                                                                                                       
|        | 10.4  |  |  |            |  | Form of Unsecured Contingent Convertible
    Subordinated Promissory Note  Sams.(1)                                                                                                                                                                                                                                                               
|        | 10.5  |  |  |            |  | Agreement, dated September 22, 1997, between
    the Company and Gary L. Gabriel.(1)                                                                                                                                                                                                                                                                
|        | 10.6  |  |  |            |  | Asset Purchase Agreement, dated December 8,
    1997, by and among NationsRent of Ohio, Inc., R&R Rental,
    Inc. (R&R) and the sole shareholder of R&R,
    together with an Amendment dated December 10, 1997.(1)                                                                                                                              
|        | 10.7  |  |  |            |  | Form of Unsecured Subordinated Promissory
    Note  R&R.(1)                                                                                                                                                                                                                                                                                        
|        | 10.8  |  |  |            |  | Asset Purchase Agreement, dated December 8,
    1997, as amended, among NationsRent of Indiana, Inc. and C&E
    Rental and Service, Inc. (C&E), together with an
    Amendment dated December 23, 1997.(1)                                                                                                                                       
|        | 10.9  |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note C&E.(1)                                                                                                                                                                                                                                                                              
|        | 10.10 |  |  |            |  | Stock Purchase Agreement, dated December 20,
    1997, as amended, among NationsRent of West Virginia, Inc.,
    Titan, together with an Amendment dated December 31,
    1997.(1)                                                                                                                                                                  
|        | 10.11 |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note  Titan.(1)                                                                                                                                                                                                                                                                          
|        | 10.12 |  |  |            |  | Stock Purchase Agreement, dated March 24,
    1998, among the Company, Bode-Finn Limited Partnership
    (Bode-Finn) and the shareholders of Bode-Finn,
    together with Amendment No. 1, dated April 6, 1998,
    and Amendment No. 2, dated April 17, 1998.(1)                                                                                 
|        | 10.13 |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note  Bode-Finn.(1)                                                                                                                                                                                                                                                                      
|        | 10.14 |  |  |            |  | Form of Warrant  Bode-Finn.(1)                                                                                                                                                                                                                                                                                                                     
|        | 10.15 |  |  |            |  | Registration Rights Agreement, dated May 5,
    1998, among the Company, Bode-Finn, and Raymond E. Mason
    Foundation.(1)                                                                                                                                                                                                                         
|        | 10.16 |  |  |            |  | Asset Purchase Agreement, dated March 25,
    1998, among NationsRent of Indiana, Inc., RFL, Enterprises, Inc.
    and the sole shareholder of RFL Enterprises, Inc.
    (RFL).(1)                                                                                                                                                                
|        | 10.17 |  |  |            |  | Asset Purchase Agreement, dated April 21,
    1998, among NationsRent of Florida, Inc. and Naples Rent-All and
    Sales Company, Inc. (Naples).(1)                                                                                                                                                                                               
|        | 10.18 |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note  Naples.(1)                                                                                                                                                                                                                                                                         
|        | 10.19 |  |  |            |  | Stock Purchase Agreement, dated May 7, 1998,
    among the Company, Raymond Equipment Co. (Raymond
    Equipment) and the shareholders of Raymond Equipment.(1)                                                                                                                                                                                   
|        | 10.20 |  |  |            |  | Form of Unsecured Subordinated Promissory
    Notes  Raymond Equipment.(1)                                                                                                                                                                                                                                                                         
|        | 10.21 |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note  Raymond Equipment.(1)                                                                                                                                                                                                                                                              
|        | 10.22 |  |  |            |  | Asset Purchase Agreement, dated May 14,
    1998, among the Company and General Rental, Inc.(1)                                                                                                                                                                                                                                                     
|        | 10.23 |  |  |            |  | Stock Purchase Agreement, dated May 30,
    1998, among the Company, J. Kelly Co., Inc.
    (J. Kelly) and the shareholders of
    J. Kelly.(1)                                                                                                                                                                                                   
|        | 10.24 |  |  |            |  | Form of Unsecured convertible Subordinated
    Promissory Note  J. Kelly.(1)                                                                                                                                                                                                                                                                       
|        | 10.25 |  |  |            |  | Form of Registration Rights Agreement among the
    Company and the shareholders of J. Kelly.(1)                                                                                                                                                                                                                                                    
|        | 10.26 |  |  |            |  | Asset Purchase Agreement, dated June 7,
    1998, among the Company, Associated Rental Equipment Management
    Company, Inc. (Associated) and the sole shareholder
    of Associated.(1)                                                                                                                                                         
|        | 10.27 |  |  |            |  | Form of Unsecured Convertible Subordinated
    Promissory Note  Associated.(1)                                                                                                                                                                                                                                                                     
|        | 10.28 |  |  |            |  | Form of Registration Rights Agreement 
    Associated.(1)                                                                                                                                                                                                                                                                                          
|        | 10.29 |  |  |            |  | Form of Subscription Agreement, dated
    May 1998, between the Company and certain subscribers.(1)                                                                                                                                                                                                                                                 
|        | 10.30 |  |  |            |  | NationsRent Third Amended and Restated 1998 Stock
    Option Plan.(9)                                                                                                                                                                                                                                                                               

25



---



##### 



|        |       |  |  |             |  |                                                                                                                                                                                                                                                                                                                          
|------- | ----- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |            
|Number  |       |  |  | Description
|        |       |  |  |            
|        | 10.31 |  |  |            |  | Form of Stock Option Agreement.(1)                                                                                                                                                                                                                                                                                       
|        | 10.32 |  |  |            |  | Amended and Restated Purchase Agreement, dated as
    of September 9, 1998, by and among NationsRent, Inc., Ray
    L. ONeal, Inc., Arenco, L.L.C., Don R. ONeal,
    Elizabeth M. ONeal and the ONeal Revocable
    Trust dated December 29, 1987.(3)                                                               
|        | 10.33 |  |  |            |  | Unsecured Convertible Subordinated Promissory
    Note, dated as of October 23, 1998, from the Company to
    Ray L. ONeal, Inc.(3)                                                                                                                                                                                     
|        | 10.34 |  |  |            |  | Preferred Stock Purchase Agreement, dated
    July 20, 1999, by and among the Company, NR Holdings
    Limited and NR Investments Limited.(6)                                                                                                                                                                            
|        | 10.35 |  |  |            |  | Registration Rights Agreement, dated as of
    July 20, 1999, by and between the Company, NR Holdings
    Limited, NR Investments Limited, James L. Kirk and H. Wayne
    Huizenga.(6)                                                                                                                                   
|        | 10.36 |  |  |            |  | Preferred Stock Purchase Agreement, dated
    August 2, 2000, by and among the Company, NR2 Holdings
    Limited, DB Capital Investors, L.P., J.P. Morgan Capital
    Corporation and Sixty Wall Street Fund, L.P.(7)                                                                                                    
|        | 10.37 |  |  |            |  | Registration Rights Agreement, dated as of
    August 2, 2000, by and among the Company, NR2 Holdings
    Limited, DB Capital Investors, L.P., J.P. Morgan Capital
    Corporation, Sixty Wall Street Fund, L.P., James L. Kirk and H.
    Wayne Huizenga and holders of the Series A Convertible
    Preferred Stock.(7)
|        | 10.38 |  |  |            |  | Form of Change in Control Severance Agreement.(8)                                                                                                                                                                                                                                                                        
|        | 10.39 |  |  |            |  | Form of Key Employee Severance Benefit Plan.(11)                                                                                                                                                                                                                                                                         
|        | 10.40 |  |  |            |  | Form of Key Employee Retention Bonus Plan.(11)                                                                                                                                                                                                                                                                           
|        | 10.41 |  |  |            |  | Executive Transition Agreement dated as of
    December 14, 2001 by and between the Company and James L.
    Kirk.(11)                                                                                                                                                                                                   
|        | 99    |  |  |            |  | Letter to Securities and Exchange Commission,
    dated May 24, 2002, regarding Temporary Note 3T.(11)                                                                                                                                                                                                                   
|        | 99.1  |  |  |            |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.(13)                                                                                                                                                                                              






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the Companys
    Registration Statement on Form S-1, as amended, Commission
    File No. 333-56233.
|(2) | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ended
    June 30, 1998.             
|(3) | Incorporated by reference to the Companys
    Current Report on Form 8-K filed on November 9, 1998.                             
|(4) | Incorporated by reference to the Companys
    Registration Statement on Form S-4, Commission File
    No. 333-69691.            
|(5) | Incorporated by reference to the Companys
    Registration Statement on Form S-3, Commission File
    No. 333-88603.            
|(6) | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ended
    June 30, 1999.             
|(7) | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ending
    June 30, 2000.            
|(8) | Incorporated by reference to the Companys
    Annual Report on Form 10-K for the year ended
    December 31, 2000.              
|(9) | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ending
    June 30, 2001.            

|     |                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Companys
    Current Report on Form 8-K filed on August 31, 2001.                
|(11) | Incorporated by reference to the Companys
    Annual Report on Form 10-K for the year ended
    December 31, 2001.
|(12) | Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the period ending
March 31, 2002.     
|(13) | Filed herewith.                                                                                                    

(b) Reports on Form 8-K

The Company filed Current Reports on
Form 8-K on April 24 and June 3, 2002 which
attached copies of the Companys Monthly Operating Reports
required to be filed with the Bankruptcy Court. The Company also
filed a Current Report on Form 8K on June 21, 2002
relating to the Company's filing of its proposed Joint Plan of
Reorganization and related disclosure statement with the Bankruptcy
Court.

26



---



##### 



SIGNATURES

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



| |                  
| | -----------------
| | NATIONSRENT, INC.

|                      |  |                                                                                                                              
|--------------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|Date: August 14, 2002 |  | By: /s/ PHILIP V. PETROCELLIPhilip V. Petrocelli
    President and Chief Executive Officer
    (Principal Executive Officer) 
|                     
|Date: August 14, 2002 |  | By: /s/ EZRA SHASHOUAEzra Shashoua
    Executive Vice President and Chief Financial Officer
    (Principal Financial Officer)
|                     
|Date: August 14, 2002 |  | By: /s/ KRIS E. HANSELKris E. Hansel
    Vice President and Controller
    (Principal Accounting Officer)                    

27