UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM 10-K


þ
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
Fiscal Year Ended DECEMBER 31, 2009





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT F
      1934




For the
transition period from __________ to ___________




Commission
File Number:  000-52459




Essex
Rental Corp.


(Exact
Name of Registrant as specified in its Charter)





Delaware
              
              20-5145048(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)1110
      Lake Cook Road, Suite 220 Buffalo Grove, Illinois
              
              60089(Address
      of Principal Executive Offices)
              
              (Zip
      code)





(847) 215-6500


(Registrant’s
telephone number, including area code)




Securities
registered pursuant to Section 12(b) of the Act:




Common
      Shares, $.0001 par value per share
              
              The
      NASDAQ Capital Market(Title
      of each class)
              
              (Name
      of exchange on which registered)Warrants
      to purchase Common Shares
              
              The
      NASDAQ Capital Market(Title
      of each class)
              
              (Name
      of exchange on which registered)Units
      consisting of one Common Share and one Warrant
              
              The
      NASDAQ Capital Market(Title
      of each class)
              
              (Name
      of exchange on which
registered)




Securities
registered pursuant to Section 12(g) of the Act: None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   ̈  Yes    þ  No




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   ̈  Yes    þ  No




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.  þ  Yes     ̈  No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   ̈Yes     ̈  No




Indicate
by check mark if disclosure of delinquent filers pursuant to item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act):  Large
Accelerated Filer   ̈    Accelerated
Filer  þ    Non-Accelerated
Filer   ̈   Smaller
Reporting Company   ̈




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




The
aggregate market value of the voting and non-voting common equity of the
Registrant held by non-affiliates as of June 30, 2009 was
$64,338,957.




The
number of shares of outstanding common stock of the Registrant as of March 15,
2010 was 13,491,652.







DOCUMENTS
INCORPORATED BY REFERENCE




Portions
of the registrant’s Definitive Proxy Statement with respect to the 2010 Annual
Meeting of Stockholders, which is anticipated to be filed with the Securities
and Exchange Commission within 120 days after the end of the registrant’s fiscal
year covered by this Annual Report on Form 10-K, are incorporated by reference
into Part III of this Annual Report on Form 10-K.








FORM
10-K REPORT INDEX




10-K Part
                  and Item No.
              
              
              
              Page No.PART IItem 1
              
              Business
              
              1Item 1A
              
              Risk
      Factors
              
              12Item 1B
              
              Unresolved
      Staff Comments
              
              19Item
      2
              
              Properties
              
              19Item
      3
              
              Legal
      Proceedings
              
              20Item
      4
              
              Submission
      of Matters to a Vote of Security Holders
              
              20PART IIItem
      5
              
              Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              
              21Item
      6
              
              Selected
      Financial Data
              
              24Item
      7
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              25Item 7A
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              43Item
      8
              
              Financial
      Statements and Supplementary Data
              
              44Item
      9
              
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              
              44Item 9A
              
              Controls
      and Procedures
              
              45Item 9B
              
              Other
      Information
              
              45PART IIIItem 10
              
              Directors,
      Executive Officers and Corporate Governance of the
    Registrant
              
              46Item 11
              
              Executive
      Compensation
              
              46Item 12
              
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              
              46Item 13
              
              Certain
      Relationships and Related Transactions
              
              46Item 14
              
              Principal
      Accountant Fees and Services
              
              46PART IVItem 15
              
              Exhibits
      and Financial Statement Schedules
              
              47





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





Some of
the statements in this Annual Report on Form 10-K are “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.  These statements include statements regarding the intent and
belief or current expectations of Essex and its management team and may be
identified by the use of words like "anticipate", "believe", "estimate",
"expect", "intend", "may", "plan", "will", "should", "seek", the negative of
these terms or other comparable terminology.  Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking
statements.  Important factors that could cause actual results to
differ materially from Essex’s expectations include, without limitation, the
continued ability of Essex to successfully execute its business plan, the
possibility of a change in demand for the products and services that Essex
provides (through its subsidiary, Essex Crane), intense competition which may
require us to lower prices or offer more favorable terms of sale, our reliance
on third party suppliers, our indebtedness which could limit our operational and
financial flexibility, global economic factors including interest rates, general
economic conditions, geopolitical events and regulatory changes, our dependence
on our management team and key personnel, as well as other relevant
risks.    The factors listed here are not
exhaustive.  Many of these uncertainties and risks are difficult to
predict and beyond management’s control.  Forward-looking statements
are not guarantees of future performance, results or
events.    Certain of such risks and uncertainties are
discussed below under Item 1A – Risk Factors.  Essex assumes no
obligation to update or supplement forward-looking information in this Annual
Report whether to reflect changed assumptions, the occurrence of unanticipated
events or changes in future operating results or financial conditions, or
otherwise.




PART
I





Essex
Rental Corp. (formerly Hyde Park Acquisition Corp.) was incorporated in August
2006 as a blank check company whose objective was to effect a merger, capital
stock exchange, asset acquisition or other similar business combination with an
operating business.





On
October 31, 2008, we acquired Essex Crane Rental Corp., which we refer to as
Essex Crane, through the acquisition of substantially all of the ownership
interests of Essex Crane’s parent company, Essex Holdings, LLC, which we refer
to as Holdings.  Essex Crane is a leading provider of lattice-boom
crawler crane and attachment rental services and possesses one of the largest
fleets of such equipment in the United States (US).  We conduct
substantially all our operations through Essex Crane.  In 2009, the
Company formed a new subsidiary, Essex Finance Corp., to facilitate the
acquisition of rental equipment.





All
activity from August 21, 2006 (inception) through March 13, 2007 relates to
Essex Rental Corp’s (formerly Hyde Park Acquisition Corp.) formation and initial
public offering.  From March 13, 2007 through October 31, 2008, the
Company’s activities were limited to identifying prospective target businesses
to acquire and completing a business combination.  On October 31,
2008, the Company consummated the acquisition of Holdings and its wholly-owned
subsidiary, Essex Crane, and, as a result, is no longer in the development
stage.  For more information regarding the acquisition of Holdings and
Essex Crane, see note 1 to our consolidated financial statements.





As used
in this Annual Report, references to “the Company” or “Essex” or to “we,”
“us” or “our” refer to Essex Rental Corp., together with its consolidated
subsidiaries, Essex Holdings, LLC, Essex Crane Rental Corp. and Essex Finance
Corp., unless the context otherwise requires.





Item 1.
            Business




Background





The
Company was incorporated in Delaware on August 21, 2006 as a blank check
company whose objective was to effect a merger, capital stock exchange,
asset acquisition or other similar business combination with an operating
business.  On March 13, 2007, we closed our initial public offering of
11,250,000 units.  Each unit that was offered had a price of $8.00 and
consisted of one share of our common stock and one warrant.  Each
warrant entitled the holders to purchase one share of our common stock at a
price of $5.00.  On March 15, 2007, we consummated the sale of an
additional 1,687,500 units which were subject to an over-allotment option
granted to EarlyBirdCapital, Inc., the representatives of the underwriters for
our initial public offering.  We also sold to EarlyBirdCapital, Inc.,
for $100, as additional compensation an option to purchase up to a total of
600,000 units at $8.80 per unit.  Laurence S. Levy, chairman of our
board of directors, Edward Levy, a member of our board of directors, and Isaac
Kier, one of our stockholders, owned a total of 2,812,500 shares of our common
stock prior to our initial public offering.  These initial
stockholders also purchased a total of 1,500,000 warrants from us at $1.00 per
warrant in a private placement completed concurrently with our initial public
offering.  The total proceeds from our initial public offering
(including from our private placement of warrants and exercise of the
underwriters’ over-allotment option) were $105,000,000.  Upon the
closing of the offering, including the over-allotment option and the private
placement of warrants, and after deducting the underwriting discounts and
commissions and offering expenses, the total net proceeds from the offering were
approximately $99,923,651.


1





Business Combination





On
October 31, 2008, we acquired Essex Crane through the acquisition of
substantially all of the ownership of Holdings.  The purchase
agreement provided for a gross purchase price of $210.0 million, less the amount
of Essex Crane’s indebtedness outstanding as of the closing (which was
refinanced as of the closing date with a credit facility made available to Essex
Crane as of the closing date), the $5.0 million stated value of the membership
interests in Holdings not acquired in the acquisition and the amount of certain
other liabilities of Essex Crane as of the closing of the
acquisition.  The purchase price was subject to adjustment at and
after the closing based on Essex Crane’s working capital as of the closing date
and crane purchases and sales by Essex Crane prior to the closing
date.  The adjusted purchase price of the Holdings acquisition was
$215.5 million, [including the amount of Essex’s indebtedness outstanding under
Essex Crane’s credit facility immediately prior to the closing]. For
additional information regarding the gross purchase price paid in the
acquisition of Essex Crane, including related transaction expenses, see note 1
to our consolidated financial statements.





The
acquisition, excluding transaction costs was financed with approximately $80.6
million of cash from the proceeds of the Company’s initial public offering, the
$5.0 million stated value of the membership interests in Holdings not acquired
in the acquisition and approximately $129.9 million of assumption of Essex
Crane’s indebtedness outstanding as of the closing (which was refinanced as of
the closing date with a credit facility made available to Essex Crane as of the
closing date).  In addition, as was required under the Company’s
certificate of incorporation, shortly after completion of the acquisition
approximately $18.7 million of the proceeds of the Company’s initial public
offering was paid to shareholders who voted against the acquisition of Essex
Crane and exercised their conversion rights.





The
ownership interests in Holdings that were not acquired by the Company in the
acquisition were retained by the management members of Holdings, including
Ronald Schad, our Chief Executive Officer, and Martin Kroll, our Chief Financial
Officer, and are referred to throughout this annual report on Form 10-K as the
“Retained Interests”.




The
Retained Interests are exchangeable at the option of the holder for an aggregate
of 632,911 shares of our common stock.  The Retained Interests do not
carry any voting rights and are entitled to distributions from Holdings only if
the Company pays a dividend to its stockholders, in which case a distribution on
account of the Retained Interests will be made on an “as exchanged”
basis.  Holders of the Retained Interests have agreed, subject to
certain exceptions, not to sell their Retained Interests in Holdings or their
shares of our common stock issuable upon exchange of such Retained Interests,
before October 31, 2010.  We have granted certain registration rights
to the holders of the Retained Interests with respect to the shares of our
common stock issuable upon exchange of the Retained Interests.  For
additional information on our acquisition of Essex Crane and related
transactions, see Note 1 to the Company’s consolidated financial
statements.





Business





Overview




Essex
Crane is a leading provider of lattice-boom crawler crane and attachment rental
services and possesses one of the largest fleets of such equipment in the United
States.  Over approximately 49 years of operation, since its founding
in 1960, Essex Crane has steadily grown from a small, family-owned crane rental
company to a private equity owned professionally managed company that today is a
public company and one of the leading players in its industry offering lattice
boom crawler rental services to a variety of customers, industries and regions
mainly throughout the United States and Canada.


2


Essex
Crane’s fleet size currently stands at more than 350 lattice-boom crawler cranes
and various types of attachments which are made available to clients depending
upon the lifting requirements of its customers such as weight, pick and carry
aspects, reach and angle of reach.  The fleet’s combination of crawler
cranes and attachments is diverse by lift capacity and capability, allowing
Essex Crane to meet the crawler crane requirements of its engineering and
construction firm customer base.  Essex Crane rents its crawler cranes
and attachments “bare,” meaning without an Essex Crane-supplied operator, and
arranges the transportation of cranes and attachments for its customers in
return for a charge for these services.  Once the crane is erected on
the customer’s site, inspected and determined to be operating properly by the
customer’s crane operator and management, the majority of the maintenance and
repair costs are the responsibility of the customer while the equipment is on
rent.  This business model allows Essex Crane to minimize its
headcount and operating costs including reduced liability related to operator
error and provides the customer with a more flexible situation where they
control the crane and the operator’s work schedule.




Through a
network of four main service centers, three smaller service locations and
several remote storage yards, complemented by a geographically dispersed highly
skilled staff of sales and maintenance service professionals, Essex Crane serves
a variety of customers engaged in construction and maintenance projects related
to power plants, refineries, bridge and road, alternative energy, water
treatment and purification, hospitals, shipbuilding and other infrastructure and
commercial construction.  Essex Crane has significantly diversified
the end-markets it serves in recent years to avoid over-exposure to any one
sector of the construction segment.  Essex Crane uses its significant
investment in modern enterprise resource planning (“ERP”) systems and business
process methods to help its management assimilate information more quickly than
others in our industry, and to provide management with real time visibility of
the factors that must be effectively managed to achieve Essex’s
goals.  Essex Crane’s end-markets are characterized by medium to large
construction projects many times with longer lead times.  Management
believes that these longer lead times, coupled with most contracts having rental
periods of between 4 and 18 months, provide them more visibility over future
project pipelines and revenues.





Products
and Services




Our
principal products and services are described below.




Equipment
Rental    We offer for rent approximately 30 models of
crawler crane and attachment rental equipment on a monthly basis.  The
attachments are rented separately and increase either the lifting capacity or
the reach capabilities of the base crawler crane.  Crawler cranes are
long-lived assets with actual lives of up to 50 years or more when properly
maintained.  The weighted-average age of our fleet was approximately
14 years at December 31, 2009 and 17 years at December 31,
2008.




Used Equipment
Sales   We routinely sell used rental equipment and invest
in new equipment in order to manage the mix, composition and size of our
fleet.  We also sell used equipment in response to customer demand for
this equipment.  The rate at which we replace used equipment with new
equipment depends on a number of factors, including changing general economic
conditions, growth opportunities and the need to adjust fleet mix to meet
customer requirements and demand.





Transportation
Service and Other Revenue   We also offer transportation
and repair and maintenance services and sell parts mainly for equipment that is
owned by Essex Crane.  Our target customers for these ancillary
services are our current rental customers as well as those who purchase used
equipment from us.





Essex
Crane generates revenue from a number of sources as follows:





·
            Equipment
      rentals – Essex Crane rents its fleet of over 350 cranes and attachments
      to a variety of engineering and construction customers under contracts,
      most of which have rental periods of between 4 and 18
      months.  The contracts typically provide for an agreed rental
      rate and a specified rental period.   Essex Crane’s revenue
      from crane and attachment rentals is primarily driven by rental rates
      (which are typically higher for the more expensive cranes with heavier
      lifting capacities than less expensive cranes with lower lifting
      capacities) charged to its customers and its fleet utilization
      rate.  Rental revenue is recognized as earned in accordance with
      the terms of the relevant rental agreement on a pro rata daily
      basis;





·
            Used
      rental equipment sales revenue – In Essex Crane’s ordinary course of
      business, it sells used cranes and attachments over time to optimize the
      combination of crane models and lifting capacities available in its fleet
      as it perceives market demands and opportunities.  On average,
      Essex Crane has historically achieved sale prices for equipment in excess
      of the appraised value.  This is due to the long useful life of
      Essex Crane’s crane and attachment fleet, the conditions prevailing in the
      secondary market and the high content of engineered high-strength steel
      included in these fleet assets.  Used rental equipment sales are
      recognized upon acceptance by the customer or the execution of a
      definitive sales agreement stipulating the date of transferring the risk
      of ownership.  The gain on sale of rental equipment realized by
      the Predecessor will not be indicative of near term future results in
      light of Essex Crane’s recent acquisition since the rental equipment has
      been adjusted to fair value as of the closing date, thereby reducing
      near-term future gain on sale;


3





·
            Transportation
      services revenue – Transportation services revenue is derived from Essex
      Crane’s management of the logistics process by which Essex Crane’s rental
      equipment is transported to and from customers’ construction sites,
      including the contracting of third party trucking for such
      transportation.  Transportation revenue is earned under
      equipment rental agreements on a gross basis representing both the
      third-party provider’s fee for transportation and Essex Crane’s fee for
      managing these transportation services and they are matched with the
      associated costs, and related costs for amounts paid to third party
      providers.  The key drivers of transportation revenue are crane
      and attachment utilization rates and average contract
      lengths.  Shorter average contract durations and high
      utilization rates generally result in higher requirements for
      transportation of equipment and resulting revenue.  The distance
      that equipment has to move between different jobsites and the type of
      equipment being moved (number of truckloads) are also major drivers of
      transportation revenue and associated costs.  Transportation
      revenue is recognized upon completion of the transportation of equipment;
      and





·
            Equipment
      repair and maintenance services revenue – While crawler cranes or
      attachments are on rent, much of the repair and maintenance work is paid
      for by the customer.  Essex Crane performs a portion of the
      repair and maintenance work and recognizes revenue for such services to
      the extent they are the customer’s responsibility.  This
      category of revenue also includes Essex Crane providing certain services
      while erecting the equipment during initial assembly or disassembly of the
      equipment at the end of the rental.  Key drivers for repair and
      maintenance revenue are the utilization rates for cranes and attachments
      as well as jobsite operating conditions.  Repair and maintenance
      revenue is recognized as such services are
  performed.





In
summary, 66.4% of total revenue for the year ended December 31, 2009 was
generated through equipment rentals, 12.4% through used rental equipment sales,
9.4% through transportation services and 11.8% through repair and
maintenance services.




US
Crawler Crane Rental Industry




The US
crawler crane rental industry is a niche component of the broader equipment
rental sector. According to the Rental Equipment Register and the American
Rental Association, the US equipment rental sector has grown from a minor
industry in 1982 to an industry generating over $30.0 billion in annual revenues
in 2008. Driving this growth has been an increase in crane and attachment
penetration rates with engineering and construction firms, the result of a
fundamental shift in contractor preferences to rent versus purchasing equipment
based on the following factors:




·
              focus on core construction
      services businesses rather than equipment
  ownership;
 ·
              access to broader pool of
      equipment through rental;
and
 ·
              an efficient use of capital as
      rental equipment has minimal equipment downtime compared to owned
      equipment, which reduces servicing and storage costs between
      projects.




Within
the equipment rental industry, crawler cranes have characteristics that
differentiate them from other rental equipment and other cranes.  The
following table summarizes what our management believes are key differentiators
between crawler cranes and the equipment portfolios of other equipment rental
companies:





Equipment
Type





Crawler cranes
              
              Other cranes
                (all terrain, rough terrain,
                tower and truck)
              
              Small equipment
                (e.g., aerial work platforms,
                backhoes, etc.)Economic
      life
              
              50
      plus years with proper maintenance due to higher strength steel percentage
      content
              
              15-30
      years due to higher relative machinery percentage content
              
              Often
      10 years or lessTypical
      Projects
              
              Large
      infrastructure components requiring heavy lifts: bridges, power plants,
      municipal infrastructure
              
              Range
      from residential condominium to large infrastructure
              
              Range
      from single house builds to large construction projectsEnd
      markets
              
              Primarily
      large infrastructure and industrial
              
              Residential
      construction to large infrastructure
              
              Residential
      construction to large infrastructureResidual
      value
              
              High
              
              Medium
              
              Medium
      to low


4





Within
the US crawler crane rental sector operators either provide cranes “bare” or
“manned.” Bare rental involves the provision of cranes without an operator, the
crane being operated by an employee of the customer.  Bare rental is
suited to construction firms with adequately trained staff to operate the heavy
machinery.  Manned rental involves the provision of an operator with
the crawler crane and is often suited to end customers unable or unwilling to
provide an operator of their own.  Manned rental involves the
maintenance of adequate staffing levels to ensure equipment can be rented as
required.  Essex Crane operates a bare rental model, because we
believe bare rental offers an opportunity for higher returns on invested capital
primarily due to decreased liability exposure and a more efficient operating
platform and business model.  Bare rental allows to us operate the
business with significantly less human resources and costs associated with those
resources than if we were to operate a manned operation.  The primary
disadvantage of renting cranes on a bare basis is that we forego a portion of
the rental market associated with construction firms that prefer to rent
equipment manned.




Operations




Essex
Crane is a national provider of crawler crane and attachment rentals with more
than 350 crawler cranes and attachments in its fleet.  Revenue is
driven through a range of activities including:





·      crawler
crane and attachment rental;


·      repair
maintenance services;


·      equipment
transportation services; and


·      used
equipment sales.




Crawler crane and
attachment rental.  Essex Crane maintains one
of the largest fleets of crawler cranes and attachments in North
America.  Rental revenue generated from the rental of cranes and
attachments were $34.6 million in 2009 or approximately 66.4% of total
revenue.  Equipment is rented to customers under contract, with an
average length of eight months (contracts range from 4-18 months in general),
which specifies a constant monthly rate for each piece of equipment over the
period of the contract.  In 2009, Essex Crane’s average monthly crane
rental rate was $21,081 and crane utilization was 43.6% on “days” basis (or
48.2% if calculated using the “hits” method).  For a discussion of the
“days” and “hits” methods of measuring crane utilization, see “Fleet Overview”
below.




Once
Essex Crane and a potential customer communicate regarding the customer’s need
for a bare lattice boom crawler crane rental, Essex Crane confirms that an
appropriate crane is available.  Essex Crane then prepares and
delivers a written rental quote to the customer.  The customer reviews
the quote and, if acceptable, places an order.





Essex
Crane’s on-line, real time information system provides visibility of the entire
crane rental fleet for the sales team including the cranes’ lease information
and expected availability.  All sales team quote and order activity is
also available on the same information system and viewable by appropriate sales,
operations, and management personnel.




Upon a
review of the order including a check of the customer’s credit and continued
crane availability, an order confirmation and a lease are sent to the
customer.  Once a signed lease and other required documentation
(including insurance certificates) are received, the order is authorized for
shipment to the customer.  Essex Crane’s operations team sees both the
quote and order activity and responds appropriately to confirm the readiness of
the required crane for shipment to the new rental, but does not begin shipping
it until the lease is authorized.  Once the crane is delivered to the
customer’s site, an Essex Crane representative inspects the crane with the
customer and an inspection report is signed verifying that the crane was
correctly delivered in accordance with the lease agreement.  The
rental period for the equipment usually begins when the first major item for the
crane begins transport to the customer and the rental ends when the last major
item of the crane is returned to Essex Crane’s designated location.




Repair and maintenance
services.  Essex Crane’s contracts have provisions that provide
for the customer to assume responsibility to operate and maintain the equipment
to manufacturer’s specifications throughout the contract
period.  Essex Crane may provide maintenance and repair services to
customers during the contract rental period and will invoice the customer for
any work carried out (to the extent such work is the customer’s
responsibility).  Revenue from such repair and maintenance services
totaled $6.1 million in 2009 or approximately 11.8% of total
revenue.  While a piece of equipment is not rented, Essex Crane
assumes responsibility to ensure that its equipment is compliant with all
manufacturers’ specifications and other regulations.


5





Equipment transportation
services.  Essex Crane does not have an in-house fleet of
vehicles to transport its cranes and attachments to and from project sites and
instead out-sources transportation to third party providers.  Essex
Crane charges a fee for arranging transportation services from its nearest
storage yard with the required equipment to the construction
location.  Revenue from such equipment transportation services totaled
$4.9 million in 2009 or approximately 9.4% of total revenue.




Used equipment
sales.  Given the size of its crane fleet and the various types
of crawler cranes, Essex Crane sells pieces of used equipment both domestically
and internationally to construction or, although infrequently, other rental
companies.  Sales of equipment are discretionary and based on a
variety of factors including, but not limited to, a piece of equipment’s orderly
liquidation value, age, rental yield, perceived demand in the marketplace and
impact of a sale on Essex Crane’s rental businesses and cash
flow.  Revenue from such used rental equipment sales totaled $6.5
million in 2009 or approximately 12.4% of total revenue.




Fleet
Overview




Essex
Crane’s fleet consists of over 350 lattice boom crawler cranes and attachments
manufactured solely by Manitowoc and Liebherr.  The fleet’s cranes
vary in age of equipment and have a maximum lifting capacity ranging from 100 to
440 tons.  As of December 31, 2009, the average lifting capacity of
Essex Crane’s fleet was approximately 250 tons and average age was 14 years
(weighted based on orderly liquidation value).  The Company owns all
of its crawler cranes and attachments and does not lease any of these items from
third parties.




Essex
Crane’s management has employed a strategy of increasing the average lifting
capacity of the crawler crane fleet by selling lower capacity models and
investing in higher capacity models.  This has resulted in average
lifting capacity growing from approximately 177 tons in 2003 to approximately
250 tons as of December 31, 2009.  Attachments are rented by customers
to enhance the lifting capacity and reach of cranes.  While Essex
Crane’s cranes have lifting capacities up to 440 tons, its attachments increase
the capacity up to a total of 660 tons.  Management has employed this
strategy as it believes larger cranes are more applicable to larger construction
projects, are less readily substitutable with other equipment, receive above
average utilization rates and provide attractive rental rate
returns.  While this strategy has resulted in a shrinking of the total
number of cranes in the fleet since 2003, average rental rate and utilization
grew significantly over the same period through December 31,
2008.   Due to the global economic downturn that began affecting
the Company’s business in 2009, utilization rates were affected and have been
reduced to rates consistent with those experienced in 2003.  In
contrast, average rental rates have remained comparatively higher due to our
enhanced fleet mix.




Historically,
Essex Crane measured equipment utilization using what was referred to as the
“hits” method.   Under this method, equipment on rent for any
period of time within a month counted as a utilization hit.  This
meant that if a piece of equipment were on rent for one day in a month it would
be treated the same in the utilization statistic as a piece of equipment on rent
for all 30 days in a month.  Essex Crane's management believes that
the “hits” utilization measurement has a less direct correlation with equipment
rental revenue.





Upon
implementation of Essex Crane’s ERP System in 2002, Essex Crane began to measure
utilization using the method referred to as the “days”
method.  Essex's management believes that this method, while it may
reflect lower utilization rates than the “hits” method, is the most accurate
method for measuring equipment utilization and correlates the most closely with
rental revenue.  Under this method, a real time report is generated
from the ERP system for each piece of equipment on rent in a
period.  The report includes the number of days each piece of
equipment was on rent on a particular lease and the base monthly rental
rate.  The total number of days on rent of all pieces of equipment
provides the numerator for determining utilization.  The denominator
is all equipment rental assets owned times the number of days in the
month.  The “days” method is the utilization measurement currently
used by Essex, and Essex anticipates that the “days” method will be the primary
basis for future disclosure of utilization rates for Essex’s cranes and
attachments.


6





The
following table outlines utilization rates (calculated using the “days” and
“hits” methods) and average monthly rental rates for the fleet for the years
ended December 31, 2009, 2008 and 2007:





Avg. Crane
                    
                    
                    Avg.
                    
                    
                    Avg.
                      AttachmentAvg. Crane
                    
                    
                    Utilization Rate
                    
                    
                    Attachment
                    
                    
                    Utilization RateYear
                    
                    Rental Rate
                    
                    
                    Days
                    
                    
                    Hits
                    
                    
                    Rental Rate
                    
                    
                    Days
                    
                    
                    Hits2007
                    
                    $
                    16,266
                    
                    
                    
                    72.1
                    %
                    
                    
                    76.3
                    %
                    
                    $
                    14,243
                    
                    
                    
                    24.6
                    %
                    
                    
                    27.3
                    %2008
                    
                    $
                    21,382
                    
                    
                    
                    72.5
                    %
                    
                    
                    77.0
                    %
                    
                    $
                    16,051
                    
                    
                    
                    42.0
                    %
                    
                    
                    44.2
                    %2009
                    
                    $
                    21,081
                    
                    
                    
                    43.6
                    %
                    
                    
                    48.2
                    %
                    
                    $
                    18,776
                    
                    
                    
                    18.0
                    %
                    
                    
                    20.2
                    %




Lattice
boom crawler cranes have long useful economic lives, often up to 50 years or
more.  This is longer than other types of cranes and equipment in the
lifting market space.  Our management believes this is due to the
relatively high value of the crane’s structural steel (including its boom) as it
relates to the total value of the crane.  These structural steel items
are complex fabrications with high replacement value made from high tensile
strength steel.  When properly maintained, these components retain
their value over the life of the crane with minimal maintenance
costs.




At the
conclusion of each rental, the rented equipment is thoroughly inspected in
accordance with requirements set by the original equipment manufacturer and
OSHA.  If maintenance or repairs are required, they are scheduled and
completed prior to the next rental.  At the start of the next rental,
another inspection is made to ensure that the equipment is in a rent ready
condition and compliant with the inspection requirements.  Essex Crane
has extensive capabilities to perform major repair and reconditioning of the
cranes and attachments.  This type of activity is done on an as-needed
basis to ensure that the equipment provides a high level of availability
(uptime) when on rent.




Essex
Crane maintains a direct relationship with Manitowoc and Liebherr, its two
principal crane suppliers.  Essex Crane has developed strong long-term
relationships with these suppliers.





Sales
and Marketing




Over its
operating history, Essex Crane has expanded its infrastructure of service
centers and storage yards to key geographical locations across the United States
in order to serve customers in a timely and efficient manner.  Essex
Crane currently operates 9 service centers and storage yards giving it the
ability to service customers throughout North America.  Essex Crane
employs a sales and marketing team of 10 people across the country, each of whom
covers a specific geographic region and reports directly to a senior management
executive.  Rather than segmenting the fleet by geography or
salesperson, the fleet is allocated based upon factors such as rental financial
return, customer mix and project mix.  As such, each salesperson is
highly incentivized to optimize fleet’s financial returns and sales
mix.





Essex
Crane markets itself to potential customers through advertising, promotion,
membership in construction trade associations and attendance at various meetings
and trade shows.  In addition Essex Crane’s web site was designed with
the goal of being very useful to engineers and designers who determine how a
construction project will be built, as well as equipment and project managers
who are responsible for the selection of the cranes that will be used to
complete the project.  Essex Crane’s management believes that Essex
Crane’s web site accomplishes this goal by providing more comprehensive crawler
crane information regarding the capacities and specifications than may be
readily available from other sources.




Essex
Crane’s sales team uses its extensive relationships with customers and potential
users of large lattice boom crawler cranes to identify potential crane rental
opportunities.  This, combined with Essex Crane’s reputation and brand
value, contributes significantly to it sales activity.  In recent
years, Essex Crane has enhanced this traditional method of lead generation with
two lead-generation sales systems.  The lead generation systems used
by Essex Crane to collect information regarding construction activity from a
variety of public records, including building permits.  This
information is then electronically sorted and filtered, using Essex Crane’s
input to focus on jobs that most likely will require a large lattice boom
crawler crane.  This output is sent directly to the regional sales
manager on the Essex Crane sales team who is responsible for the geographic area
in which the project will be built.  Essex Crane’s management believes
that these methods provide a high degree of market visibility and awareness to
Essex Crane’s sales team and management.




Essex
Crane operates a customized rental information management system through which
detailed operational and financial information is made available on a daily
basis.  The system is also used to maintain a detailed database of
publicly announced construction projects on which crawler crane equipment will
be required.  Management and sales personnel use this information to
closely monitor business activity by piece of equipment, looking at customer
trends and proactively responding to changes in the heavy lift
marketplace.  Essex Crane believes that its disciplined fleet
management process, with its focus on project duration and lead time, as well as
customer demand, enables Essex Crane to maximize utilization and rental
rates.


7





Customers
and end markets





Essex
Crane serves a variety of customers throughout North America, many of which are
large engineering and construction firms focused on large infrastructure and
infrastructure-related projects that require significant lifting capacity and
high mechanical reliability.  For the year ended December 31, 2009,
the Company generated approximately 30%, 23%, 17% and 16% from the
industrial/marine, petrochemical, power and transportation end markets,
respectively.  Because of the scale and duration of these projects,
rental agreement periods range from 4-18 months and average approximately 8
months.  This provides us with better future revenue visibility and
project lead generation times than our competitors.  Essex Crane’s
revenue generation model and customer base can be contrasted to other equipment
rental companies that provide lighter lifting equipment (such as low capacity
cranes or equipment such a scissor lifts) that are commonly rented for shorter
periods of time and generally serve residential and smaller commercial
construction projects.  The Company generated approximately $3.0
million and $0.8 million of its total revenue from foreign countries for the
years ended December 31, 2009 and 2008, which represents the two month
post-acquisition period, respectively.




Essex
Crane’s end-markets incorporate construction and repair and maintenance projects
in the following key sub-sectors:





·
            industrial /marine – offshore
      facilities, marine facilities and other industrial
      facilities;


·
            power – power plants,
      cogeneration power and wind
power;


·
            transportation – airports, port
      facilities, bridges, roads and
canals;


·
            petrochemicals – offshore
      platforms, refineries, petrochemical plants and
      pipelines;


·
            sewer and water – sewers,
      treatment plants and pumping plants;
and


·
            general building - sports arenas,
      hospitals, commercial and
residential.




Many of
the market sectors served by Essex Crane have been adversely affected by the
weakening economy and difficult commercial credit
environment.  Management believes that, in the long-term, Essex
Crane’s strong niche market position and improvements in its fleet due to
investment in new cranes will provide opportunity for future
growth.  Management bases such belief on the assumption that, in the
long-term, there will be improvements in our customers’ ability to obtain
financing, including credit, for infrastructure projects.  We cannot
assure you that Essex Crane’s customers’ access to financing for infrastructure
projects, including credit, will improve.





After
experiencing increasing revenues from 2004 through 2008, 2009 results were
significantly lower and negatively impacted by uncertainty in the end markets in
which Essex Crane’s customers operate caused by declining economic conditions
and available credit.  Total revenues for the year ended December 31,
2009 were $52.1 million; a significant decline from the pro forma revenues of
$85.9 million and $78.1 million for the years ended December 31, 2008 and 2007,
respectively.  As of December 31, 2009, Essex Crane’s estimated
12-month revenue backlog stood at approximately $14.3 million.  In
contrast, Essex Crane’s 12-month revenue backlog was $30.3 million and $33.5
million as of December 31, 2008 and 2007, respectively.





Strategy




Our
management anticipates that the following longer-term market trends will
increase demand for lattice boom crawler cranes and attachments in the future
and over longer periods:




·
              increased levels of
      infrastructure spending, including the construction of major bridges,
      airports and water treatment
facilities;
  ·
              increased demand for electric
      power will require construction of additional power plants, potentially
      including nuclear power
plants;
  ·
              continued higher energy costs
      will increase construction activity to improve and expand efficiencies and
      capacities at refineries, offshore production suppliers, and petrochemical
      facilities;


8


·
              increased
      environmental awareness will increase demand for construction of
      alternative energy sources such as wind power, and clean air requirements
      including SO2 scrubbers and ash
precipitators;
  ·
              continued tendency for
      contractors to rent larger lattice boom crawler cranes rather than own
      their own equipment; and
  ·
              modular construction methods,
      including pre-fabrication, will continue to increase because of potential
      cost savings and site
efficiencies.




Increase market share and pursue
profitable growth opportunities.Through its fleet size,
geographically dispersed service centers and storage yards, which allow Essex to
provide equipment for projects throughout the United States and, to a lesser
extent, Canada and Mexico, and track record of customer service, Essex Crane
intends to take advantage of these trends in order to maximize the opportunities
for profitable growth within the North American crawler crane rental market
by:




·
              optimizing
      fleet allocation across geographic regions, customers and end-markets to
      maximize utilization and rental
rates;
  ·
              focusing on superior customer
      service and providing a superior fleet of cranes and attachments as
      compared to our competitors;
  ·
              leveraging Essex Crane’s leading
      fleet size and composition across the country to increase its customer
      base and share of its existing customer base’s spending in the
      sector;
  ·
              continuing to align incentives
      for local sales people and managers with both profit and growth
      targets;
  ·
              pursuing selected acquisitions of
      other smaller, more regionally focused crawler crane rental fleets or
      companies complementary to existing
  operations;
  ·
              expanding used equipment sales by
      positioning used cranes for refurbishment and re-sale;
      and
  ·
              establishing and maintaining
      existing relationships with international market players and crane
      manufacturers for future equipment purchase and sale
      opportunities.




Further drive profitability, cash
flow and return on capital.  Our management believes there are
significant opportunities to further increase the profitability of Essex Crane’s
operations by:




·
              continuing to re-position the
      fleet by selling older, lighter tonnage cranes and purchasing newer,
      heavier lifting capacity cranes that command higher margins and are in
      greater demand due to their ability to service large
      infrastructure-related
projects;
  ·
              actively managing the quality,
      reliability and availability of Essex Crane’s fleet and offering superior
      customer service in order to support a competitive pricing
      strategy;
  ·
              evaluating each new potential
      rental contract opportunity based on strict return guidelines and
      allocating its fleet
accordingly;
  ·
              using Essex Crane’s size and
      national market presence to achieve economies of scale in capital
      investment; and
  ·
              leveraging Essex Crane’s
      extensive customer relationships and success in selling used
      equipment.




Competition




The heavy
lift equipment rental industry is highly fragmented throughout North America,
with a variety of smaller companies, many of which are family-owned, operating
on a regional or local scale.  Companies that have a national focus
generally provide heavy lift rental services across a spectrum of crane types
such as all-terrain, truck and tower cranes as well as
crawlers.  Essex Crane is the only national crane rental services
company that focuses exclusively on lattice-boom crawler cranes and attachments,
which allows Essex Crane to develop greater expertise in comparison to its
competitors, but still allows for economies of scale advantages with regard to
purchasing power and allocation of rental equipment resources to the
market.  Its fleet of over 350 cranes and attachments is one of the
largest crawler crane fleets in North America.  Essex Crane’s
principal competitors include ALL Erection & Crane Rental, Lampson
International, Maxim Crane Works, M.D., Moody & Sons and AmQuip Crane
Corp.  Some of these competitors operate nationally and others are
regional.  Most of our competitors do not focus exclusively on the
North American bare rental crawler crane market.


9





Essex
believes that there are four key factors differentiating it from its
competitors:





·
            crawler
      crane focus – Essex Crane is solely focused on heavy lift crawler cranes
      dedicated to infrastructure and other large construction
      projects.  Other companies also focus on other crane types with
      lower lift capacities;





·
            national
      capabilities – some competitors offer national service capabilities,
      however most are regional players.  Our management believes that
      a national presence provides the ability to fully service engineering and
      construction firms with a similar national
  footprint;





·
            “bare”
      rental – Essex does not rent its equipment with an
      operator.  While some other operators also rent equipment bare,
      generally equipment is rented with an operator.  Renting
      equipment on a bare rental basis minimizes liability for the Company,
      provides a more efficient operating platform and business model;
      and





·
            outsourced transport – unlike
      many of its competitors, Essex Crane does not operate an in-house
      transport department.  In management’s view, this allows Essex
      Crane to focus on core competencies and removes the need for capital
      investment in truck fleets and associated
      infrastructure.




Competition
in the heavy lift equipment rental segment is strong and is defined by equipment
availability, reliability, service and price.  Our management believes
that Essex Crane’s extensive crawler crane and attachment fleet, national
presence and sales force, client relationships and equipment allocation and
management systems provide Essex Crane with a good scale and competitive
positioning within the industry relative to its peers.




Risk
of Loss and Insurance




The
operation of lattice boom crawler cranes includes risks such as a mechanical and
structural failures, physical damage, property damage, operator overload or
error, equipment loss, or business interruptions.  Essex Crane
primarily rents its cranes and attachments on a “bare” lease and seldom supplies
the operator or performs the routine scheduled maintenance on the
equipment.  Essex Crane requires the lessee to supply a primary
insurance policy covering the loss of the equipment and general liability for
claims initiated by an accident, storm, fire or theft.  Essex Crane
also requires that it be named as an additional insured and the loss payee on
the lessee’s insurance policy.  Essex Crane’s lease agreement also
requires the lessee to indemnify Essex Crane for any injury, damage and business
interruption caused by the crane or the attachment while it is being
leased.  Essex Crane maintains secondary insurance coverage for any
claim not covered by the lessee’s insurance, however, Essex Crane cannot
guarantee that its insurance or the insurance of its customers will cover all
claims or risks or that any specific claim will be paid by an
insurer.




Government
Regulation




Federal,
state and local authorities subject Essex Crane’s facilities and operations to
requirements relating to environmental protection, occupational safety and
health and many other subjects.  These requirements, which can be
expected to change and expand in the future, impose significant capital and
operating costs on Essex Crane’s business.




The
environmental laws and regulations govern, among other things, the discharge of
substances into the air, water and land, the handling, storage, use and disposal
of hazardous materials and wastes and the cleanup of properties affected by
pollutants.  Environmental laws also impose obligations and liability
for the investigation and cleanup of properties affected by hazardous substance
spills or releases.  Essex Crane can be subject to liability for the
disposal of substances which it generates and for substances disposed of on
property which it owns or operates, even if such disposal occurred before its
ownership or occupancy.  Accordingly, Essex may become liable, either
contractually or by operation of law, for investigation, remediation and
monitoring costs even if the contaminated property is not presently owned or
operated by Essex Crane, or if the contamination was caused by third parties
during or prior to our ownership or operation of the property.  In
addition, because environmental laws frequently impose joint and several
liability on all responsible parties, Essex Crane may be held liable for more
than its proportionate share of environmental investigation and cleanup
costs.  Contamination and exposure to hazardous substances can also
result in claims for damages, including personal injury, property damage, and
natural resources damage claims.  Some of Essex Crane’s properties
contain, or previously contained, above-ground or underground storage tanks
and/or oil-water separators.  Given the nature of Essex Crane’s
operations (which involve the use and disposal of petroleum products, solvents
and other hazardous substances for fueling and maintaining its cranes,
attachments and vehicles) and the historical operations at some of its
properties, Essex Crane may incur material costs associated with soil or
groundwater contamination.  Under environmental and safety laws, Essex
Crane may be liable for, among other things, (i) the costs of investigating and
remediating contamination at our sites as well as sites to which we sent
hazardous wastes for disposal or treatment regardless of fault and (ii) fines
and penalties for non-compliance.  We incur ongoing expenses
associated with the performance of appropriate investigation and remediation
activities at certain of our locations.


10




Essex
Crane’s operations are also subject to federal, state and local laws and
regulations pertaining to occupational safety and health, most notably standards
promulgated by OSHA.  Essex Crane is subject to various OSHA
regulations that primarily deal with maintaining a safe work-place
environment.  OSHA regulations require Essex Crane, among other
things, to maintain documentation of work-related injuries, illnesses and
fatalities and files for recordable events, complete workers compensation loss
reports and review the status of outstanding worker compensation claims, and
complete certain annual filings and postings.  Essex Crane may be
involved from time to time in administrative and judicial proceedings and
investigation with these governmental agencies, including inspections and audits
by the applicable agencies related to its compliance with these
requirements.  During 2009, Essex did not incur material expenses
related to environmental investigations or remediation activities, and
management does not expect to incur such expenses in the near
term.  There can be no assurance, however, that Essex will not incur
such expenditures in the future.





Climate
Change





To the
extent that climate change does occur, we may experience extreme weather and
changes in precipitation and temperature, all of which may result in physical
damage or a decrease in demand for rental equipment located in or potentially
rented in these areas affected by these conditions.  Should the impact
of climate change be material in nature, including destruction of our rental
equipment assets or property, plant and equipment, or occur for lengthy periods
of time, our financial condition or results of operations may be adversely
affected.





In
addition, developments in federal and state legislation and regulation on
climate change could result in increased capital expenditures to improve the
energy efficiency of our rental equipment without a corresponding increase in
revenue.




Customers




Our
customer base is highly diversified and ranges from Fortune 500 companies to
small businesses.  Our largest customer accounted for less than 10
percent of our revenues in 2009 and our top 5 customers accounted for less than
18% percent of our revenues in 2009.  Historically, we have typically
retained over 60% percent of our customer base year-over-year while adding new
customers as we attempt to grow our business.




Our
customer base varies by branch and is determined by several factors, including
the equipment mix and marketing focus of the particular branch as well as the
business composition of the local economy.  Our customers
include:




•
              construction companies that use
      equipment for constructing and renovating commercial buildings,
      warehouses, industrial and manufacturing plants, office parks, airports,
      residential developments and other
  facilities;
 
 •
              industrial companies—such as
      manufacturers, refineries, chemical companies, paper mills, railroads,
      ship builders, off-shore fabricators and utilities, including wind farms -
      that use equipment for plant maintenance, upgrades, expansion and
      construction;
 
 •
              municipalities that require
      equipment for a variety of purposes;
and
 
 •
              contractors performing repair and
      maintenance to major renovation projects for owners of commercial and
      industrial facilities, such as power
  companies.




Suppliers




Our
strategic approach with respect to our suppliers is to maintain the minimum
number of suppliers per category of equipment that can satisfy our anticipated
volume and business requirements.  This approach is designed to ensure
the terms we negotiate are competitive and that there is sufficient product
available to meet anticipated customer demand.  We utilize a
comprehensive selection process to determine our equipment
vendors.  We consider product capabilities and industry position,
product liability history and financial strength.


11




We have
been making ongoing efforts to consolidate our vendor base in order to further
increase our purchasing power.  We estimate that our largest supplier
accounted for approximately 34.5% of our 2009 total purchases, including
equipment for rental, and that our 2 largest suppliers accounted for
approximately 48.3% of such purchases.  We believe we have sufficient
alternative sources of supply available for each of our equipment
categories.





Seasonality




Although
our business is not significantly impacted by seasonality, the demand for our
rental equipment tends to be lower during the winter months.  The
level of equipment rental activities are directly related to commercial and
industrial construction and maintenance activities.  Therefore,
equipment rental performance will be correlated to the levels of current
construction activities.  The severity of weather conditions can have
a temporary impact on the level of construction activities.




Employees





As of December 31, 2009 Essex had 111
employees, 4 of which are senior management, 14 of which are operational key
management, 7 of which are operational supervisors and 10 of which are employed
in the sales and marketing team.  Approximately 7 of Essex’s staff are
affiliated with trade unions.  Essex has not in the past 11 years
experienced any work stoppage as a result of issues with labor or with unions
and believes that this fact is a testament to its relationship with its
employees.  To the Company’s knowledge there is no current campaign by
any union to organize additional employees of Essex.




Availability
of Information





The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934 (the “Exchange Act”).  The Company therefore files periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the “SEC”).  Such reports may be obtained by visiting the
Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or
by calling the SEC at (800) SEC-0330.  In addition, the SEC maintains
an internet site at http://www.sec.gov that contains reports, proxy and
information statements and other information.  Financial and other
information can also be accessed on the Investor Relations section of the
Company’s website at http://www.essexcrane.com.  The Company makes
available through its website, free of charge, copies of its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act as soon as reasonably practicable after filing such
material electronically or otherwise furnishing it to the SEC.  Also
posted on Essex Crane’s website are the Company’s corporate governance
documents, the charters of the Audit Committee, Nominating Committee and
Compensation Committee.  The reference to our website is textual in
reference only, and information on the Company’s website is not incorporated
into this Form 10-K or the Company’s other securities filings and is not a part
of them.





Item 1A.
            Risk
    Factors





Our
business may be adversely affected by changing economic conditions beyond our
control, including decreases in construction or industrial
activities.




The heavy
crane rental industry’s revenue is closely tied to conditions in the end markets
in which Essex Crane’s customers operate and more broadly to general economic
conditions.  Essex Crane’s products are used primarily in
infrastructure-related projects and other non-residential construction projects
in a variety of industries (including the power, transportation infrastructure,
petrochemical, municipal construction and industrial and marine
industries).  Consequently, the economic downturn, and particularly
the weakness in Essex Crane’s end markets may lead to a significant decrease in
demand for its equipment or depress equipment rental and utilization rates and
the sales prices for equipment we sell.  During periods of expansion
in Essex Crane’s end markets, Essex Crane generally has benefited from increased
demand for its products.  Conversely, during recessionary periods in
Essex Crane’s end markets, Essex has been adversely affected by reduced demand
for its products.  Weakness in Essex Crane’s end markets, such as a
decline in non-residential construction, infrastructure projects or industrial
activity, may in the future lead to a decrease in the demand for Essex Crane’s
equipment or the rental rates or prices it can charge.  Factors that
may cause weakness in Essex Crane’s end markets include but are not limited
to:


12





·
            slowdowns in non-residential
      construction in the geographic regions in which Essex Crane
      operates;





·
            reductions in corporate spending
      for plants, factories and other facilities;
  and





·
            reductions in government spending
      on highways and other infrastructure
  projects.




Future
declines in non-residential construction, infrastructure projects and industrial
activity could adversely affect Essex Crane’s operating results by decreasing
its revenues and profit margins.  Continued weakness or further
deterioration in the non-residential construction and industrial sectors caused
by these or other factors could have a material adverse effect on our financial
position, results of operations and cash flows in the future and may also have a
material adverse effect on residual values realized on the disposition of our
rental fleet.  Declines in Essex Crane’s order backlog should be
considered as an indication of a decline in the strength of the non-residential
construction markets.





The
current worldwide economic downturn may have an adverse impact on our business
and financial condition in ways that we currently cannot predict.





The
current worldwide economic downturn — which has included, among other things,
significant reductions in available capital and liquidity from banks and other
providers of credit, substantial reductions and/or fluctuations in equity and
currency values worldwide and concerns that the worldwide economy may enter into
a prolonged recessionary period — make it increasingly difficult for us, our
customers and our suppliers to accurately forecast future product demand trends,
which could reduce the utilization rate of our fleet.  Alternatively,
this forecasting difficulty could cause a shortage of equipment available for
rental that could result in an inability to satisfy demand for our products and
a loss of market share.





Fluctuations
in the stock market, as well as general economic and market conditions, may
impact the market price of our securities.





The
market price of our securities have been and may be subject to significant
fluctuations in response to general economic changes and other factors
including, but not limited to:




·
              variations
      in our quarterly operating results or results that vary from investor
      expectations;
  ·
              changes
      in the strategy and actions taken by our competitors, including pricing
      changes;
  ·
              securities
      analysts’ elections to not cover our common stock, or, if analysts do
      elect to cover our common stock, changes in financial estimates by
      analysts, or a downgrade of our common stock or of our sector by
      analysts;
  ·
              announcements
      by us or our competitors of significant contracts, acquisitions, strategic
      partnerships, joint ventures or capital
  commitments;
  ·
              loss
      of a large supplier;
  ·
              investor
      perceptions of us and the equipment rental and distribution
      industry;
  ·
              our
      ability to successfully integrate acquisitions and consolidations;
      and
  ·
              national
      or regional catastrophes or circumstances and natural disasters,
      hostilities and acts of
terrorism.




Broad
market and industry factors may materially reduce the market price of our
securities, regardless of our operating performance.  In addition, the
stock market in recent years has experienced price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies.  These fluctuations, as well as general economic and market
conditions, including to those listed above and others, may harm the market
price of our securities.


13


We
are dependent upon key personnel whose loss may adversely impact Essex Crane’s
business and our results of operations.




We depend
on the expertise, experience and continued services of Essex Crane’s senior
management employees, especially Ronald Schad, Essex Crane’s and the Company’s
President and Chief Executive Officer, Martin Kroll, Essex Crane’s and the
Company’s Chief Financial Officer and Essex Crane’s Senior Vice President,
William Erwin, Essex Crane’s Vice President Operations and Customer Support and
William O’Rourke, Essex Crane’s Vice President Sales and Account
Management.  Mr. Schad has acquired specialized knowledge and skills
with respect to Essex Crane and its operations and most decisions concerning the
business of Essex Crane will be made or significantly influenced by
him.  The loss of Mr. Schad, Mr. Kroll, Mr. Erwin or Mr. O’Rourke or
other senior management employees, or an inability to attract or retain other
key individuals, could materially adversely affect us.  We seek to
compensate and incentivize our key executives, as well as other employees,
through competitive salaries and bonus plans, but there can be no assurance that
these programs will allow us to retain key employees or hire new key
employees.  As a result, if Messrs. Schad, Kroll, Erwin, and/or
O’Rourke were to leave Essex Crane, we could face substantial difficulty in
hiring qualified successors and could experience a loss in productivity while
any such successors obtain the necessary training and experience.  In
connection with the acquisition, we entered into three-year employment
agreements with each of Messrs. Schad, Kroll, Erwin and
O’Rourke.  However, there can be no assurance that the terms of these
employment agreements will be sufficient to retain Messrs. Schad, Kroll, Erwin
and/or O’Rourke.





Our
dependence on a small number of crane manufacturers poses a significant risk to
our business and prospects.




Essex
Crane’s crane fleet has historically been comprised of only Manitowoc and
Liebherr crawler cranes. Given Essex Crane’s reliance on two manufacturers for
its entire fleet of crawler cranes, and limited alternative sources of crawler
cranes, if either of these manufacturers were unable to meet expected
manufacturing timeframes due to, for example, natural disasters or labor
strikes, Essex Crane may experience a significant increase in lead times to
acquire new equipment or may be unable to acquire such equipment at
all.  Any inability to acquire the model types or quantities of new
equipment on a timely basis to replace older, less utilized equipment would
adversely impact our future financial condition or results of
operations.




In
addition, Essex Crane has developed strong relationships with Manitowoc and
Liebherr.  There can be no assurance that Essex Crane will be able to
maintain its relationships with these suppliers.  Termination of Essex
Crane’s relationship with these suppliers could materially and adversely affect
our business, financial condition or results of operations if such termination
resulted in Essex Crane being unable to obtain adequate rental and sales
equipment from other sources in a timely manner or at all.




The
cost of new equipment Essex Crane uses in its rental fleet may increase, which
may cause us to spend significantly more for replacement equipment, and in some
cases we may not be able to procure equipment at all due to supplier
constraints.





Essex
Crane’s business model is capital intensive and requires significant continual
investment in new cranes to meet customer demand.  As a result, our
financial condition and results of operations may be significantly impacted by a
material change in the pricing of new cranes that we acquire.  Such
changes may be driven by a number of factors which include, but are not limited
to:




·
              steel
      prices – due to the high tensile steel component of the cranes,
      significant changes in the price of steel can materially change the cost
      of acquiring a crane;
 
 ·
              global
      demand – the market for crawler cranes is global and significant growth in
      overseas demand for cranes could materially increase the cost of new
      cranes regardless of US economic
conditions;
 
 ·
              inflation
      – overall inflationary conditions in the US may impact the operating costs
      of one of Essex Crane’s key crane suppliers and therefore impact crane
      pricing for customers such as Essex Crane;
and
 
 ·
              currency fluctuations – as
      one of our principal suppliers is based in Europe, devaluation of the US
      dollar (as compared to the Euro) may materially increase the cost of
      acquiring cranes and attachments; conversely, inflation of the value of
      the US dollar may adversely affect Essex Crane’s revenues from
      international sales of used cranes and
  attachments.


14





While
Essex Crane can manage the size and aging of its fleet generally over time,
eventually it must replace older equipment in its fleet with newer
models.  We would be adversely impacted if Essex Crane were unable to
procure crawler cranes to allow it to replace our older and smaller capacity
crawler cranes over time as anticipated.





If
we are unable to obtain additional capital as required, we may be unable to fund
the capital outlays required for the success of our business, including those
relating to purchasing equipment and to acquiring new rental
locations.





Our
ability to compete, sustain our growth and expand our operations through new
locations largely depends on access to capital.  If the cash we
generate from Essex Crane’s business, together with cash on hand and cash that
we may borrow under Essex Crane’s credit facility or short-term debt obtained by
Essex Finance is not sufficient to implement our growth strategy and meet our
capital needs, we will require additional financing.  However, we may
not succeed in obtaining additional financing on terms that are satisfactory to
us or at all.  In addition, our ability to obtain additional financing
collateralized by Essex Crane’s assets and Essex Crane’s ability to obtain
additional financing on a secured or unsecured basis are restricted by Essex
Crane’s credit facility.  If we are unable to obtain sufficient
additional capital in the future, we may be unable to fund the capital outlays
required for the success of our business, including those relating to purchasing
cranes and attachments and to new service locations or storage
yards.  Furthermore, any additional indebtedness that we do incur may
make us more vulnerable to economic downturns and may limit our ability to
withstand competitive pressures.





If
we are successful in our efforts to expand our operations, through new
locations, acquisitions or additional equipment, such expansion may result in
risks and costs associated with business start-up and integration.




The
opening of new service locations or storage yards or the completion of any
future acquisitions of other equipment rental companies may result in
significant start-up or transaction expenses and risks associated with entering
new markets in which we have limited or no experience.  New service
locations and storage yards require significant up-front capital expenditures
and may require a significant investment of our management’s time to
successfully commence operations.  New locations may also require a
significant amount of time to provide an adequate return on capital invested, if
any.  In addition, in the event that Essex Crane were to acquire
different types of cranes and attachments than those it currently rents, or
different classes of rental equipment, there can be no assurance that our
customers would choose to rent such items from us or would do so at such rates
or on such terms, that would be acceptable to us.




Our
ability to realize the expected benefits from any future acquisitions of other
equipment rental companies depends in large part on our ability to integrate and
consolidate the new operations with our existing operations in a timely and
effective manner.  In addition, we may fail or be unable to discover
certain liabilities of any acquired business, including liabilities relating to
noncompliance with environmental and occupational health and safety laws and
regulations.  Any significant diversion of management’s attention from
our existing operations, the loss of key employees or customers of any acquired
business, or any major difficulties encountered in opening new locations or
integrating new operations could have an adverse effect on our business,
financial condition or results of operations.




The
crane rental industry is competitive.




The crane
rental industry is highly fragmented and is served by companies who focus almost
exclusively on crane and lifting equipment rental.  Essex Crane
competes directly with regional, and local crane rental companies and a limited
number of national crane rental companies (including ALL Erection & Crane,
Lampson International and Maxim Crane Works).  There can be no
assurance that Essex will not encounter increased competition from existing
competitors or new market entrants (including a newly-formed competitor created
by consolidating several existing regional competitors) that may be
significantly larger and have greater financial and marketing
resources.




Our
management believes that rental rates, fleet availability and size and quality
are the primary competitive factors in the crane rental
industry.  From time to time, Essex Crane or its competitors may
attempt to compete aggressively by lowering rental rates or prices or offering
more favorable rental terms.  Competitive pressures could adversely
affect our revenues and operating results by decreasing Essex Crane’s market
share or depressing the rental rates.  To the extent Essex Crane
lowers rental rates, offers different rental terms or increases its fleet in
order to retain or increase market share, Essex Crane’s operating margins would
be adversely impacted.


15




Our
status as a public company may be a competitive disadvantage.




We are
and will continue to be subject to the disclosure and reporting requirements of
applicable US securities laws and rules promulgated by The NASDAQ Stock
Market.   Many of Essex’s principal competitors are not subject
to these disclosure and reporting requirements or the NASDAQ
rules.  As a result, we may be required to disclose certain
information and expend funds on disclosure and financial and other controls that
may put Essex Crane at a competitive disadvantage to its principal
competitors.




We
may encounter substantial competition in our efforts to expand our
operations.




An
element of our growth strategy is to continue to expand by opening new service
centers and equipment storage yards.  The success of our growth
strategy depends in part on identifying sites for new locations at attractive
prices.  Zoning restrictions may in the future prevent Essex Crane
from being able to open new service centers or storage yards at sites it has
identified.  We may also encounter substantial competition in our
efforts to acquire other crane rental companies, which may limit the number of
acquisition opportunities and lead to higher acquisition costs.




The
crane rental industry has inherent operational risks that may not be adequately
covered by Essex Crane’s insurance.




Essex
Crane may not be adequately insured against all risks and there can be no
assurance that its insurers will pay a particular claim.  Even if its
insurance coverage is adequate to cover its losses, Essex Crane may not be able
to timely obtain a replacement crane in the event of a
loss.  Furthermore, in the future, Essex Crane may not be able to
obtain adequate insurance coverage at reasonable rates for its
fleet.  Essex Crane’s insurance policies will also contain
deductibles, limitations and exclusions which, although management believes are
standard in the heavy lift crane rental industry, may nevertheless increase its
costs.  Moreover, certain accidents or other occurrences may result in
intangible damages (such as damage to our reputation) for which insurance may
not provide an adequate remedy.




Essex
Crane may not be able to renew its insurance coverage on terms favorable to it
that could lead to increased costs in the event of future claims.




When
Essex Crane’s current insurance policies expire, it may be unable to renew such
coverage upon terms acceptable to it, if at all.  If Essex Crane is
able to renew Essex Crane’s coverage it expects that the premium rates and
deductibles may increase as a result of general rate increases for this type of
insurance as well as its historical claims experience and that of Essex Crane’s
competitors in the industry.  If we cannot obtain insurance coverage,
it could adversely affect Essex Crane’s business by increasing its costs with
respect to any claims.  Additionally, existing or future claims may
exceed the level of Essex Crane’s present insurance, and its insurance may not
continue to be available on economically reasonable or desirable terms, if at
all.




Essex
Crane may not be able to generate sufficient cash flows to meet its debt service
obligations.




Essex
Crane’s ability to make payments on its indebtedness will depend on its ability
to generate cash from its future operations.  As of December 31, 2009,
Essex Crane has a revolving credit facility which provides for an aggregate debt
facility of $190.0 million of which $131.9 million is
outstanding.  This facility is secured by a first priority lien on all
of Essex Crane’s assets and, in the event of default; the lenders generally
would be entitled to seize the collateral.  In the event of a
prolonged economic downturn, Essex Crane’s business may not generate sufficient
cash flow from operations or from other sources to enable it to repay its
indebtedness and to fund its other liquidity needs, including capital
expenditure requirements and may not be able to refinance any of its
indebtedness on commercially reasonable terms, or at all.  If Essex
Crane cannot service or refinance its indebtedness, we may have to take actions
such as asset divestitures, seeking additional equity or reducing or delaying
capital expenditures, any of which could have an adverse effect on our
operations.  Additionally, Essex Crane may not be able to effect such
actions, if necessary, on commercially reasonable terms, or at all.




In the
event we incur further debt obligations in relation to acquisitions, or for any
other purpose, the exposure to the risks outlined above will increase
accordingly.


16





Essex
Crane’s loan agreements contain restrictive covenants that will limit Essex
Crane’s corporate activities.




Essex
Crane’s loan agreements impose operating and financial restrictions that will
limit Essex Crane’s ability to:





·
            create
      additional liens on their assets;





·
            make
      investments and capital expenditures above a certain
      threshold;





·
            incur
      additional indebtedness;





·
            engage
      in mergers or acquisitions;





·
            pay
      dividends or redeem outstanding capital
stock;





·
            sell
      any of Essex Crane’s cranes or any other assets outside the ordinary
      course of business; and





·
            change its
      business.





Essex
Crane will need to seek permission from its lender in order for Essex Crane to
engage in some corporate actions.  Essex Crane’s lender’s interests
may be different from those of Essex Crane, and no assurance can be given that
Essex Crane will be able to obtain its lender’s permission when
needed.  This may prevent Essex Crane from taking certain actions that
are in its best interests.





Essex
Crane is subject to numerous environmental laws and regulations that may result
in its incurring unanticipated liabilities, which could have an adverse effect
on our operating performance.





Federal,
state and local authorities subject Essex Crane’s facilities and operations to
requirements relating to environmental protection. These requirements can be
expected to change and expand in the future, and may impose significant capital
and operating costs on Essex Crane’s business.




Environmental
laws and regulations govern, among other things, the discharge of substances
into the air, water and land, the handling, storage, use and disposal of
hazardous materials and wastes and the cleanup of properties affected by
pollutants. If Essex Crane violates environmental laws or regulations, it may be
required to implement corrective actions and could be subject to civil or
criminal fines or penalties. There can be no assurance that Essex Crane will not
have to make significant capital expenditures in the future in order to remain
in compliance with applicable laws and regulations or that Essex Crane will
comply with applicable environmental laws at all times. Such violations or
liability could have an adverse effect on our business, financial condition and
results of operations. Environmental laws also impose obligations and liability
for the investigation and cleanup of properties affected by hazardous substance
spills or releases. Essex Crane can be subject to liability for the disposal of
substances which it generates and for substances disposed of on property which
it owns or operates, even if such disposal occurred before its ownership or
occupancy. Accordingly, Essex Crane may become liable, either contractually or
by operation of law, for investigation, remediation and monitoring costs even if
the contaminated property is not presently owned or operated by Essex Crane, or
if the contamination was caused by third parties during or prior to Essex
Crane’s ownership or operation of the property. In addition, because
environmental laws frequently impose joint and several liability on all
responsible parties, Essex Crane may be held liable for more than its
proportionate share of environmental investigation and cleanup costs.
Contamination and exposure to hazardous substances can also result in claims for
damages, including personal injury, property damage, and natural resources
damage claims. Some of Essex Crane’s properties contain, or previously
contained, above-ground or underground storage tanks and/or oil-water
separators. Given the nature of Essex Crane’s operations (which involve the use
and disposal of petroleum products, solvents and other hazardous substances for
fueling and maintaining its cranes, attachments and vehicles) and the historical
operations at some of its properties, Essex Crane may incur material costs
associated with soil or groundwater contamination. Future events, such as
changes in existing laws or policies or their enforcement, or the discovery of
currently unknown contamination, may give rise to remediation liabilities or
other claims that may be material.





Environmental
requirements may become stricter or be interpreted and applied more strictly in
the future. In addition, Essex Crane may be required to indemnify other parties
for adverse environmental conditions that are now unknown to us. These future
changes or interpretations, or the indemnification for such adverse
environmental conditions, could result in environmental compliance or
remediation costs not anticipated by us, which could have a material adverse
effect on our business, financial condition or results of
operations.


17





Essex
Crane is subject to numerous occupational health and safety laws and regulations
that may result in its incurring unanticipated liabilities, which could have an
adverse effect on our operating performance.




Essex
Crane’s operations are subject to federal, state and local laws and regulations
pertaining to occupational safety and health, most notably standards promulgated
by the Occupational, Safety and Health Administration, or OSHA. Essex Crane is
subject to various OSHA regulations that primarily deal with maintaining a safe
work-place environment. OSHA regulations require Essex Crane, among other
things, to maintain documentation of work-related injuries, illnesses and
fatalities and files for recordable events, complete workers compensation loss
reports and review the status of outstanding worker compensation claims, and
complete certain annual filings and postings. Essex Crane may be involved from
time to time in administrative and judicial proceedings and investigation with
these governmental agencies, including inspections and audits by the applicable
agencies related to its compliance with these requirements.




To date,
Essex Crane’s compliance with these and other applicable safety regulations has
not had a material effect on its, Holdings’ or our results of operations or
financial condition. Essex Crane’s failure, however, to comply with these and
other applicable requirements in the future could result in fines and penalties
to Essex Crane and require it to undertake certain remedial actions or be
subject to a suspension of its business, which, if significant, could materially
adversely affect our business or results of operations. Moreover, Essex Crane’s
mere involvement in any audits and investigations or other proceedings could
result in substantial financial cost to us and divert our management’s
attention. Several recent highly-publicized accidents involving cranes (none of
which involved cranes or attachments provided by Essex Crane) could result in
more stringent enforcement of work-place safety regulations, especially with
respect to companies which rent older cranes and attachments. Additionally,
future events, such as changes in existing laws and regulations, new laws or
regulations or the discovery of conditions not currently known to Essex Crane,
may give rise to additional compliance or remedial costs that could be
material.




Safety
requirements may become stricter or be interpreted and applied more strictly in
the future. These future changes or interpretations could have a material
adverse effect on our business, financial condition or results of
operations.





There
are a substantial number of shares of our common stock available for resale in
the future that may cause a decrease in the market price of our common
stock.




In
connection with our acquisition of Essex Crane, Holdings issued its Class A
Membership Interests to members of Essex Crane’s senior
management.  Such membership interests may be exchanged for up to an
aggregate of 632,911 shares of our common stock, subject to certain adjustments.
We have granted registration rights to Essex Crane’s senior management with
respect to the shares of our common stock issuable upon exchange of the Retained
Interests, which entitle Essex Crane’s senior management to file a registration
statement with respect to such shares under certain circumstances, including
upon demand after the October 31, 2010.  We also expect to file a
registration statement with respect to the 1,272,500 shares of our common stock
held by Kirtland Capital Company III LLC and Kirtland Capital Partners III LP at
such time as we and Kirtland believe that market conditions would be conducive
to such registration.




In
addition, warrants to purchase an aggregate of 13,295,781 shares of our common
stock issued to our initial stockholders, purchasers in our initial public
offering and EarlyBirdCapital, Inc. (excluding 1,741,719 shares of our common
stock that would have been issuable upon exercise of warrants repurchased by us
between November 1, 2008 and December 31, 2009) became exercisable upon the
closing of the acquisition of Essex Crane.  All of our common stock
issuable upon exercise of the warrants will be available for resale upon
exercise. Lastly, 2,812,500 shares of our common stock purchased by our initial
stockholders prior to our initial public offering were released from escrow in
November 2009 and are eligible for resale in the public market subject to
compliance with applicable law. Our initial stockholders are entitled to demand
that we register the resale of their shares of common stock at any time
after the date on which their shares are released from escrow.




The
presence of this additional number of shares of common stock eligible for
trading in the public market may have an adverse effect on the market price of
our common stock.  In addition, upon exercise of options and warrants
to purchase our common stock, the equity interests of our stockholders, as a
percentage of the total number of the outstanding shares of common stock, and
the net book value of the shares of our common stock will be significantly
diluted.


18


We
may issue shares of our common stock and preferred stock to raise additional
capital, including to complete a future business combination, which would reduce
the equity interest of our stockholders.




Our
amended and restated certificate of incorporation authorizes the issuance of up
to 40,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. We currently have
10,815,500 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of shares upon full
exercise of our outstanding warrants (net of repurchases), employee stock
options and unit purchase options, and the number of shares issuable upon
exchange of the Retained Interests) and all of the 1,000,000 shares of preferred
stock available for issuance. Although we currently have no other commitments to
issue any additional shares of our common or preferred stock, we may in the
future determine to issue additional shares of our common or preferred stock to
raise additional capital for a variety of purposes, including to complete a
future acquisition. The issuance of additional shares of our common stock or
preferred stock may significantly reduce the equity interest of stockholders and
may adversely affect prevailing market prices for our common stock.





ITEM 1B.
            UNRESOLVED STAFF
      COMMENTS




None.




ITEM 2.
            PROPERTIES





Essex
Crane leases its headquarters at 1110 Lake Cook Road, Suite 220, Buffalo Grove,
Illinois 60089, which consists of 6,680 square feet of office space. In
addition, Essex Crane currently owns the following properties:


·
              A service center located at 2039
      Fulton Springs Road, Alabaster, Shelby County, Alabama 35007. Land area
      totals 400,752 square feet and building area totals 28,575
      feet.
 
 ·
              A satellite service center
      located at 14133 Weld County Road 9.5 Longmont, Weld County, Colorado. The
      land area of the property totals 409,900 square feet and building area
      totals 16,000 square feet.
 
 ·
              A service center located at 5315
      Causeway Boulevard Tampa, Hillsborough County, Florida 33619. Gross land
      area totals 204,732 square feet and building area totals 18,604 square
      feet.
 
 ·
              A service center located at 303
      Peach Lane Arcola, Fort Bend County, Texas 77583. Gross landarea totals 710,681 square feet
      and building area totals 36,342 square
  feet.
  In
addition, Essex Crane leases the following properties throughout the United
States:
  ·
              A satellite service center
      comprising 33,500 square feet of outside storage space located at 6048
      193rd Avenue SW, Rochester, Washington
  98579.
 
 ·
              A satellite service center
      comprising 74,476 square feet of outside storage space located at 1072
      Harrisburg Pike, Carlisle, PA
17103.
 
 ·
              A service Center comprising 6,000
      square feet of warehouse space and approximately three acres of outside
      storage space located at 15060 Ceres Avenue Fontana, CA
      92335.


Essex
Crane also has agreements which allow it to store equipment at two additional
storage yards located strategically in the United States.




Essex
Crane’s growth strategy includes the establishment of service and storage
centers across the United States, with a particular emphasis on new facilities
in areas of the United States which our management from time to time believes
present growth opportunities for its business. Our management currently believes
that growth opportunities exist in the Northeast and Mid-Atlantic regions and
intends to investigate potential additional facilities in those regions.
We have not identified specific locations for any such new
facilities.


19





We also
maintain offices at 461 Fifth Avenue, 25th Floor, New York, New York 10017
pursuant to an agreement with ProChannel Management LLC, an affiliate of
Laurence S. Levy, Chairman of our Board of Directors.  Such office is
primarily used by our corporate Secretary, Carol Zelinski, and Laurence S. Levy
and Edward Levy, each of whom serves on our Board of Directors.





We
consider our current facilities adequate for our current
operations.





ITEM 3.
            LEGAL
      PROCEEDINGS




From time
to time, the Company is party to various legal actions in the normal course of
our business.  Management believes that the Company is not party to
any litigation that, if adversely determined, would have a material adverse
effect on our business, financial condition, result of operations or cash
flows.





ITEM 4.
            SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS





None.


20


PART
II




ITEM 5.
            MARKET FOR REGISTRANT’S COMMON
      EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES




Market
Information





As of
December 31, 2009, our units, common stock and warrants were traded on the
Over-the-Counter Bulletin Board under the symbols, ERNTU, ERNT and, ERNTW
respectively. The following table sets forth the range of high and low closing
bid prices for the units, common stock and warrants for the periods indicated
since the units commenced public trading on March 13, 2007 and since the common
stock and warrants commenced public trading on March 27, 2007. The
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily reflect actual
transactions.  Effective January 13, 2010, our units, common stock and
warrants commenced trading on the Nasdaq Capital Market under the symbols,
ESSXU, ESSX and, ESSXW respectively.





Units
                                        
                                        
                                        Common Stock
                                        
                                        
                                        WarrantsHigh
                                        
                                        
                                        Low
                                        
                                        
                                        High
                                        
                                        
                                        Low
                                        
                                        
                                        High
                                        
                                        
                                        LowYear
      ended December 31, 2009First
      Quarter
                                        
                                        $
                                        3.81
                                        
                                        
                                        $
                                        3.80
                                        
                                        
                                        $
                                        4.50
                                        
                                        
                                        $
                                        3.00
                                        
                                        
                                        $
                                        1.05
                                        
                                        
                                        $
                                        0.32Second
      Quarter
                                        
                                        
                                        6.50
                                        
                                        
                                        
                                        3.80
                                        
                                        
                                        
                                        6.60
                                        
                                        
                                        
                                        3.65
                                        
                                        
                                        
                                        1.61
                                        
                                        
                                        
                                        0.51Third
      Quarter
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        6.30
                                        
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        1.39
                                        
                                        
                                        
                                        0.90Fourth
      Quarter
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        6.20
                                        
                                        
                                        
                                        5.00
                                        
                                        
                                        
                                        1.10
                                        
                                        
                                        
                                        0.45Year
      ended December 31, 2008First
      Quarter
                                        
                                        $
                                        9.15
                                        
                                        
                                        $
                                        8.33
                                        
                                        
                                        $
                                        7.70
                                        
                                        
                                        $
                                        7.30
                                        
                                        
                                        $
                                        1.32
                                        
                                        
                                        $
                                        0.95Second
      Quarter
                                        
                                        
                                        9.65
                                        
                                        
                                        
                                        8.97
                                        
                                        
                                        
                                        7.82
                                        
                                        
                                        
                                        7.55
                                        
                                        
                                        
                                        1.97
                                        
                                        
                                        
                                        1.20Third
      Quarter
                                        
                                        
                                        9.65
                                        
                                        
                                        
                                        8.75
                                        
                                        
                                        
                                        7.82
                                        
                                        
                                        
                                        7.52
                                        
                                        
                                        
                                        2.08
                                        
                                        
                                        
                                        1.27Fourth
      Quarter
                                        
                                        
                                        8.51
                                        
                                        
                                        
                                        3.00
                                        
                                        
                                        
                                        7.74
                                        
                                        
                                        
                                        3.20
                                        
                                        
                                        
                                        1.60
                                        
                                        
                                        
                                        0.60





As of
March 8, 2010, there were approximately 127 holders of record of our common
stock, six holders of record of warrants and one holder of record of our
Units.





Dividend
Policy





We have
not paid any cash dividends on our common stock to date and do not intend to pay
cash dividends in the near future. The payment of cash dividends in the future
will be contingent upon our revenues, earnings, if any, capital requirements and
general financial condition.  In addition, we are a holding company
and conduct all of our operations through Essex Crane.  As a result,
we rely on dividends and distributions to us from our subsidiaries, Essex Crane
and Holdings.  Essex Crane’s existing credit facility limits Essex
Crane’s and Holdings’ ability to declare and pay dividends or make distributions
on account of their capital stock and membership interests, and any debt
instruments that the Company or its subsidiaries may enter into in the future
may limit our subsidiaries’ ability to pay dividends to us and our ability to
pay dividends to our stockholders.  Payment of dividends is within the
discretion of our board of directors.  It is the present intention of
our board of directors to retain all earnings for liquidity management (through
debt reduction), dilution management (through continued warrant and common stock
repurchases), to invest in additional rental equipment and use in business
operations.  Accordingly, our board of directors does not anticipate
declaring any dividends in the foreseeable future on our common
stock.





Recent
Sales of Unregistered Securities and Use of Proceeds




In August
2006 we sold the following shares of common stock without registering under the
Securities Act of 1933, as amended:




Stockholders
                    
                    Number of SharesLaurence
      S. Levy
                    
                    
                    1,800,000Edward
      Levy
                    
                    
                    900,000Isaac
      Kier
                    
                    
                    112,500





Such
shares were issued in connection with our organization pursuant to the exemption
from registration contained in Section 4(2) of the Securities Act as they were
sold to sophisticated, wealthy individuals or entities. The shares issued to the
individuals and entities above were sold at a purchase price of $0.0167 per
share. Effective February 2, 2007 and February 5, 2007, our board of
directors authorized a stock dividend of 0.5 shares and 0.25 shares of common
stock, respectively, for each outstanding share of common stock on such dates,
effectively lowering the purchase price to approximately $0.009 per
share.


21





The
shares issued prior to our initial public offering were held in escrow with
Continental Stock Transfer & Trust Company, as escrow agent, until October
31, 2009. Such shares could have been released from escrow earlier than that
date if, prior to October 31, 2009, we consummated a liquidation, merger, stock
exchange or other similar transaction which resulted in all of our stockholders
having the right to exchange their shares of common stock for cash, securities
or other property. During the escrow period, the holders of these shares were
not able to sell or transfer their securities except for limited
exceptions.  These shares were released from escrow in November
2009.





Simultaneously
with the consummation of our initial public offering on March 13, 2007, we
consummated the private sale of 1,500,000 warrants at a price of $1.00 per
warrant. These warrants were purchased by Laurence S. Levy, Edward Levy and
Isaac Kier and are identical to the warrants included in the units sold in the
in initial public offering, except that if we call the warrants sold in the
initial public offering for redemption, the warrants sold to Messrs. Levy, Levy
and Kier may be exercisable on a cashless basis so long as they are held by the
purchasers or their affiliates. Messrs. Levy, Levy and Kier agreed that the
warrants purchased by them will not be sold or transferred by them until a
business combination had been completed.





We used
the proceeds from these private sales to our initial stockholders to fund the
acquisition of Essex Crane and related expenses, including fees and expenses
associated with the identification of Essex Crane as a potential acquisition
target, for working capital and for other general corporate
purposes.




Initial
Public Offering




On March
13, 2007 we closed our initial public offering of 11,250,000 units with each
unit consisting of one share of our common stock, $.0001 par value per share and
one warrant, each to purchase one share of common stock. The units were sold at
an offering price of $8.00 per unit, generating gross proceeds of $90,000,000.
The managing underwriter in the offering was EarlyBirdCapital, Inc. The
securities sold in the offering were registered under the Securities Act of 1933
on a registration statement on Form S-1 (No. 333-138452). The Securities and
Exchange Commission declared the registration statement effective on March 5,
2007.




On
March 15, 2007, we consummated the closing of the 1,687,500 units which
were subject to the over-allotment option. The 12,937,500 units sold in the
initial public offering, including the 1,687,500 units subject to the
over-allotment option, generated total gross proceeds of $103,500,000. Of the
gross proceeds of the initial public offering (including upon exercise of the
over-allotment option) and sale of warrants to Messrs. Levy, Levy and Kier,
$99,710,000 (or approximately $7.71 per share sold in the offering) was placed
in trust.





We paid a total of
$6,117,500 in underwriting discounts and commissions. Of that total, $1,552,500
was accrued and deferred and not payable until we completed the acquisition
of Essex Crane. In addition, approximately $563,450 was paid for costs and
expenses related to the offering. After deducting the underwriting discounts and
commissions and the offering expenses, the total net proceeds to us from the
offering, including deferred underwriting discounts of $1,552,500, were
approximately $98,423,651, of which $98,210,000 was deposited into the trust
account. In addition, all of the proceeds from the private sale of the warrants
were deposited into the trust fund, for a total of $99,710,000 held in trust.
The remaining proceeds were available to be used to search for potential target
businesses, conduct business, legal and accounting due diligence on prospective
business combinations and continuing general and administrative expenses. We
used $82,118,675 of the proceeds of the initial public offering held in our
trust account as of the closing date of the acquisition of Essex Crane to pay
the net purchase price in the acquisition.   Approximately
$18,705,000 of the proceeds of our initial public offering was paid to holders
of our common stock who voted against the acquisition of Essex Crane and
exercised their conversion rights.  The remaining balance of
$1,814,160 held in the trust account following payment to shareholders who
exercised their conversion rights was distributed to us and was used for general
corporate purposes.




Financial
Advisor





On
December 18, 2008, the Company issued 132,911 shares of its common stock to
Macquarie Capital (USA), Inc., the Company’s financial advisor in the
acquisition of Essex Crane as part of its fee for services
rendered.  Such shares were issued pursuant to an exemption from
registration contained in Section 4(2) of the Securities Act, as they were
issued to a single sophisticated investor in a privately negotiated
transaction.


22


Purchases
of Equity Securities by the Issuer




The
following table provides information about purchases of the Company’s common
stock and warrants by the Company during the fourth quarter of
2009:





Period
                  
                  Total Number
                    of Warrants
                    Purchased
                  
                  
                  Average Price
                    Paid per
                    Warrant
                  
                  
                  Total Number of
                    Warrants Purchased
                    as Part of
                    Repurchase Plan (1)
                  
                  
                  Maximum Dollar Value
                    of Warrants and/or
                    Common Stock that may
                    Yet be PurchasedOctober
      1, 2009 to October 31, 2009
                  
                  
                  150,000
                  
                  
                  $
                  1.19
                  
                  
                  
                  150,000
                  
                  
                  $
                  9,847,779December
      1, 2009 to December 31, 2009
                  
                  
                  25,000
                  
                  
                  
                  1.00
                  
                  
                  
                  25,000
                  
                  
                  
                  9,822,779175,000
                  
                  
                  $
                  1.16
                  
                  
                  
                  175,000
                  
                  
                  $
                  9,822,779





(1)  In
addition to the Warrants purchased for the three months ended December 31, 2009
pursuant to the repurchase plan, the Company previously purchased a total of
2,421,236 shares of its common stock including 63,500 shares repurchased
pursuant to the repurchase plan and 2,357,736 shares previously held by
shareholders who voted against the acquisition of Holdings and exercised their
conversion rights, and 1,566,719 warrants pursuant to the repurchase
plan.





The
repurchase plan reflected in the table above was publicly announced on October
22, 2008.





Equity
Compensation Plans





For
information regarding equity compensation plans, see Item 12 of this annual
report on Form 10-K.


23


Item
      6.
            Selected
      Financial Data





The
following table sets forth selected consolidated financial data of the Company
as of and for the years ended December 31, 2009, 2008, 2007 and
2006.  The following table also sets forth selected consolidated
financial data of the Predecessor as of and for the ten month period ended
October 31, 2008 and as of and for the years ended December 31, 2007, 2006 and
2005.  The information in the following table should be read together
with the Company’s consolidated financial statements and accompanying notes as
of December 31, 2009 and 2008 and for the years ended December 31,
2009, 2008 and 2007, the Predecessor’s audited consolidated financial statements
and accompanying notes as of and for the ten month period ended October 31, 2008
and for the year ended December 31, 2007  and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” included under
Item 7 of this report. These historical results are not necessarily
indicative of the results to be expected in the future.




Essex Holdings, LLC (Predecessor)For the TenEssex Rental Corp. (Successor)
              
              
              Months Ended
              
              
              
              For the Years EndedFor the Years Ended December 31,
              
              
              October 31,
              
              
              
              December 31,2009
              
              
              
              2008
              
              
              
              2007
              
              
              
              2006
              
              
              2008
              
              
              
              2007
              
              
              
              2006
              
              
              
              2005Operations
      SummaryTotal
      revenue
              
              $
              52,084,392
              
              
              $
              14,872,789
              
              
              $
              -
              
              
              $
              -
              
              $
              70,978,557
              
              
              $
              78,122,079
              
              
              $
              63,515,355
              
              
              $
              49,032,143Cost
      of revenues
              
              
              32,900,942
              
              
              
              7,055,992
              
              
              
              -
              
              
              
              -
              
              
              29,545,082
              
              
              
              38,757,886
              
              
              
              33,438,156
              
              
              
              31,951,102Gross
      profit
              
              
              19,183,450
              
              
              
              7,816,797
              
              
              
              -
              
              
              
              -
              
              
              41,433,475
              
              
              
              39,364,193
              
              
              
              30,077,199
              
              
              
              17,081,041Selling,
      general, administrative and other expenses
              
              
              11,329,156
              
              
              
              4,185,375
              
              
              
              456,661
              
              
              
              1,550
              
              
              13,762,884
              
              
              
              9,244,998
              
              
              
              8,860,953
              
              
              
              7,736,074Goodwill
      impairment
              
              
              -
              
              
              
              23,895,733
              
              
              
              -
              
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Income
      (loss ) from operations
              
              
              7,854,294
              
              
              
              (20,264,311
              )
              
              
              (456,661
              )
              
              
              (1,550
              )
              
              27,670,591
              
              
              
              30,119,195
              
              
              
              21,216,246
              
              
              
              9,344,967Interest
      Income
              
              
              643
              
              
              
              1,405,637
              
              
              
              2,543,781
              
              
              
              1,148
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Interest
      Expense (1)
              
              
              (6,681,740
              )
              
              
              (1,124,398
              )
              
              
              
              
              
              
              
              
              
              (8,190,438
              )
              
              
              (14,961,069
              )
              
              
              (11,429,235
              )
              
              
              (9,822,189
              )Income
      (loss ) before taxes
              
              
              1,173,197
              
              
              
              (19,983,072
              )
              
              
              2,087,120
              
              
              
              (402
              )
              
              19,480,153
              
              
              
              15,158,126
              
              
              
              9,787,011
              
              
              
              (477,222
              )Net
      income (loss)
              
              $
              1,195,806
              
              
              $
              (11,917,121
              )
              
              $
              1,699,120
              
              
              $
              (402
              )
              $
              11,417,074
              
              
              $
              11,216,856
              
              
              $
              9,283,424
              
              
              $
              (435,088
              )Weighted
      average shares outstandingBasic
              
              
              14,110,789
              
              
              
              13,517,010
              
              
              
              13,224,144
              
              
              
              2,812,500Diluted
              
              
              15,805,191
              
              
              
              13,517,010
              
              
              
              13,224,144
              
              
              
              2,812,500Earnings
      (loss) per shareBasic
              
              $
              0.08
              
              
              $
              (0.88
              )
              
              $
              0.13
              
              
              $
              (0.00
              )Diluted
              
              $
              0.08
              
              
              $
              (0.88
              )
              
              $
              0.13
              
              
              $
              (0.00
              )Other Operating
      DataDepreciation
              
              $
              11,210,472
              
              
              $
              1,809,623
              
              
              $
              -
              
              
              $
              -
              
              $
              6,908,980
              
              
              $
              8,034,011
              
              
              $
              7,758,332
              
              
              $
              7,633,642Other
      depreciation and amortization
              
              $
              781,751
              
              
              $
              139,943
              
              
              $
              -
              
              
              $
              -
              
              $
              110,019
              
              
              $
              133,124
              
              
              $
              128,687
              
              
              $
              150,884Year-end Financial
      PositionCash
      held in trust fund
              
              $
              -
              
              
              $
              -
              
              
              $
              100,927,634
              
              
              $
              -
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Rental
      equipment, net
              
              
              260,767,678
              
              
              
              255,692,116
              
              
              
              -
              
              
              
              -
              
              
              133,172,649
              
              
              
              124,950,463
              
              
              
              121,081,185
              
              
              
              125,574,407Total
      assets
              
              
              286,463,157
              
              
              
              289,998,510
              
              
              
              102,569,184
              
              
              
              169,441
              
              
              169,397,016
              
              
              
              149,081,546
              
              
              
              141,454,333
              
              
              
              144,824,204Current
      liabilities
              
              
              15,146,529
              
              
              
              13,883,446
              
              
              
              2,526,315
              
              
              
              144,843
              
              
              16,966,002
              
              
              
              12,586,433
              
              
              
              9,793,667
              
              
              
              9,150,688Short-term
      debt obligations
              
              
              5,170,614
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Junior
      term B debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              15,293,910Revolving
      credit facility
              
              
              131,919,701
              
              
              
              137,377,921
              
              
              
              -
              
              
              
              -
              
              
              129,895,169
              
              
              
              129,862,723
              
              
              
              78,370,611
              
              
              
              92,898,449Total
      liabilities
              
              
              212,325,126
              
              
              
              217,952,753
              
              
              
              2,526,315
              
              
              
              144,843
              
              
              160,690,875
              
              
              
              151,989,341
              
              
              
              105,613,724
              
              
              
              118,267,019Common
      stock, subject to conversion
              
              
              -
              
              
              
              -
              
              
              
              19,932,029
              
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Paid
      in capital (Members' equity)
              
              
              84,589,119
              
              
              
              84,383,579
              
              
              
              78,410,547
              
              
              
              24,719
              
              
              40,270,000
              
              
              
              40,270,000
              
              
              
              40,270,000
              
              
              
              40,269,999Total
      stockholders' equity
              
              $
              74,138,031
              
              
              $
              72,045,757
              
              
              $
              80,110,840
              
              
              $
              24,598
              
              $
              (8,706,141
              )
              
              $
              (2,907,795
              )
              
              $
              35,840,609
              
              
              $
              26,557,185




(1)
            Includes
      the impact of the undesignated interest rate swap held by the
      Predecessor.(2)
            Financial
      Position amounts disclosed for the year ended December 31, 2005 related to
      the Predecessor are unaudited.  The corresponding Operations
      Summary and Other Operating Data disclosed
      have been audited.




24





ITEM 7.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ESSEX RENTAL
      CORP. AND ESSEX HOLDINGS LLC
  (PREDECESSOR)




The
following discussion should be read in conjunction with our consolidated
financial statements and the accompanying notes thereto included elsewhere in
this Annual Report on Form 10-K. The following discussion contains, in addition
to historical information, forward-looking statements that include risks and
uncertainties (see discussion of “Forward-Looking Statements” included elsewhere
in this Annual Report on Form 10-K). Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those factors set forth under Item 1A—Risk
Factors of this Annual Report on Form 10-K.





Overview





History





Essex
Rental was formed on August 21, 2006 as Hyde Park Acquisition Corp. to serve as
a vehicle to effect a merger, capital stock exchange, asset acquisition or other
similar business combination with an operating company.   Essex Rental
consummated its initial public offering on March 13, 2007.  All
activity from August 21, 2006 (inception) through March 13, 2007 relates to
Essex Rental Corp’s (formerly Hyde Park Acquisition Corp.) formation and initial
public offering. From March 13, 2007 through October 31, 2008, the Company’s
activities were limited to identifying prospective target businesses to acquire
and complete a business combination.  On October 31, 2008, the Company
consummated the acquisition of Holdings and its wholly-owned subsidiary, Essex
Crane, and, as a result, is no longer in the development stage.  In
August 2009, the Company formed a new subsidiary, Essex Finance Corp., to
facilitate the acquisition of rental equipment.  For more information
regarding the acquisition of Holdings and Essex Crane, see note 1 to our
financial statements.





Business




Essex
Crane is a leading provider of lattice-boom crawler crane and attachment rental
services and possesses one of the largest fleets of such equipment in the United
States.  Over approximately 49 years of operation, since its founding
in 1960, Essex Crane has steadily grown from a small, family-owned crane rental
company to a private equity owned professionally managed company that today is a
public company and one of the leading players in the industry offering lattice
boom crawler rental services to a variety of customers, industries and regions
mainly throughout the United States and Canada.





Over the
past several years, Essex Crane has been focused on reinvesting capital into its
rental fleet.  Specifically, it has sold lower lifting capacity cranes
for better utilized heavier lifting capacity cranes.  During the years
ended December 31, 2009, 2008 and 2007, the Company invested approximately,
$19.8 million, $20.8 million and $18.8 million, respectively into new cranes and
attachments for its rental fleet.





Essex
Crane’s investment decisions contributed greatly to the repositioning Essex
Crane’s fleet to maximize its utilization rates and average rental
rates.  Although we believe the repositioning of the fleet has
maximized utilization rates and average rental rates, the economic downturn has
significantly adversely impacted our business activity levels.  During
the periods reported:




·
            utilization rates of cranes
      decreased to 43.6% (or 48.2%, if calculated using the “hits” method) in
      2009 from 72.1% (or 76.3%, if calculated using the “hits” method) in 2007
      on a pro forma basis;




·
            average crane rental rates
      increased to $21,081 in 2009 from $16,266 in 2007 on a pro forma basis,
      and average attachment rental rates increased to $18,776 in 2009 from
      $14,243  in 2007 on a pro forma basis;
  and




·
            utilization rates of attachments
      decreased to 18.0% (or 20.2% if calculated using the “hits” method) in
      2009 from 24.6% (or 27.3% if calculated using the “hits” method) in 2007
      on a pro forma basis.


25





The
impact of the economic downturn is also reflected in Essex Crane’s operating
results and cash flow. During the period from December 31, 2007 through December
31, 2009:





·
            revenue decreased by 33.3% to
      $52.1 million in 2009 from $78.1 million in 2007 on a pro forma basis and
      equipment rental revenue decreased by 29.1% to $34.6 million in 2009 from
      $48.8 million in 2007 on a pro forma
  basis;





·
            cost of revenues decreased by
      19.9% to $32.9 million in 2009 from $41.1 million in 2007 on a pro forma
      basis but increased as a percentage of total revenue to 63.3% from
      52.6%;




·
            selling, general and
      administrative expenses increased by $0.9 million or 9.4% to $10.5 million
      in 2009 from $9.6 million in 2007 on a pro forma basis primarily due to
      expenses related to being a publicly traded company.  As a
      percentage of total revenue these costs increased to 20.2% from
      13.5%;




Results
of Operations





Essex
Rental Corp. – Year ended December 31, 2009 compared to years ended December 31,
2008 and 2007





The
Company had a net income of $1.2 million for the year ended December 31,
2009.  Total revenue, cost of revenues and gross profit were $52.1
million, $32.9 million and $19.2 million, respectively, for the year ended
December 31, 2009.  Selling, general, administrative and other
expenses of $11.3 million was composed primarily of salaries, payroll taxes
benefits, sales and marketing, insurance, professional fees, rent, travel,
depreciation and amortization expenses.  Interest expense related to
borrowings under Essex Crane’s revolving credit facility was $6.7 million for
the year ended December 31, 2009.  The Company had an income tax
benefit of $23,000 for the year ended December 31, 2009 related to income before
income taxes of $1.2 million.





Essex
Rental had a net loss of $11.9 million for the year ended December 31, 2008,
including an after-tax charge related to goodwill impairment of
approximately $14.8 million ($23.9 million gross). Absent that item, net income
would have been approximately $2.9 million.  Essex Rental’s financial
results for the year ended 2008 included the operations of Essex Crane for the
two month post acquisition period.  Total revenue, cost of revenues
and gross profit were $14.9 million, $7.1 million and $7.8 million,
respectively.  Selling general, administrative and other expenses of
$4.2 million was composed primarily of salaries, payroll taxes benefits, sales
and marketing, insurance, professional fees, rent and travel expenses and
included $1.1 million of transaction costs.  Interest income from cash
held in trust was $1.4 million while interest expense related to borrowings
under Essex Crane’s revolving credit facility was $1.1 million for the year
ended December 31, 2008.  Essex Rental had a tax benefit of $8.1
million for the year ended December 31, 2008 primarily related to the net loss
before income taxes of $20.0 million.





For the
year ended December 31, 2007, Essex Rental had a net income of $1.7 million
derived from interest income of $2.5 million offset by operating expenses of
$0.4 million, including officers' liability insurance, professional fees, travel
and other expenses, Delaware franchise taxes, transfer agent and trustee fees,
administrative fees, other operating expenses and includes $0.2 million of dead
deal costs and $0.4 million of New York State and City income
taxes.





Essex
Rental Corp. – Year ended December 31, 2009 compared to unaudited pro-forma year
ended December 31, 2008 operating results





As
previously discussed, Essex Rental acquired Holdings and its operating
subsidiary Essex Crane on October 31, 2008.  As a result, our
consolidated operating results only include Essex Crane’s results of operations
since the acquisition date.  The following financial information
provides a comparison of the Company’s results of operations for the year ended
December 31, 2009 to the unaudited pro forma results of operations for the year
ended December 31, 2008 as if we had acquired Holdings (and Essex Crane) on
January 1, 2008.  Management believes that such pro forma comparison
provides a more meaningful comparison of our business’s results of operations
for the year ended December 31, 2008.  The following unaudited pro
forma operating results of our business are not intended to be, and not
indicative of, the consolidated results of operations of the Company that would
have been reported had the acquisition of Holdings (and Essex Crane) been
completed as of the dates presented, and are not necessarily indicative of the
results to be expected going forward.   The unaudited pro forma
financial information should be read in conjunction with our historical
financial statements and the historical financial statements of Holdings
included elsewhere in this annual report on Form 10-K.


26





UnauditedSuccessor
                      
                      
                      Pro FormaYear Ended December 31,2009
                      
                      
                      2008Revenue
                      
                      $
                      52,084,392
                      
                      
                      $
                      85,851,346Cost
      of revenues
                      
                      
                      32,900,942
                      
                      
                      
                      38,444,438Gross
      profit
                      
                      
                      19,183,450
                      
                      
                      
                      47,406,908Selling,
      general, administrative and other operating expenses
                      
                      
                      11,329,156
                      
                      
                      
                      18,693,621Goodwill
      impairment
                      
                      
                      -
                      
                      
                      
                      23,895,733Income
      from operations
                      
                      
                      7,854,294
                      
                      
                      
                      4,817,554Other
      income (expense), net
                      
                      
                      (6,681,097
                      )
                      
                      
                      (9,524,943
                      )Income
      (loss) before income taxes
                      
                      
                      1,173,197
                      
                      
                      
                      (4,707,389
                      )Provision
      (benefit) for income taxes
                      
                      
                      (22,609
                      )
                      
                      
                      (1,068,388
                      )Net
      income (loss)
                      
                      $
                      1,195,806
                      
                      
                      $
                      (3,639,001
                      )





For the
year ended December 31, 2009, we had net income of $1.2 million compared to a
pro forma net loss of $3.6 million for the year ended December 31,
2008.   The $4.8 million increase in net income was primarily due to a
$23.9 million ($14.8 million net of tax) goodwill impairment charge recorded in
2008, a decrease in selling, general, administrative and other operating
expenses of $7.4 million as a result of $6.2 million of transaction costs not
eligible for capitalization incurred in 2008 and $2.8 million lower
interest expense associated with lower market interest rates on our
debt.  The decrease in expenses were offset by a decrease in revenues
of $33.8 million (39.3%) and gross profit of $28.2 million (59.5%),
respectively, resulting primarily from lower equipment rental revenue of $27.3
million and lower transportation revenue of $3.3 million.





UnuaditedSuccessor
                  
                  
                  Pro FormaYear Ended December 31,2009
                  
                  
                  2008REVENUEEquipment
      rentals
                  
                  $
                  34,556,696
                  
                  
                  $
                  61,823,678Used
      rental equipment sales
                  
                  
                  6,478,197
                  
                  
                  
                  8,439,805Transportation
                  
                  
                  4,909,346
                  
                  
                  
                  8,163,171Equipment
      repairs and maintenance
                  
                  
                  6,140,153
                  
                  
                  
                  7,424,692Total
      revenue
                  
                  $
                  52,084,392
                  
                  
                  $
                  85,851,346





Revenue
for the year ended December 31, 2009 was $52.1 million, a 39.3% decrease
compared to pro forma revenue of $85.9 million for the year ended December 31,
2008.   Revenue and Pro Forma Revenue were comprised of the following
components:





·
            Equipment
      rentals revenue, which represented 66.4% of total revenue, was $34.6
      million for the year ended December 31, 2009, a 44.1% decrease from $61.8
      million on a pro forma basis for the year ended December 31,
      2008.  This decrease was primarily driven by a decrease in crane
      utilization to 43.6% under the “days” method (or 48.2% if calculated using
      the “hits” method) for the year ended December 31, 2009 from 72.5% under
      the “days” method (or 77.0% if calculated using the “hits” method) on a
      pro forma basis for the year ended December 31, 2008.  The
      decrease in utilization was a result of excess market supply of rental
      equipment compared to the demand brought on by the weakening economy and a
      difficult commercial credit environment.  The Company also
      experienced a decrease in the average crane rental rate of 1.4% to $21,081
      (per crane per rental month) for the year ended December 31, 2009 relative
      to $21,382 on a pro forma basis for the year ended December 31,
      2008.  The slight decrease in the average rental rate is due to
      the expiration of rental agreements executed at higher rental rates in the
      prior year and new agreements being entered into at lower average rental
      rates.  As more rental agreements expire, we expect the average
      rental rates will continue to decline further in 2010 until utilization
      rates recover.





27


·
            Used
      rental equipment sales revenue, which represented 12.4% of total revenue,
      was $6.5 million for the year ended December 31, 2009, a 23.2% decrease
      from pro forma used rental equipment sales revenue of $8.4 million for the
      year ended December 31, 2008.  These used equipment sales have
      presented Essex Crane with opportunities to further enhance its
      combination of cranes and attachments by providing an additional cash flow
      source for purchasing additional new rental equipment.  Thirteen
      lower lifting capacity cranes and attachments were sold by Essex Crane for
      the year ended December 31, 2009 which was a decrease from twenty two for
      the year ended December 31, 2008.  In both periods the market
      presented opportunities to sell a number of the lower utilization units
      which have lower rental rates, and Essex reinvested the proceeds of such
      sales into a smaller number of larger cranes and attachments which yield
      higher utilization rates and higher relative rental rates on the capital
      costs and enable Essex to improve the strategic position of its rental
      fleet for the future.  The average lifting capacity of cranes
      sold was 158 tons and 153 tons for the years ended December 31, 2009 and
      2008, respectively, compared 256 tons and 295 tons for cranes purchased
      during the same periods, respectively.  Cranes sold during the
      year ended December 31, 2009 were sold at an average price in excess of
      120% of Orderly Liquidation Value (“OLV”).  OLV is determined
      for collateral measurement purposes by an independent appraiser on behalf
      of the lead lender for the Company’s asset based revolving credit
      facility;





·
            Transportation
      revenue, which represented 9.4% of total revenues was $4.9 million for the
      year ended December 31, 2009, a 39.9% decrease from pro forma
      transportation revenue of $8.2 million for the year ended December 31,
      2008.  This decrease is primarily a result of lower crane rental
      utilization and was impacted by the combination of cranes and attachments
      rented and the specific distances that equipment had to move for various
      rentals; and





·
            Equipment
      repairs and maintenance revenue (including rigging and other services),
      which represented 11.8% of total revenue, was $6.1 million for the year
      ended December 31, 2009, a 17.3% decrease from pro forma repair and
      maintenance revenue of $7.4 million for the year ended December 31,
      2008.  This decrease is attributed to a lower demand for
      repairs, maintenance and other services resulting from lower crane rental
      utilization.





UnauditedSuccessor
                    
                    
                    ProFormaYearEndedDecember31,2009
                    
                    
                    2008COST
      OF REVENUESSalaries,
      payroll taxes and benefits
                    
                    $
                    6,006,715
                    
                    
                    $
                    8,041,998Depreciation
      expense (a)
                    
                    
                    11,210,472
                    
                    
                    
                    10,561,967Book
      value of equipment sold
                    
                    
                    5,584,784
                    
                    
                    
                    4,625,783Transportation
                    
                    
                    3,743,595
                    
                    
                    
                    6,727,663Equipment
      repairs and maintenance
                    
                    
                    4,873,005
                    
                    
                    
                    6,647,754Yard
      operating expenses
                    
                    
                    1,482,371
                    
                    
                    
                    1,839,273Total
      cost of revenues
                    
                    $
                    32,900,942
                    
                    
                    $
                    38,444,438





(a)
            A
      pro forma adjustment to depreciation expense of $1.8 million is reflected
      for the year ended December 31, 2008 based on the fair value purchase
      price allocation to the rental equipment which was significantly in excess
      of the historical carrying amount of Holdings, thereby increasing
      depreciation expense.





Cost of
revenues for the year ended December 31, 2009 was $32.9 million, a 14.4%
decrease from the pro forma cost of revenues of $38.4 million for the year ended
December 31, 2008.  Cost of revenues was 63.3% of total revenue for
the year ended December 31, 2009, relative to 44.8% for the year ended December
31, 2008.  The decrease in cost of revenues resulted from decreases in
salaries, payroll taxes and benefits, transportation expenses and equipment
repairs and maintenance partially offset by increases in depreciation expense
and in the net book value of equipment sold as described below.





Salary, payroll tax and benefit
expenses decreased 25.3% to $6.0 million for the year ended December 31, 2009
from $8.0 million on a pro forma basis for the year ended December 31,
2008.  The decrease was a direct result of a 10% salary reduction on
certain operations managers, reduced hours, lower overtime, some headcount
reduction and reduced bonus expense.





Depreciation expense related to rental
equipment increased 6.1% to $11.2 million for the year ended December 31, 2009
compared to $10.6 million on a pro forma basis for the year ended December 31,
2008.  The increase in depreciation expense is primarily related to
equipment purchased during 2009.


28





Net book value of rental equipment sold
increased 20.7% to $5.6 million for the year ended December 31, 2009, from $4.6
million on a pro forma basis for the year ended December 31,
2008.  The increase in net book value of equipment sold was driven by
a higher relative asset basis for the sales occurring after the fair value
acquisition accounting resulting in a step-up in basis to fair market value
recorded on October 31, 2008 partially offset by a decrease in the number of
cranes sold.





Transportation
expenses decreased 44.4% to $3.7 million for the year ended December 31, 2009,
from $6.7 million for the year ended December 31, 2008.  The decrease
was related primarily to lower crane rental utilization.





Equipment
repairs and maintenance expenses decreased 26.7% to $4.9 million for the year
ended December 31, 2009, from $6.6 million for the year ended December 31,
2008.  The decrease was primarily related to lower crane rental
utilization and also related to improved cost productivity and lower parts
expense.





Yard
operating expense decreased by 19.4% to $1.5 million for the year ended December
31, 2009, from $1.8 million for the year ended December 31, 2008.  The
decrease was primarily related to lower crane rental utilization.





Essex
Crane’s gain on the sale of used rental equipment was $0.9 million (13.8%
margin, calculated by dividing the gain on the sale divided by the revenue from
such sale) for the year ended December 31, 2009 compared to a pro forma gain of
$3.8 million (45.2% margin) for the year ended December 31, 2008.  The
lower level of gains on sales was due to the increase in book value of equipment
driven by a higher relative asset basis resulting from the fair value
acquisition accounting recorded on October 31, 2008 and also due to the lower
levels of used equipment sales in the current period.  The pro forma
gain on sale of equipment included in these pro forma financial results for the
year ended December 31, 2008, presented consistently with that used in the
Company’s Definitive Proxy Statement, filed with the SEC on October 8, 2008,
will not be indicative of future results since the rental equipment was adjusted
to fair value as of the closing date of the acquisition, thereby reducing
potential future gains on sale.





UnauditedSuccessor
                        
                        
                        ProFormaYearEndedDecember31,2009
                        
                        
                        2008SELLING,
      GENERAL, ADMINISTRATIVE AND OTHER OPERATING EXPENSESSelling,
      general and administrative
                        
                        $
                        10,547,405
                        
                        
                        $
                        17,698,297Goodwill
      impairment
                        
                        
                        -
                        
                        
                        
                        23,895,733Non-rental
      depreciation and amortization (a)
                        
                        
                        781,751
                        
                        
                        
                        995,324Total
      selling, general, administrative and other operating
    expenses
                        
                        $
                        11,329,156
                        
                        
                        $
                        42,589,354





(a)
            A
      pro forma adjustment to non-rental depreciation amortization expense of
      $0.9 million was recorded for the year ended December 31, 2008 for the
      amortization of the customer list and trademark acquired in the Holdings
      acquisition.





Total
Selling, general, administrative and other operating expenses for the year ended
December 31, 2009 was $11.3 million, a $31.3 million or 73.4% decrease from
$42.6 million on a pro forma basis for the year ended December 31,
2008.  Total selling, general, administrative and other expenses
decreased primarily due to the $23.9 million goodwill impairment charge recorded
in 2008 as well as $6.2 million of transaction related expenses not eligible for
capitalization incurred in 2008, partially offset by higher operating costs
associated with being a public company including fees related to the Company’s
board of directors, audit, legal, insurance and investor
relations.   Selling, general, administrative and other operating
expenses also decreased due to a compensation expense decrease of $1.4 million
primarily due to a reduction in bonus expense and the temporary salary reduction
program pursuant to which our chief executive officer, members of our executive
management and other key managers receiving salaries elected to reduce the
amount of their salaries paid in cash in exchange for fully vested common shares
that are temporarily restricted from sale valued at approximately 42% of the
reduced cash compensation.  Other components of administrative
expenses include: salaries, payroll taxes and benefits, insurance and selling
and marketing expenses.


29





UnauditedSuccessor
                  
                  
                  Pro FormaYear Ended December 31,2009
                  
                  
                  2008OTHER
      INCOME (EXPENSES), NETOther
      income (expense)
                  
                  $
                  643
                  
                  
                  $
                  -Interest
      expense
                  
                  
                  (6,681,740
                  )
                  
                  
                  (9,524,943
                  )Total
      other income (expenses), net
                  
                  $
                  (6,681,097
                  )
                  
                  $
                  (9,524,943
                  )





Interest
expense of $6.7 million for the year ended December 31, 2009 decreased by $2.8
million or 29.9% from $9.5 million on a pro forma basis primarily due to lower
market interest rates on the Company’s debt and a decrease in the balance of
debt outstanding.





Income
tax benefit was approximately $23,000 for the year ended December 31, 2009,
compared to a $1.1 million pro forma tax benefit for the year ended December 31,
2008.  The lower income tax benefit for the year ended December 31,
2009 is primarily due to an increase of income before income taxes of $5.9
million.  The effective tax rates were (1.9%) and 22.7% for the year
ended December 31, 2009 and 2008, respectively.  The effective rate
was lower than the statutory federal tax rate for the year ended December 31,
2009 due to 2008 tax return to provision differences, an increase in uncertain
tax positions and state and local taxes including a change in estimate of $0.6
million associated with the Company’s state income tax apportionments and
rates.  The effective tax rate was lower than the statutory federal
tax rate for the year ended December 31, 2008 due to state and local
taxes.





Essex
Crane had 111 full-time employees as at December 31, 2009 compared to 129
full-time employees at December 31, 2008.





Essex
Rental Corp. - Unaudited pro forma fiscal year ended December 31, 2008
operating results compared to unaudited pro-forma fiscal year ended
December 31, 2007 operating results





As
previously discussed, Essex Rental Corp. acquired Holdings and its operating
subsidiary Essex Crane on October 31, 2008.  As a result, our
consolidated operating results only include Essex Crane’s results of operations
since the acquisition date. The following unaudited pro forma financial
information provides a comparison of the pro forma results of operations for the
years ended December 31, 2008 and 2007 as if we had acquired Holdings (and
Essex Crane) on January 1, 2007.  Management believes that such
pro forma comparison provides a more meaningful comparison of our business’s
results of operations for the years ended December 31, 2008 and
2007.  The following unaudited pro forma operating results of our
business are not intended to be, and not indicative of, the consolidated results
of operations of the Company that would have been reported had the acquisition
of Holdings (and Essex Crane) been completed as of the dates presented, and are
not necessarily indicative of the results to be expected for a full year, going
forward.   The unaudited pro forma financial information should
be read in conjunction with our historical financial statements and the
historical financial statements of Holdings included elsewhere in this Annual
Report on Form 10-K.





UnauditedProFormaYearEndedDecember31,2008
                  
                  
                  2007Revenue
                  
                  $
                  85,851,346
                  
                  
                  $
                  78,122,079Cost
      of revenues
                  
                  
                  38,444,438
                  
                  
                  
                  41,111,313Gross
      profit
                  
                  
                  47,406,908
                  
                  
                  
                  37,010,766Selling,
      general, administrative and other operating expenses
                  
                  
                  18,693,621
                  
                  
                  
                  10,509,522Goodwill
      impairment
                  
                  
                  23,895,733
                  
                  
                  
                  -Income
      from operations
                  
                  
                  4,817,554
                  
                  
                  
                  26,501,244Other
      income (expense), net
                  
                  
                  (9,524,943
                  )
                  
                  
                  (12,236,793
                  )Income
      (loss) before income taxes
                  
                  
                  (4,707,389
                  )
                  
                  
                  14,264,451Provision
      (benefit) for income taxes
                  
                  
                  (1,068,388
                  )
                  
                  
                  4,162,025Net
      (loss) income
                  
                  $
                  (3,639,001
                  )
                  
                  $
                  10,102,426





For the
year ended December 31, 2008 we had a pro forma net loss of $3.6 million
compared to pro forma net income a $10.1 million in 2007.  The
decrease in pro forma earnings was primarily due to a $23.9 million ($14.8
million net of tax) goodwill impairment charge and $6.2 million of transaction
related expenses not eligible for capitalization recorded in 2008, which
were partially offset by an increase in gross profit of approximately $10.4
million.


30





UnauditedProFormaYearEndedDecember31,2008
                  
                  
                  2007REVENUEEquipment
      rentals
                  
                  $
                  61,823,678
                  
                  
                  $
                  48,800,490Used
      rental equipment sales
                  
                  
                  8,439,805
                  
                  
                  
                  13,232,768Transportation
                  
                  
                  8,163,171
                  
                  
                  
                  8,667,849Equipment
      repairs and maintenance
                  
                  
                  7,424,692
                  
                  
                  
                  7,420,972Total
      revenue
                  
                  $
                  85,851,346
                  
                  
                  $
                  78,122,079




Pro forma
revenue for the year ended December 31, 2008 was $85.9 million, a 9.9% increase
from $78.1 million for the year ended December 31, 2007.  Pro forma
revenue was comprised of the following components:





·
            Pro forma equipment rentals
      revenue, which represented 72.0% of total pro forma revenue, was $61.8
      million for the year ended December 31, 2008, a 26.7% increase from $48.8
      million for 2007. This increase was partly driven by an increase in crane
      utilization to 72.5% (or 77.0% if calculated using the “hits” method) in
      the year ended December 31, 2008 from 72.1% (or 76.3% if calculated using
      the “hits” method) in the year ended December 31, 2007, but mainly driven
      by an increase in the average crane rental rate of 31.4%, to $21,382 (per
      crane per rental month) in the year ended December 31, 2008 relative to
      $16,266 in the year ended December 31, 2007. This increased average crane
      rental rate represents both rental rate increases for the same models of
      equipment year over year, as well as a change in the type and lifting
      capacity of cranes on rent toward higher value and larger lifting capacity
      cranes with higher relative rental rates as Essex Crane continues to
      manage the fleet toward larger lifting
  capacities;





·
            Pro forma attachment rental
      revenue, included in equipment rental revenue described above, was $7.0
      million for the year ended December 31, 2008, a 22.8% increase from $5.7
      million for the fiscal year ended December 31, 2007. This increase was
      driven by a greater number of higher rental rate attachments being on
      rent. Attachments vary in rental rate from $2,000 per month to over
      $100,000 per month for the largest lifting capacity enhancement
      attachments. Essex Crane maintains an extensive group of attachment assets
      which are rented along with their cranes and enhance the cranes’ lifting
      capacity, reach or capability. Accordingly, the utilization percentage for
      these assets may vary greatly and does not necessarily correlate to rental
      revenue because of the diversity in rental rates due to the capability and
      capital cost of the varying attachments. The average utilization of these
      assets was 42.0% (or 44.2% if calculated using the “hits” method) for the
      year ended December 31, 2008 and 24.6% (or 27.3% if calculated using the
      “hits” method) for the year ended December 31,
  2007;




·
            Pro forma used rental equipment
      sales revenue, which represented 9.8% of total pro forma revenue, was $8.4
      million for the year ended December 31, 2008, a 36.2% decrease from $13.2
      million for 2007. These used equipment sales have presented Essex Crane
      with opportunities to further enhance its combination of cranes and
      attachments by providing an additional cash flow source for purchasing
      additional new rental equipment. The number of lower lifting capacity
      cranes sold by Essex Crane was 22 in 2008 which was a decrease from 45 for
      the year ended December 31, 2007.  In both years the market
      presented opportunities to sell many of the lower rental rate units and
      Essex reinvested the proceeds of such sales into a smaller number of
      larger cranes and attachments which yield higher utilization rates and
      higher relative rental rates on the capital costs and enable Essex to
      improve its strategic position of its rental fleet for the
      future.  Cranes sold during the year ended December 31, 2008
      were sold at an average price in excess of 105% of
    OLV;




·
            Pro forma transportation revenue,
      which represented 9.5% of total pro forma revenues, was $8.2 million for
      the year ended December 31, 2008, a 5.8% decrease from $8.7 million for
      the year ended December 31, 2007. This decrease is a result of the
      combination of cranes and attachments rented and the specific distances
      that equipment had to move for various rentals;
  and




·
            Pro forma equipment repairs and
      maintenance revenue (including rigging and other services), which
      represented 8.7% of total revenue, was $7.4 million for both the years
      ended December 31, 2008 and
2007.


31




Unaudited
      Pro FormaYear
      Ended December 31,2008
                    
                    
                    2007COST
      OF REVENUESSalaries,
      payroll taxes and benefits
                    
                    $
                    8,041,998
                    
                    
                    $
                    7,320,488Depreciation
      expense (a)
                    
                    
                    10,561,967
                    
                    
                    
                    10,387,438Book
      value of equipment sold
                    
                    
                    4,625,783
                    
                    
                    
                    7,183,496Transportation
                    
                    
                    6,727,663
                    
                    
                    
                    6,731,983Equipment
      repairs and maintenance
                    
                    
                    6,647,754
                    
                    
                    
                    7,574,332Yard
      operating expenses
                    
                    
                    1,839,273
                    
                    
                    
                    1,913,576Total
      cost of revenues
                    
                    $
                    38,444,438
                    
                    
                    $
                    41,111,313




(a)
            Pro forma adjustments to
      depreciation expense of $1.8 million and $2.4 million are reflected for
      the years ended December 31, 2008 and 2007, respectively,  based
      on the fair value purchase price allocation to the rental equipment which
      was significantly in excess of the carrying amount of Holdings, thereby
      increasing depreciation
expense.





Pro forma
cost of revenues for the year ended December 31, 2008 was $38.4 million for the
year ended December 31, 2008, a 6.5% decrease from $41.1 million for the year
ended December 31, 2007.  Pro forma cost of revenues was 44.8% of
total pro forma revenue for the year ended December 31, 2008, relative to 52.6%
for the year ended December 31, 2007. The decrease in cost of revenues resulted
from decreases in the net book value of equipment sold and equipment repairs and
maintenance partially offset by increases in the salaries, payroll taxes and
benefits and depreciation expenses as described below:




·
            Pro forma salary, payroll tax and
      benefit expenses increased 9.9% to $8.0 million for the year ended
      December 31, 2008, from $7.3 million for the year ended December 31, 2007.
      The increase was also a direct result of the higher utilization of Essex’s
      fleet. In addition, all employees, including those who work directly in
      the generation of revenues, receive bonuses based on Holdings’ financial
      performance, which had higher payouts due to higher profitability levels,
      contributing to increased salary and payroll tax
      expenses.







·
            Pro forma depreciation expense
      related to rental equipment increased 1.7% to $10.6 million for the year
      ended December 31, 2008, from $10.4 million for the year ended December
      31, 2007. The increase in depreciation expense was driven by additional
      investment in lattice-boom crawler cranes and attachments during 2008 as
      Holdings enhanced the size and capacity of its
    fleet.





·
            Pro forma net book value of
      rental equipment sold decreased 35.6% to $4.6 million for year ended
      December 31, 2008, from $7.2 million for the year ended December 31, 2007.
      The decrease in net book value of equipment sold was driven by the
      decrease in the used equipment sales (number of units sold) during 2008 as
      more fully described in used equipment sale revenue partially offset by
      the higher relative asset basis for the sales occurring after the fair
      value acquisition
accounting.





·
            Pro forma equipment repairs and
      maintenance expenses decreased 12.2% to $6.6 million for the year ended
      December 31, 2008, from $7.6 million in the year ended December 31, 2007.
      The decrease was directly impacted by repair and maintenance revenues, a
      result of the increased crane utilization and combination of equipment
      rented and also affected by the fleet mix changes as a result of used
      equipment sales and new equipment
  investments.





·
            Pro forma yard operating expense
      decreased by 3.9% to $1.8 million for the year ended December 31, 2008,
      from $1.9 million for the year ended December 31, 2007.  The
      variances were minimal in this cost
  category.





Essex
Crane’s pro forma gain on the sale of used rental equipment was $3.8 million
(45.2% margin, calculated by dividing the gain on the sale by the revenue from
such sale) for the year ended December 31, 2008 compared to $6.0 million (45.7%
margin) for the year ended December 31, 2007.  The lower level of
gains on sales was the result of the lower levels of used equipment sales in the
corresponding period discussed above.   As a result, the gain on
sale of equipment included in these pro forma financial results for the years
ended December 31, 2008 and 2007 may not be indicative of future results since
the rental equipment was adjusted to fair value as of the closing date of the
acquisition, thereby reducing future gain on sale.


32




Unaudited
      Pro FormaYear
      Ended December 31,2008
                  
                  
                  2007SELLING,
      GENERAL, ADMINISTRATIVE AND OTHER OPERATING EXPENSESSelling,
      general and administrative
                  
                  $
                  17,698,297
                  
                  
                  $
                  9,568,535Goodwill
      impairment
                  
                  
                  23,895,733
                  
                  
                  
                  -Non-rental
      depreciation and amortization (a)
                  
                  
                  995,324
                  
                  
                  
                  940,987Total
      selling, general, administrative and other operating
    expenses
                  
                  $
                  42,589,354
                  
                  
                  $
                  10,509,522




(a)
            Adjustments to non-rental
      depreciation expense of $0.9 million and $0.8 million were recorded for
      the years ended December 31, 2008 and 2007, respectively, based on the
      purchase price allocation of the fair value of the property and equipment
      which was significantly in excess of the carrying amount of Holdings,
      thereby increasing depreciation
expense.





Pro forma
selling, general and administrative expenses for the year ended December 31,
2008 was $17.7 million, an 85.0% increase from $9.6 million in the year ended
December 31, 2007. This increase was primarily the result of the one-time
acquisition transaction related expenses not eligible for
capitalization incurred totaling approximately $6.2 million in
2008.  Also, there were higher employee bonus expenses related to the
better operating performance of the business, higher sales and marketing
expenses and reserves for bad debt, which were partially offset by lower
insurance expenses. Pro forma selling, general and administrative expenses
increased to 20.6% (14.6% excluding the transaction-related costs) of the pro
forma total revenue for the year ended December 31, 2008, from 11.7% for the
year ended December 31, 2007.  Key components of administrative
expenses include: salaries, payroll taxes and benefits, insurance and selling
and marketing expenses.





The
Company recorded a non-cash charge of $23.9 million for the year ended
December 31, 2008 to expense the goodwill related to its October 31, 2008
acquisition.  This non-cash impairment charge is more fully described
in Item 1 of the Form 10-K and note 1 to our consolidated financial
statements.





Pro forma
non-rental depreciation and amortization expense increased 5.8% to $1.0 million
for the year ended December 31, 2008, from $0.9 million for the year ended
December 31, 2007.  Both years had a depreciation adjustment for the
fair value purchase accounting adjustment and the amortization of the other
identifiable intangibles resulting from the acquisition.  The increase
in depreciation expense was driven by additional property and equipment acquired
during 2008.




Unaudited
      Pro FormaYear
      Ended December 31,2008
                    
                    
                    2007OTHER
      INCOME (EXPENSES), NETInterest
      expense
                    
                    $
                    (9,524,943
                    )
                    
                    $
                    (12,236,793
                    )Total
      other income (expenses), net
                    
                    $
                    (9,524,943
                    )
                    
                    $
                    (12,236,793
                    )




(a)
            Adjustments of $0.7 million and
      $0.1 million were recorded for the years ended December 31, 2008 and 2007,
      respectively, for the additional borrowing on the revolving credit
      facility that was a direct result of the acquisition and for the
      amortization of deferred financing
costs.





The pro
forma benefit for income taxes was $1.1 million for the year ended December 31,
2008, compared to a $4.2 million pro forma tax provision for the year ended
December 31, 2007.  The higher provision for income taxes for the year
ended December 31, 2007 is primarily due to higher pre-tax income and partially
offset by the 2007 reversal of substantially all of the valuation allowance
maintained at December 31, 2006.





Essex
Crane had 129 full-time employees as at December 31, 2008 compared to 124
full-time employees at December 31, 2007.


33


Essex Holdings
LLC - Ten months ended
October 31, 2008 compared to year ended December 31, 2007





The
following is a discussion of the key factors that impact the consolidated
operating results, financial condition, liquidity and cash flows of Holdings for
the ten months ended October 31, 2008 compared to the year ended December 31,
2007 and should be read in conjunction with Holdings’ consolidated financial
statements and the notes thereto.





The
following is a summary of the results of Holdings for the ten months ended
October 31, 2008 compared to the year ended December 31, 2007:





Total
revenue for the ten months ended October 31, 2008 was a $71.0 million compared
to $78.1 million for the year ended December 31, 2007. The decline in total
revenue and components thereof was primarily due to a two month shorter period
in 2008. Total revenue was comprised of the following components:





·
            Equipment rental revenue, which
      represented 72.3% of total revenue, was $51.3 million for the ten
      months ended October 31, 2008 compared to $48.8 million or 62.5% of total
      revenue for the year ended December 31, 2007. This increase was partly
      driven by an increase in crane utilization, but mainly driven by an
      increase in the average crane rental rate.  This increased
      average crane rental rate represents both rental rate increases for the
      same models of equipment year over year, as well as a change in the type
      and lifting capacity of cranes on rent toward larger, higher rental rate
      cranes as Essex continues to manage the fleet toward larger lifting
      capacities.





·
            Used equipment sale revenue,
      which represented 9.5% of total revenue, was $6.7 million for the for the
      ten months ended October 31, 2008 compared to $13.2 million or 16.9% of
      total revenue for the year ended December 31, 2007.  This was
      due to fewer crane sales in the ten month period ended October 31,
      2008.  These used equipment sales have presented Essex Crane
      with opportunities to further enhance its combination of cranes and
      attachments by providing an additional cash flow source for purchasing
      additional new rental equipment. The number of lower lifting capacity
      cranes sold by Essex Crane in 2008 was less than the prior
      year.  In both years the market presented opportunities to sell
      many of the lower rental rate units and Essex Crane reinvested the
      proceeds of such sales into a smaller number of larger cranes and
      attachments which yield higher utilization rates and higher rental rates
      on the capital costs and enable Essex Crane to improve its strategic
      position of its rental fleet for the
  future.





·
            Transportation revenue, which
      represented 9.8% of total revenue, was $6.9 million for the ten months
      ended October 31, 2008 compared to $8.7 million or 11.1% total revenue for
      the year ended December 31,
2007.





·
            Repair and maintenance revenue
      (including rigging and other services), which represented 8.4% of total
      revenue, was $6.0 million for the  ten months ended October 31,
      2008 compared to $7.4 million or 9.5% of total revenue for the year ended
      December 31, 2007.





Cost of
revenues for the ten months ended October 31, 2008 was $29.5 million compared to
$38.8 million in the year ended December 31, 2007.  Cost of revenues
was 41.6% of total revenue for the for the ten months ended October 31, 2008,
relative to 49.6% for the year ended December 31, 2007.  The decrease
in cost of revenues between the ten months ended October 31, 2008 and year ended
December 31, 2007 was due to the two month shorter period in 2008.





·
            Salary, payroll tax and benefit
      expenses was $6.7 million for the ten months ended October 31, 2008
      compared to $7.3 million for the year ended December 31,
      2007.





·
            Depreciation expense related to
      rental equipment was $6.9 million for the ten months ended October 31,
      2008 compared to $8.0 million for the year ended December 31,
      2007.





·
            Net book value of rental
      equipment sold was $3.2 million for the ten months ended October 31, 2008
      compared to $7.2 million for the year ended December 31, 2007. The
      decrease in net book value of equipment sold was driven by the decrease in
      the used equipment sales (number of units sold) during
      2008.





·
            Equipment repairs and maintenance
      expenses were $5.4 million for the ten months ended October 31, 2008
      compared to $7.6 million for the year ended December 31, 2007. The
      decrease was a direct result of the repair and maintenance activities, a
      result of the increased crane utilization and combination of equipment
      rented and also affected by the fleet mix changes as a result of used
      equipment sales and new equipment
  investments.


34





·
            Yard operating expense was $1.5
      million for the ten months ended October 31, 2008 compared to $1.9 million
      for the year ended December 31,
2007.





Essex’s
gain on the sale of used rental equipment was $3.5 million (52.5% margin) for
the ten months ended October 31, 2008 and $6.0 million (45.7% margin) for the
year ended December 31, 2007, which was due to fewer crane sales in the shorter
2008 period.





Selling,
general and administrative expenses for the ten months ended October 31, 2008
was $13.7 compared to $9.1 million in the year ended December 31,
2007.  This increase was primarily the result of acquisition
transaction related expenses not eligible for capitalization incurred
totaling approximately $5.2 million including an associated $500,000 bonus
payment in 2008.  Selling, general and administrative expenses were
19.3% (11.9% excluding transaction costs) of total revenue for the ten months
ended October 31, 2008 which were higher than 11.7% for the year ended December
31, 2007.  Components of administrative expenses include: salaries,
payroll taxes and benefits, insurance and selling and marketing
expenses.





Interest
expense was $7.7 million for the ten months ended October 31, 2008 compared to
$12.2 million for the year ended December 31, 2007.  This decrease
resulted from lower market interest rates and a two month shorter period in
2008.  Market interest rates declined significantly in
2008.





Other
income (expense) includes the effects of marking the interest rate swap to
market and ultimate settlement costs which caused a $0.5 million expense for the
ten months ended October 31, 2008 compared to a $2.8 million charge to expense
in the year ended December 31, 2007. This represented the present value of the
future cash settlement payments under the swap agreement.





Provision
for income taxes was $8.1 million for the ten month period ended October 31,
2008, compared to $3.9 million tax provision for the year ended December 31,
2007.  As of December 31, 2007, Holdings had two consecutive years of
significant net income before tax and expected similar future earnings
performance, thereby resulting in establishing a tax provision and relieving the
valuation reserve against the net operating losses in the balance sheet that
existed at December 31, 2006. The increase in provision for income taxes is
primarily due to higher pre-tax income and the utilization of net operating loss
carry-forwards from prior years partially offset by the reversal of
substantially all of the valuation reserve maintained at December 31,
2006.





Net income for the ten months ended October 31, 2008 was $11.4 million compared
to a net income of $11.2 million for the year ended December 31,
2007.





Liquidity
and Capital Resources





The
Company has substantial liquidity from its operating cash flows despite the
significant downturn in the construction industry. As described below, the
Company had positive net cash flows for the year ended December 31, 2009 even
though it purchased $17.2 million of new heavier lifting capacity rental
equipment. Combined cash flows provided by operating activities of the Successor
and Predecessor for all three years presented were approximately $64.0 million.
As of December 31, 2009, the Company had total debt obligations outstanding of
approximately $137.1 million and an additional $48.7 million was available for
borrowing under Essex Crane’s $190.0 million revolving credit facility. This
credit facility will provide liquidity through October 31, 2013.  We
believe that the sources of cash from operations and the revolving credit
facility should adequately fund the investment needs of the business for the
foreseeable future. Essex Crane has a $100.0 million interest rate swap
agreement in place that locks this portion of its debt based upon LIBOR of 2.71%
plus 225 basis points.  Management believes this cost of
interest is more than sufficient to cover the rental revenue it
generates since rental rates are established as a percentage of the values of
the underlying equipment.





Cash
Flow from Operating Activities





The
Company’s cash provided by operating activities for the year ended December 31,
2009 was $15.1 million. This was primarily the result of net income of $1.2
million, which, when adjusted for non-cash expense items, such as depreciation
and amortization of $12.5 million, gains on the sale of rental equipment of $0.9
million, deferred income taxes of $0.1 million and stock-based compensation
expense of $0.6 million, provided positive cash flows of approximately $13.4
million. The cash flows from operating activities were also increased by a $5.9
million reduction in receivables and reduced by a $0.3 million increase in spare
parts inventory, a $2.5 million decrease in accounts payable and accrued
expenses and a $1.4 million decrease in unearned rental revenue.




35




The
Company’s cash used in operating activities for the year ended December 31,
2008 was $0.7 million. This is primarily the result of a net loss of
$11.9 million, which, when adjusted for non-cash expense items, such as
goodwill impairment of $23.9 million, depreciation and amortization of $2.0
million, deferred income taxes of $9.9 million, stock-based compensation expense
of $0.1 million, and gains on the sale of rental equipment of $0.3 million,
provided positive cash flows of approximately $3.9 million for the two
month post-acquisition period.  The cash flows from operating
activities were also reduced by $1.7 million of interest earned from the trust
fund, an increase in receivables of $1.5 million, a decrease of
$0.4 million in accounts payable and accrued expenses, and a
$0.4 million increase in unearned rental revenue.





The
Company’s cash used in operating activities for the year ended December 31,
2007 was $0.6 million.  The cash flows used in operating activities
was primarily attributable to net income of $1.7 million, which was more
than offset by interest earned on the cash held in Trust of $2.8
million.





The
Predecessor’s cash provided by operating activities for the ten months ended
October 31, 2008, the date Holdings was acquired, was approximately $27.7
million. This was primarily the result of net income of $11.4 million, which
when adjusted for non-cash expense items such as depreciation and amortization,
gains on sales of rental equipment, deferred income taxes, stock-based
compensation expense and the change in fair value of the interest rate swap,
provided positive cash flows of approximately $23.1 million. The cash flows from
operating activities were also increased by a $1.1 million decrease in accounts
receivable, a $4.0 million increase in accounts payable and accrued expenses and
a $0.4 million increase in unearned rental revenue. These increases were
partially offset by decreases in operating cash flows as a result of a $0.8
million increase in prepaid expenses and other assets and a $0.1 million
increase in spare parts inventory.





The
Predecessor’s cash provided by operating activities for the year ended December
31, 2007 was approximately $22.4 million. This was primarily the result of net
income of $11.2 million, which when adjusted for non-cash expense items such as
depreciation and amortization, gains on sales of rental equipment, deferred
income taxes, stock-based compensation expense and the change in fair value of
the interest rate swap, provided positive cash flows of approximately $20.7
million. The cash flows from operating activities were also increased by a $2.2
million increase in accounts payable and accrued expenses and a $0.6 million
increase in unearned rental revenue. These increases to operating cash flows
were partially offset by decreases resulting from a $1.1 million increase in
accounts receivables.





Cash
Flow from Investing Activities





For
the year ended December 31, 2009, cash used in investing activities was
approximately $11.8 million. This was primarily the result of purchases of
rental equipment of $17.2 million, purchases of property and equipment of $1.0
million and an increase in accounts receivables related to the sale of rental
equipment of $0.1 million. These investing activity uses of cash were partially
offset by $6.5 million in proceeds received for the sale of rental
equipment.





For the
year ended December 31, 2008, cash provided by investing activities was
approximately $23.7 million.  This is primarily the result of the
use of all the cash held in Trust Fund ($102.6 million), the majority of which
was used to fund the acquisition of Holdings, and since the acquisition of
Holdings on October 31, 2008, the purchase of $2.8 million rental equipment and
$0.2 million in property and equipment, partially offset by proceeds from the
sale of rental equipment of $1.7 million.





For
the year ended December 31, 2007, cash used in investing activities was
$98.3 million which consisted of $99.7 million of the cash raised in the
Company’s initial public offering contributed to the cash held in Trust Fund
partially offset by disbursements from the Trust Fund of $1.6 million for
qualified expenditures.





The
Predecessor’s cash used in investing activities for the ten months ended
October 31, 2008, the date Holdings was acquired, was approximately $23.5
million. This was primarily the result of $18.0 million in purchases in rental
equipment, $3.0 million in purchases of property and equipment and a $9.9
million purchase of Hyde Park common stock. These investing uses of cash were
partially offset by a $0.7 million decrease in accounts receivables from rental
equipment sales and proceeds from the sale of rental equipment of $6.7
million.





The
Predecessor’s cash used in investing activities for the year ended December 31,
2007 was approximately $6.4 million. This was primarily the result of purchases
of rental equipment of $18.8 million, purchases of property and equipment of
$0.7 million and an increase in accounts receivables related to the sale of
rental equipment of $0.1 million. These investing activity uses of cash were
partially offset by $13.2 million in proceeds received for the sale of rental
equipment.





36





Cash
flow from financing activities





Cash
used in financing activities was approximately $3.3 million for the year ended
December 31, 2009. This is primarily due to a net decrease in total debt
obligations of $2.9 million. Total borrowings for the year under the short-term
debt obligations and revolving credit facility were $60.7 million and total
payments on the revolving credit facility were $63.6 million. The Company also
used $0.4 million to repurchase warrants.




Cash used
in financing activities was approximately $24.0 million for the year ended
December 31, 2008.  This is primarily due to $18.7 million in payments
made to reacquire and retire common stock for those parties that did not vote in
favor of the business combination and $1.8 million paid for the repurchase of
common stock and warrants.  Since the October 31, 2008 acquisition of
Holdings, total borrowings under the revolving credit facility were
$12.2 million and total payments were $14.9 million.  The
Company also paid $0.8 million of deferred financing costs in connection
with amending the revolving credit facility assumed in the acquisition
of Holdings.





Cash
provided by financing activities for the year ended December 31, 2007 was
$99.9 million.  The Company completed an initial public offering
of units (made up of common stock and warrants) in March 2007,
resulting in net proceeds, after deducting underwriting commissions and other
fees and expenses, of approximately $98.5 million (see note 1 to the
consolidated financial statements for further information related to our initial
public offering) and $1.5 million from the issuance of warrants in a private
placement.





The
Predecessor’s cash used in financing activities for the ten months ended October
31, 2008, the date Holdings was acquired, was approximately $3.5 million. Total
borrowings and payments during the ten months under the Predecessor’s revolving
credit facility were $78.0 million.  The Company also paid
$0.2 million of deferred financing costs and $3.3 million to terminate an
interest rate swap.





The
Predecessor’s cash used in financing activities for the year ended December 31,
2007 was approximately $16.0 million. During the period, the Predecessor
refinanced its long-term debt with a new asset-based senior secured revolving
line of credit facility and made a $50.0 million member dividend distribution.
Total borrowings during the year under the Predecessor’s revolving credit
facility were $133.4 million and total payments were
$81.9 million.  The Company also paid $2.0 million of
deferred financing costs and $15.5 million to repay its Junior Term B
debt.





Revolving
Credit Facility





The
following information discusses significant events during the year ended
December 31, 2009 and 2008 that relate to the revolving credit
facility assumed in the acquisition of Holdings.  Also see note 7 to the
consolidated financial statements for further information related to our credit
facility.





In
conjunction with the acquisition of Holdings on October 31, 2008, Essex Crane
amended its asset-based senior secured revolving line of credit facility, which
permits it to borrow up to $190.0 million.  The maximum borrowing
amount of the revolving credit facility may be increased by up to $5.0 million
any time prior to November 2010 subject to certain specified terms and
conditions in the credit agreement.  Essex Crane may borrow up to an
amount equal to the sum of 85% of eligible net receivables and 75% of the net
orderly liquidation value of eligible rental equipment. The revolving credit
facility is scheduled to mature in October 2013 and is collateralized by a first
security interest in substantially all of the Company’s assets.





The
maximum amount that could be borrowed under the revolving credit facility, net
of letters of credit, interest rate swaps and other reserves was approximately
$180.6 million at December 31, 2009, which was limited by the eligible borrowing
base.  The Company’s available borrowing under the revolving credit
facility is $48.7 million at December 31, 2009. As of December 31, 2009 and for
the year then ended, the Company was in compliance with its covenants and other
provisions of the revolving line of credit facility.  Some of the
financial covenants including a fixed charge coverage ratio and rental equipment
utilization ratio do not become active unless the available borrowing falls
below the $20.0 million threshold.  The Company’s available borrowing
base of approximately $48.7 million well exceeded the threshold at December 31,
2009. Any failure to be in compliance with any material provision or covenant of
these agreements could have a material adverse effect on the Company’s liquidity
and operations.





Our
management believes that cash generated from operations, together with amounts
available under the revolving credit facility, will be adequate to permit Essex
Crane to meet its debt service obligations, ongoing costs of operations, working
capital needs and capital expenditure requirements for the foreseeable future.
Also, substantially all of Essex Crane’s rental equipment and all its other
assets are subject to liens under its revolving credit facility. None of such
assets may be available to satisfy the claims of its general creditors. Essex
Crane’s future financial and operating performance, ability to service or
refinance its debt and ability to comply with covenants and restrictions
contained in its debt agreements will be subject to future economic conditions
and to financial, business and other factors, many of which are beyond its
control.


37





Short-term
Debt Obligations





Essex Finance entered into two
short-term debt obligations with a vendor related to the acquisition of two
cranes and related attachments during the year ended December 31, 2009. These
short-term obligations are interest free for six months and then accrue interest
at 3.0% for an additional six months and are collateralized by the respective
cranes and attachments purchased. On the six month anniversary of the
origination of each obligation, a 10% principal payment is due. On the one year
anniversary of the origination of each obligation, the remaining unpaid
principal balance is due, at which time the Company will likely repay the entire
remaining unpaid principal using proceeds from the revolving credit facility
discussed below. The unpaid principal balances of the individual obligations as
of December 31, 2009 are $2,554,637 and $2,615,977 and mature on October 20,
2010 and November 20, 2010, respectively.




Capitalized
Expenditures




The
Company’s capitalization criteria is to capitalize costs in the period they are
incurred related to projects with total costs in excess of $20,000 when the
projects extend the useful lives or enhance the crane’s capabilities. These
capital projects are depreciated using the straight line method over an
estimated useful life of 7 years. Individual rental equipment items and
property, plant and equipment items purchased with costs in excess of $5,000 are
also capitalized and are depreciated over the useful life of the respective item
purchased.




The
following table provides quantitative information regarding the amount and types
of costs capitalized during 2009 and 2008 (which for the Successor includes the
two month post acquisition period):




PredecessorSuccessor
                          
                          
                          For
      the TenFor
      the years Ended December 31,
                          
                          
                          Months
      Ended2009
                          
                          
                          2008
                          
                          
                          October
      31, 2008Purchases
      of rental equipment
                          
                          $
                          19,588,468
                          
                          
                          $
                          2,782,879
                          
                          
                          $
                          16,055,038Deposits
      made to purchase rental equipment
                          
                          
                          5,513
                          
                          
                          
                          -
                          
                          
                          
                          1,571,079Costs
      to prepare cranes for sale
                          
                          
                          191,909
                          
                          
                          
                          12,127
                          
                          
                          
                          428,261Purchases
      of property, plant & equipment
                          
                          
                          195,676
                          
                          
                          
                          158,721
                          
                          
                          
                          1,386,212Capitalized
      crane repair costs
                          
                          
                          443,149
                          
                          
                          
                          -
                          
                          
                          
                          1,558,081Capitalized
      internally developed software costs
                          
                          
                          372,543
                          
                          
                          
                          -
                          
                          
                          
                          15,390Total
      capitalized expenditures
                          
                          $
                          20,797,258
                          
                          
                          $
                          2,953,727
                          
                          
                          $
                          21,014,061




During the years ended December 31,
2009 and 2008, which represents the two month post acquisition period, the
Successor expensed repair and maintenance costs of approximately $4.9 million
and $1.2 million respectively. During the ten months ended October 31, 2008, the
Predecessor expensed repair and maintenance costs of approximately $5.4 million.
Based on forecasted utilization rates, the Company expects to capitalize
approximately $5.9 million of costs during the year ended December 31, 2010;
approximately $2.9 million of which is for the purchase of one lattice boom
crawler crane.





Off
Balance Sheet Arrangements




Options
and warrants issued in conjunction with our initial public offering and to
members of Essex Crane’s senior management are equity linked derivatives and
accordingly represent off-balance sheet arrangements. The options and warrants
meet the scope exception within the applicable accounting guidance and are
accordingly not accounted for as derivatives, but instead are accounted for as
equity.


38


Contractual
Obligations





The
following table summarizes the Company’s contractual obligations for the next
five years and thereafter as of December 31, 2009:




Payments
      Due by PeriodContractual
      Obligations
                  
                  Less
      than 1 Year
                  
                  
                  1-3
      Years
                  
                  
                  3-5
      Years
                  
                  
                  More
      than 5 Years
                  
                  
                  TotalRevolving
      Credit FacilityPrincipal
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  131,919,701
                  
                  
                  $
                  -
                  
                  
                  $
                  131,919,701Interest
      (a)
                  
                  
                  5,764,891
                  
                  
                  
                  11,529,782
                  
                  
                  
                  4,804,076
                  
                  
                  
                  -
                  
                  
                  
                  22,098,749Short-term
      debt obligationsPrincipal
                  
                  
                  5,170,614
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,170,614Interest
                  
                  
                  65,145
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  65,145Commitment
      to purchase rental equipment
                  
                  
                  2,560,150
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,560,150Operating
      Leases:Minimum
      lease payments
                  
                  
                  323,334
                  
                  
                  
                  253,327
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  576,661Other
      long-term liabilities:Capital
      lease obligations, including interest
                  
                  
                  7,692
                  
                  
                  
                  18,588
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26,280Total
                  
                  $
                  13,891,826
                  
                  
                  $
                  11,801,697
                  
                  
                  $
                  136,723,777
                  
                  
                  $
                  -
                  
                  
                  $
                  162,417,300




(a) Amounts
include interest expected to be incurred on the Company's revolving credit
facility based on the amount outstanding as of December 31,
2009.




Critical
Accounting Policies





Our
discussion and analysis of our financial condition and results of operations for
the purposes of this document are based upon our audited consolidated
audited financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts in the consolidated financial
statements and accompanying notes. Actual results, however, may materially
differ from the calculated estimates and this difference would be reported in
its current operations.





We
prepare our consolidated financial statements in accordance with U.S. generally
accepted accounting principles. Our significant accounting policies are
presented in note 2 to our 2009 audited financial statements, and the following
summaries should be read in conjunction with the audited financial statements
and the related notes thereto. While all accounting policies affect the
financial statements, certain accounting policies may be viewed as critical to
us. Critical accounting policies are those that are both most important to the
portrayal of the financial statements and results of operations and that require
our management’s most subjective or complex judgments or
estimates.  Our management believes the policies that fall within this
category are policies related to revenue recognition, rental equipment,
impairment of goodwill and long-lived assets, derivative financial
instruments and income taxes.





Revenue
Recognition





Essex
recognizes revenue, including multiple element arrangements, in accordance with
the provisions of applicable accounting guidance. We generate revenue from Essex
Crane’s rental of cranes and related equipment and other services such as crane
and equipment transportation and repairs and maintenance. In many instances, we
provide some of the above services under the terms of a single customer
Equipment Rental Agreement.




Revenue
arrangements with multiple elements are divided into separate units of
accounting based on vendor-specific objective evidence if available, third-party
evidence if vendor-specific objective evidence is not available, or estimated
selling price if neither vendor-specific objective evidence nor third-party
evidence is available. The estimated selling prices of the individual
deliverables are not materially different than the terms of the Equipment Rental
Agreements.





Revenue
from equipment rentals are billed monthly in advance and recognized as earned,
on a straight line basis over the rental period specified in the associated
equipment rental agreement. Rental contract terms span several months or longer.
Because the term of the contracts can extend across financial reporting periods,
when rentals are billed in advance, we defer recognition of revenue and record
unearned rental revenue at the end of reporting periods so that rental revenue
is included in the appropriate period. Repair service revenue is recognized when
the service is provided. Transportation revenue from rental equipment delivery
service is recognized for the drop off of rental equipment on the delivery date
and is recognized for pick-up when the equipment is returned to the Essex Crane
service center, storage yard or next customer location. New and used rental
equipment sales are recognized upon acceptance by the customer and the execution
of a definitive sales agreement stipulating the date risk ownership is
transferred.





39





These
policies are directly related to our cash flow and earnings. There are estimates
required in recording certain repair and maintenance revenues and also in
recording any allowances for doubtful accounts. The estimates have historically
been accurate in all material respects and we do not anticipate any material
changes to our current estimates in these areas.




Useful
Lives of Rental Equipment





Essex
Crane’s primary assets consist of its lattice-boom crawler crane and attachment
fleet, which are recorded at cost less accumulated depreciation. In conjunction
with the acquisition of Essex Crane on October 31, 2008, Essex recorded all of
its crane and attachment fleet values at fair value.  Essex
depreciates the existing crane and attachment fleet over periods between 20 and
30 years on a straight line basis such that additions of new cranes to the fleet
are depreciated over a 30 year time period while used cranes acquired will be
amortized over a period of 20 to 25 years. Management experience and third-party
estimates indicate a possible asset life for a properly repaired and maintained
lattice-boom crawler crane fleet of 50 years or more. Essex’s management reviews
the value of its crane fleet annually in conjunction with its
lenders.





Allowance
for Doubtful Accounts





The
Company maintains allowances for doubtful accounts and credit
memos.  The allowance for doubtful accounts is the Company’s best
estimate of the amount of credit losses in accounts receivable and is included
in selling, general and administrative expenses in the consolidated statements
of operations. The Company periodically reviews the allowance for doubtful
accounts and balances are written off against the allowance when management
believes it is probable the receivable will not be recovered. Our estimate could
require change based on changing circumstances, including changes in the economy
or in the particular circumstances of individual customers. Accordingly, the
Company may be required to increase or decrease our allowance.





Business
Combination





On
October 31, 2008, we acquired Essex Crane through the acquisition of
substantially all of the ownership of Holdings. The purchase agreement provided
for a gross purchase price of $210.0 million, less the amount of Essex Crane’s
indebtedness outstanding as of the closing (which was refinanced as of the
closing date with a credit facility made available to Essex Crane as of the
closing date), the $5.0 million stated value of the membership interests in
Holdings not acquired in the acquisition and the amount of certain other
liabilities of Essex Crane as of the closing of the acquisition. The purchase
price was subject to adjustment at and after the closing date based on Essex
Crane’s working capital as of the closing date and crane purchases and sales by
Essex Crane prior to the closing date. The adjusted purchase price of the
Holdings acquisition was $215.5 million, [including the amount of Essex’s
indebtedness outstanding under Essex Crane’s credit facility immediately prior
to the closing]. For additional information regarding the gross purchase
price paid in the acquisition of Essex Crane, including related transaction
expenses, see note 1 to our consolidated financial statements.





The
acquisition, excluding transaction costs was financed with approximately $80.6
million of cash from the proceeds of the Company’s initial public offering, the
$5.0 million stated value of the membership interests in Holdings not acquired
in the acquisition and approximately $129.9 million of assumption of Essex
Crane’s indebtedness outstanding as of the closing (which was assumed and credit
agreement amended as of the closing date). In addition, as was required
under the Company’s certificate of incorporation, shortly after completion of
the acquisition approximately $18.7 million of the proceeds of the Company’s
initial public offering was paid to shareholders who voted against the
acquisition of Essex Crane and exercised their conversion rights.





The
ownership interests in Holdings that were not acquired by the Company in the
acquisition were retained by the management members of Holdings, including
Ronald Schad, our Chief Executive Officer, and Martin Kroll, our Chief Financial
Officer, and are referred to throughout this Annual Report as the “Retained
Interests”.


40




The
Retained Interests are exchangeable at the option of the holder for an aggregate
of 632,911 shares of our common stock.  The Retained Interests do not
carry any voting rights and are entitled to distributions from Holdings only if
the Company pays a dividend to its stockholders, in which case a distribution on
account of the Retained Interests will be made on an “as exchanged”
basis.  Holders of the Retained Interests have agreed, subject to
certain exceptions, not to sell their Retained Interests in Holdings or their
shares of our common stock issuable upon exchange of such Retained Interests,
before October 31, 2010. We have granted certain registration rights to the
holders of the Retained Interests with respect to the shares of our common stock
issuable upon exchange of the Retained Interests. For additional information on
our acquisition of Essex Crane and related transactions, see Note 1 to the
Company’s consolidated financial statements.




Purchase Price in
the Acquisition




The
purchase price of the Holdings acquisition was negotiated during the fourth
quarter of 2007 and the first quarter of 2008 and was agreed upon on March 6,
2008, the date the purchase agreement was signed. The Company based its
purchase price negotiations on its estimates of the enterprise value of
Holdings, which in turn were based on Holdings’ historical and projected revenue
and earnings before interest, taxes, depreciation and amortization (“EBITDA”),
which were provided by the sellers. The Company’s Management and financial
advisor determined that the purchase price was fair to the Company from a
financial point of view using three methodologies:




·
            an
      analysis of expected discounted future cash flows, wherein the advisor
      applied a discount rate of 14.1% to six years of forecasted EBITDA to
      compute the fair value of Essex Crane’s discounted future cash
      flows;





·
            an
      analysis of comparable public companies, wherein the advisor utilized the
      median EBITDA and EBIT multiple of eight publicly traded companies that
      the advisor and Management believed were comparable to Essex Crane;
      and





·
            an
      analysis of comparable transactions, wherein the advisor utilized the
      median EBITDA and EBIT multiple from 14 transactions the advisor and
      Management believed were comparable to the Holdings
      acquisition.





For
additional information regarding the assumptions used to negotiate the purchase
price and the analysis performed by our financial advisor, please see the
sections of Essex’s Definitive Proxy Statement, filed with the Commission on
October 8, 2008, entitled “THE ACQUISITION PROPOSAL – Background of the
Acquisition” (beginning on page 43) and “THE ACQUISITION PROPOSAL –
Fairness Opinion” (beginning on Page 49).




The
Company’s management continued to believe that the negotiated purchase price was
fair as of the October 31, 2008 closing date given the financial results of
Holdings through September 30, 2008, which were consistent with the projections
evaluated by the Company’s management (and the financial advisor that provided a
fairness opinion) when originally analyzing the enterprise value of Holdings and
negotiating the purchase price.





Under the
terms of its initial public offering, the Company’s initial business combination
was required to be with a business whose fair market value was at least equal to
80% of the Company’s net assets on the acquisition date. The fairness
opinion obtained by the Company’s board of directors in connection with the
acquisition included an opinion that the fair market value of Holdings satisfied
the “80% test”, based on the maximum net asset value of the Company, which the
financial advisor determined to be approximately $155.0 million based on the
Company’s book value as of September 30, 2007 of approximately $79.8 million and
approximately $75.2 million in contingent capital representing the aggregate
exercise price of the Company’s outstanding warrants that would become
exercisable following the closing of a business combination, which had not
significantly changed as of the acquisition date. The purchase price
excluding transaction costs (the fair market value of the acquired company) of
$215.5 million was well in excess of $124.0 million (80% of $155.0 million, the
maximum value of the acquiring company).




Goodwill
Impairment – Subsequent to Acquisition





Goodwill
of $23,895,733 was recorded associated with the acquisition of Holdings on
October 31, 2008 for the excess of the purchase price over the fair value of
identifiable assets acquired, net of liabilities assumed.  The
goodwill was subsequently determined to be impaired as of December 31, 2008 upon
review of information up until the date the financial statements were issued and
was written off in full.





As
required by applicable accounting guidance, the Company was required to consider
various triggering events that could indicate that its fair value had fallen
below its book value as of December 31, 2008 which could result in the
recognition of an impairment loss. Management determined that the 35.3% decline
in its stock price from $6.95 on October 31, 2008, the date of the acquisition,
to $4.50 at December 31, 2008 was a triggering event that required further
analysis. The decline in stock price resulted in the Company’s market
capitalization being less than the book value of equity for the month of
December 2008, which management considered an extended period of time. As such,
the Company engaged an experienced and qualified third party to assist
Management in performing a valuation of goodwill using management’s assumptions
discussed below.





41





The
Company, as required by applicable accounting guidance, considered all financial
information available through February 2009 in refining its assumptions
used to perform the valuation including its declining revenues, gross margin, a
declining backlog and other financial information in determining its forecast of
future revenues, gross margin, EBITDA and EBIT. These forecast assumptions
were significantly worse than those utilized in determining the purchase price
in March 2008 (which management also considered appropriate as of the October
31, 2008 acquisition date) due to the rapidly declining economy and the credit
crisis during November and December 2008 which continued into the first quarter
of 2009 at which time it began negatively affecting our business. In
addition to reduced forecast assumptions, there was also a decline in other
market based measures, including the EBITDA median multiple of comparable public
companies, which were brought on by the rapidly declining economy and credit
crisis. A valuation of the Company was prepared for goodwill impairment analysis
purposes using the following methodologies:





·
            an
      analysis of expected discounted future cash flows, wherein a discount rate
      of 13.0% was applied to five years of forecasted future cash flows to
      compute the fair value of Essex’s discounted future cash flows;
      and





·
            an
      analysis of EBITDA multiples calculated using an estimated enterprise
      value based on financial information for comparable public companies,
      wherein an EBITDA multiplier was used for seven publicly traded companies
      that the advisor and Management believed were comparable to
      Essex.





The
average EBITDA estimates for the comparable five year period used in the
discounted cash flow valuation for the goodwill impairment evaluation were 14.1%
lower than those used for the fairness opinion. Also, the EBITDA multiple
derived from the estimated enterprise value of comparable public companies used
for the goodwill impairment evaluation decreased approximately 43.7% from the
acquisition date value used in the fairness opinion.





Based on
the results of the valuation performed, and in conjunction with the significant
decreases in the metrics used in the valuation, the fair value of the equity of
the Company’s single reporting unit was estimated at approximately $49.7
million, compared to book value of equity of approximately $86.9 million. As a
result, the Company performed a step 2 impairment analysis. Since the book value
of equity exceeded its fair value by more than the amount of the goodwill
recorded at December 31, 2008, all of the goodwill was deemed to be impaired
resulting in a loss of approximately $23.9 million recognized in the Company’s
statement of operations for the year ended December 31, 2008.





Income
Taxes





The
Company uses an asset and liability approach, as required by the applicable
accounting guidance for financial accounting and reporting of income
taxes.  Deferred tax assets and liabilities are computed using tax
rates expected to apply to taxable income in the years in which those assets and
liabilities are expected to be realized. The effect on deferred tax assets and
liabilities resulting from a change in tax rates is recognized as income or
expense in the period that the change in tax rates is enacted.





Management
makes certain estimates and judgments in determining income tax expense for
financial statement purposes.  These estimates and judgments are
applied in the calculation of certain tax credits and in the calculation of the
deferred income tax expense or benefit associated with certain deferred tax
assets and liabilities.  Significant changes to these estimates may
result in an increase or decrease to Essex Rental’s tax provision in a
subsequent period.





Management
assesses the likelihood that it will be able to recover its deferred tax
assets.  If recovery is not likely, the Company will increase its
provision for income taxes by recording a valuation allowance against the
deferred tax assets that are unlikely to be recovered.





The
Company follows the applicable accounting guidance related to the accounting for
uncertainty in income taxes. The Company recognizes potential accrued interest
and penalties related to unrecognized tax benefits in income tax
expense.





The
Company files income tax returns in the United States federal jurisdiction and
in most state jurisdictions.  The Company is subject to U.S. federal
or state income tax examinations for years 2006 through 2009.





Essex’
management makes certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and judgments are
applied in the calculation of certain tax credits and in the calculation of the
deferred income tax expense or benefit associated with certain deferred tax
assets and liabilities. Significant changes to these estimates may result in an
increase or decrease to Essex’s tax provision in a subsequent
period.


42





At
December 31, 2009, the Company had unused federal net operating loss
carry-forwards totaling approximately $54.0 million that begin expiring in 2021.
At December 31, 2008, the Company also had unused state net operating loss
carry-forwards totaling approximately $27.3 million that expire between 2010 and
2029. The net operating loss carry-forwards are subject to internal revenue code
section 382 limitations based upon the purchase price and may be favorably
impacted by built in tax gains on the sale of rental equipment and property and
equipment which were acquired in the acquisition.





Impairment
of long-lived assets





Long
lived assets are recorded at the lower of amortized cost or fair value. Losses
related to long-lived assets are recorded where indicators of impairment are
present and the estimated undiscounted cash flows to be generated by the asset
(rental and associated revenues less related operating expenses plus any
terminal value) are less than the assets’ carrying value. If the carrying value
of the assets will not be recoverable, as determined by the undiscounted cash
flows, the carrying value of the assets is reduced to fair value. Essex, under
the terms of its credit agreement, engages an independent third party to help
management appraise the value of the crane and attachment fleet on at least an
annual basis. We consider a number of factors including value in use for crane
and attachment rental, secondary market values and possible values in alternate
use.





Derivative
Financial Instruments





Essex
uses derivative financial instruments for the purpose of hedging the risks
associated with interest rate fluctuations on its revolving credit facility with
the objective of converting a targeted amount of its floating rate debt to a
fixed rate. The Company does not enter into derivative transactions for
speculative purposes, and therefore holds no derivative instruments for trading
purposes.





Essex
believes that the use of derivatives in the form of interest rate swaps is an
important tool to manage its balance sheet liabilities and interest rate risk,
while protecting its associated rental margins. The Company sets its equipment
rental rates based in part as a percentage of the investment cost of the
equipment and then uses the interest rate swap to lock in the associated
interest costs of a period of time.





ITEM 7A.
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET
RISK





Our
earnings are affected by changes in interest rates due to the fact that interest
on our revolving credit facility is calculated based upon either LIBOR or Prime
Rate plus an applicable margin as of December 31, 2009 for which we have an
interest rate swap to effectively fix the interest rate at 4.96% on $100.0
million of the $131.9 million of outstanding borrowings under our senior
secured credit facility. The weighted average interest rate in effect on those
borrowings at December 31, 2009 was 2.49% excluding the impact of the interest
rate swap and 4.37% taking into consideration the swap. A 1.0% increase in the
effective interest rate on our total outstanding borrowings (including our
short-term debt obligations) not effectively fixed as a result of the interest
rate swap at December 31, 2009 would increase our interest expense by
approximately $0.4 million on an annualized basis.





Derivatives
are used for hedging purposes rather than speculation. The Company does not
enter into financial instruments for trading purposes. See also note 8 to the
notes to consolidated financial statements for additional discussion of
derivative instruments.





The fair
values of the Company’s financial instruments (including such items in the
financial statement captions as cash and cash equivalents, accounts receivable
and accounts payable and accrued expenses approximate their carrying values
based on their nature and terms.




The fair
value of the Company’s total debt outstanding as of December 31, 2009 was $129.4
million, excluding the impact of our interest rate swap. If market rates of
interest increased 50 basis points due to a change in the applicable margin rate
of interest (a 12.5% increase from the Company’s current margin) the estimated
fair value of the Company’s total debt obligations would be approximately $129.4
million. If market rates of interest decreased 50 basis points due to a change
in the applicable margin rate of interest (a 12.5% decrease from the Company’s
current margin) the estimated fair value of the Company’s total debt obligations
would be approximately $129.3 million.




The
Company’s interest rate swap had a liability fair value of approximately $2.3
million as of December 31, 2009. If market rates of interest permanently
increased by 50 basis points, the fair value of the Company’s interest rate swap
would be a $1.0 million liability. If market rates of interest permanently
decreased by 50 basis points, the fair value of the Company’s interest rate swap
would be a $3.8 million liability.


43





These
amounts were determined by considering the impact of hypothetical interest rates
on the Company’s financial instruments. Theses analyses do not consider the
effects of the changes in the overall economy that could exist in such an
environment. Further, in the event of changes of such magnitude, management
would likely take actions to further mitigate its exposure to the changes.
However, due to the uncertainty of the specific actions that would be taken and
their possible effects, this analysis assumes no changes in the Company’s
financial structure or results.





The
Company cannot predict the effect of adverse changes in interest rates on its
debt and derivative instruments and, therefore, the Company cannot predict its
exposure to market risk. Consequently, further results may differ materially
from the estimated adverse changes discussed above.




ITEM 8.
            FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA





The
consolidated financial statements and supplementary data of Essex Rental Corp.
required by this Item are described in Item 15 of this Annual Report on
Form 10-K and are presented beginning on page F-1.




ITEM 9.
            CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
  DISCLOSURE





None.


44





ITEM 9A.
            CONTROLS AND
      PROCEDURES





Evaluation
of Disclosure Controls and Procedures





The
Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities and Exchange Act of 1934) as of December 31, 2009.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2009, the Company’s disclosure
controls and procedures are effective to provide reasonable assurance that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and is
accumulated and communicated to the Company’s management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.





Management’s
Report on Internal Control over Financial Reporting





Essex
Rental Corp.’s management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rule 13a-15(f) under the Exchange Act.




Because
of its inherent limitations, systems of internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can only provide reasonable assurance with respect to
financial statement preparation and presentation.




The
Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness, as of December
31, 2009, of the Company’s internal control over financial reporting based on
the framework in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on such
evaluation, management has concluded that its internal control over financial
reporting was effective as of December 31, 2009. Our internal control over
financial reporting has been audited as of December 31, 2009 by Grant
Thornton, an independent registered public accounting firm, as stated in their
report which is included herein.




Changes
in Internal Control over Financial Reporting





There
were no changes to the internal control over financial reporting of the Company
identified in connection with the Company’s evaluation referred to above that
occurred during the fourth quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




ITEM 9B.
            OTHER
      INFORMATION





None.


45


PART
III




ITEM 10.
            DIRECTORS, EXECUTIVE OFFICERS,
      AND CORPORATE GOVERNANCE OF THE
  REGISTRANT





The
information required by this Item is incorporated by reference to the applicable
information in our Proxy Statement related to the 2010 Annual Meeting of
Stockholders (the “2010 Proxy Statement”), which will be filed with the SEC on
or before April 30, 2010.




ITEM 11.
            EXECUTIVE
      COMPENSATION





The
information required by this Item is incorporated by reference to the applicable
information in the 2010 Proxy Statement, which will be filed with the SEC on or
before April 30, 2010.




ITEM 12.
            SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS





Equity
Compensation Plans





The
following table provides certain information, as of December 31, 2009, about our
common stock that may be issued upon the exercise of options, warrants and
rights, as well as the issuance of shares granted to employees, consultants or
members of our Board of Directors, under our existing equity compensation plan,
the Hyde Park Acquisition Corp. 2008 Long-Term Incentive Plan.




Plan Category
                
                Number of Securities to be
                  issued upon exercise of
                  outstanding options,
                  warrants and rights
                
                
                Weighted-average exercise
                  price of outstanding
                  options, warrants and
                  rights
                
                
                Number of securities
                  remaining available for
                  future issuance under equity
                  compensation plansEquity
      compensation plans approved by stockholders (1)
                
                
                565,000
                
                
                $
                4.50
                
                
                
                992,323Equity
      plans not approved by stockholders
                
                
                -
                
                
                
                -
                
                
                
                -Total
                
                
                565,000
                
                
                $
                4.50
                
                
                
                992,323





(1)  During
the year ended December 31, 2009, the Company issued 16,377 shares to certain
employees as compensation under the Company’s 2008 Long Term Incentive
Plan.





The
additional information required by this Item is incorporated by reference to the
applicable information in the 2010 Proxy Statement, which will be filed with the
SEC on or before April 30, 2010.




ITEM 13.
            CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS





The
information required by this Item is incorporated by reference to the applicable
information in the 2010 Proxy Statement, which will be filed with the SEC on or
before April 30, 2010.




ITEM 14.
            PRINCIPAL ACCOUNTANT FEES AND
      SERVICES





The
information required by this Item is incorporated by reference to the applicable
information in the 2010 Proxy Statement, which will be filed with the SEC on or
before April 30, 2010.


46





PART
IV




ITEM 15.
            EXHIBITS AND FINANCIAL STATEMENT
      SCHEDULES





(a)
Documents filed as a part of this report





(1)
Consolidated financial statements:





Successor
and Predecessor Company Financial Statements





Reports
of Independent Registered Public Accounting Firms





Essex
Rental Corp. Consolidated Balance Sheets—December 31, 2009 and 2008


Essex
Holdings, LLC and Subsidiary Consolidated Balance Sheet—October 31,
2008




Essex
Rental Corp. Consolidated Statements of Operations for the years ended
December 31, 2009, 2008 and 2007




Essex
Holdings, LLC and Subsidiary Consolidated Statements of Operations for the
ten months ended October 31, 2008 and year ended December 31,
2007




Essex
Rental Corp. Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2009, 2008 and 2007




Essex
Holdings, LLC and Subsidiary Essex Rental Corp. Consolidated Statements of
Stockholders’ Equity for the ten months ended October 31, 2008 and the year
ended December 31, 2007





Essex
Rental Corp. Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007




Essex
Holdings, LLC and Subsidiary Essex Rental Corp. Consolidated Statements of Cash
Flows for the ten months ended October 31, 2008 and the year ended
December 31, 2007





Notes to
consolidated financial statements





(3) Exhibits: The exhibits to this
report are listed in the exhibit index below.





(b)
Description of Exhibits


47





Exhibit No.
            
            Description2.1
            
            Purchase
      Agreement, dated as of March 6, 2008, among Hyde Park Acquisition Corp.,
      Essex Holdings LLC, KCP Services LLC, and the Members of Essex Holdings
      LLC signatory thereto. (1)2.2
            
            Amendment
      No. 1 to Purchase Agreement, dated May 9, 2008, among Hyde Park
      Acquisition Corp., Essex Holdings LLC, KCP Services LLC and the Members of
      Holdings signatory thereto. (1)2.3
            
            Amendment
      No. 2 to Purchase Agreement, dated August 14, 2008, among Hyde Park
      Acquisition Corp., Essex Holdings LLC, KCP Services LLC and the Members of
      Holdings signatory thereto. (1)3.1
            
            Amended
      and Restated Certificate of Incorporation. (1)3.2
            
            Amended
      and Restated Bylaws of the Corporation, effective as of September 28,
      2007. (2)4.1
            
            Specimen
      Unit Certificate. (3)4.2
            
            Specimen
      Common Stock Certificate. (3)4.3
            
            Specimen
      Warrant Certificate.  (3)4.4
            
            Form
      of Unit Purchase Option to be granted to Representative.
    (3)4.5
            
            Form
      of Warrant Agreement between Continental Stock Transfer & Trust
      Company and the Registrant. (3)10.1
            
            Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Laurence S.
      Levy. (3)10.2
            
            Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Edward Levy.
      (3)10.3
            
            Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Isaac Kier.
      (3)10.4
            
            Form
      of Investment Management Trust Agreement between Continental Stock
      Transfer & Trust Company and theRegistrant.
      (3)10.5
            
            Form
      of Stock Escrow Agreement between the Registrant, Continental Stock
      Transfer & Trust Company and the Initial Stockholders.
      (3)10.6
            
            Form
      of Letter Agreement between ProChannel Management LLC and Registrant
      regarding administrative support. (3)10.7
            
            Form
      of Promissory Note, dated as of August 21, 2006, issued to each of
      Laurence S. Levy, Edward Levy and Isaac Kier. (3)10.8
            
            Form
      of Registration Rights Agreement among the Registrant and the Initial
      Stockholders. (3)10.9
            
            Form
      of Subscription Agreement among the Registrant, Graubard Miller and each
      of Laurence S. Levy, Edward Levy and Isaac Kier. (3)10.10
            
            Lock-up
      Agreement, dated October 31, 2008, between Registrant and Ronald Schad.
      (4)10.11
            
            Lock-up
      Agreement, dated October 31, 2008, between Registrant and Martin Kroll.
      (4)10.12
            
            Lock-up
      Agreement, dated October 31, 2008, between Registrant and William
      O’Rourke. (4)10.13
            
            Lock-up
      Agreement, dated October 31, 2008, between Registrant and William Erwin.
      (4)10.14
            
            Escrow
      Agreement, dated October 31, 2008, among Registrant, KCP Services LLC
      and Key Bank National
  Association.  (4)








10.15
              
              Compliance
      Agreement, dated October 31, 2008, among Registrant, Essex Holdings LLC,
      KCP Services LLC, Essex Crane Rental Corp. and the members of Essex
      Holdings LLC. (4)10.16
              
              Employment
      Agreement, dated October 31, 2008, among Registrant, Essex Crane Rental
      Corp. and Ronald Schad. (4)10.17
              
              Employment
      Agreement, dated October 31, 2008, among Registrant, Essex Crane Rental
      Corp. and Martin Kroll. (4)10.18
              
              Employment
      Agreement, dated October 31, 2008, among Registrant, Essex Crane Rental
      Corp. and William O’Rourke. (4).10.19
              
              Employment
      Agreement, dated October 31, 2008, among Registrant, Essex Crane Rental
      Corp. and William Erwin. (4)10.20
              
              Amended
      and Restated Limited Liability Company Agreement of Essex Holdings LLC,
      dated October 31, 2008, among Registrant, Ronald Schad, Martin Kroll,
      William O’Rourke and William Erwin. (4)10.21
              
              Registration
      Rights Agreement, dated October 31, 2008, among Registrant, Ronald Schad,
      Martin Kroll, William O’Rourke and William Erwin. (4)10.22
              
              Second
      Amended and Restated Loan and Security Agreement, dated March 6, 2008,
      among Essex Crane Rental Corp., Essex Holdings LLC, Textron Financial
      Corporation, National City Business Credit, Inc., Sovereign Bank, Wachovia
      Capital Finance Corporation (Central), Wachovia Capital Markets, LLC and
      the Financial Institutions named therein. (1)10.23
              
              Hyde
      Park Acquisition Corp. 2008 Long Term Incentive Plan
(1)16
              
              Letter
      from McGladrey & Pullen, LLP to the Securities and Exchange
      Commission, dated December 16, 2008. (5)21
              
              Subsidiaries
      of Registrant (*)23.1
              
              Consent
      of McGladrey & Pullen, LLP (*)23.2
              
              Consent
      of Grant Thornton LLP (*)31.1
              
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (*)31.2
              
              Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (*)32.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002
(*)





(1)
Incorporated by reference to the Registrant Definitive Proxy Statement on
Schedule 14A, filed with the Securities and Exchange Commission on October 8,
2008, regarding the Special Meeting of the Registrant’s Stockholders held on
October 31, 2008.





(2)
Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed
with the Securities and Exchange Commission on September 28, 2007.





(3)
Incorporated by reference to the Registrant’s Registration Statement on Form S-1
(SEC File 333-138452).





(4)
Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed
with the Securities and Exchange Commission on November 6, 2008.





(5)
Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed
with the Securities and Exchange Commission on December 16, 2008.





(*)
Attached herein.





Report
of Independent Registered Public Accounting Firm





Board of
Directors and Shareholders


Essex
Rental Corp.





We have
audited the accompanying consolidated balance sheets of Essex Rental Corp. (a
Delaware corporation) and Subsidiaries (collectively, the “Company”) as of
December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the two years in
the period ended December 31, 2009.  We have also audited the
consolidated balance sheet of Essex Holdings, LLC and Subsidiary (the
“Predecessor”) as of October 31, 2008 and the related consolidated statements of
operations, members’ equity, and cash flows for the period from January 1, 2008
through October 31, 2008 and for the year ended December 31,
2007.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2009
and 2008, and the consolidated results of its operations and its cash flows for
each of the two years in the period ended December 31, 2009, and the financial
position of the Predecessor as of October 31, 2008, and the consolidated results
of its operations and its cash flows for the period from January 1, 2008 through
October 31, 2008 and the year ended December 31, 2007, in conformity with
accounting principles generally accepted in the United States of
America.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Essex Rental Corp.’s internal control over
financial reporting as of December 31, 2009, based on criteria established in
Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated March 15, 2010 expressed an
unqualified opinion.





/s/ Grant
Thornton LLP


Chicago,
Illinois


March 15,
2010


F-1





Report
of Independent Registered Public Accounting Firm





To the Board of Directors and
Stockholders


Essex
Rental Corp. f/k/a Hyde Park Acquisition Corp.





We have
audited the accompanying statements of operations, stockholders’ equity and cash
flows for the year ended December 31, 2007 of Essex Rental Corp. f/k/a Hyde Park
Acquisition Corp. (a corporation in the development stage).  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.   An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations of Essex Rental Corp. f/k/a Hyde
Park Acquisition Corp. and its cash flows for the year ended December 31, 2007,
in conformity with U.S. generally accepted accounting principles.





/s/
McGladrey & Pullen, LLP


New York,
New York


March 31,
2008


F-2




Report
of Independent Registered Public Accounting Firm




The Board
of Directors and Shareholders


Essex
Rental Corp.




We have
audited Essex Rental Corp. (a Delaware corporation) and Subsidiaries’ internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  Essex Rental Corp.’s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting in Item 9A.  Our
responsibility is to express an opinion on Essex Rental Corp.’s internal control
over financial reporting based on our audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects.  Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances.  We
believe that our audit provides a reasonable basis for our opinion.




A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.




In our
opinion, Essex Rental Corp. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal Control – Integrated Framework issued by
COSO.




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the accompanying consolidated balance sheets of
Essex Rental Corp. and Subsidiaries as of December 31, 2009 and 2008, and
the related consolidated statements of operations, stockholders’ equity, and
cash flows for each
of the two years in the period ended December 31, 2009 and the consolidated
balance sheet of Essex Holdings, LLC and Subsidiary (the “Predecessor”) as of
October 31, 2008 and the related consolidated statements of operations, members’
equity, and cash flowsfor the period from January 1, 2008 through
October 31, 2008 and for year ended December 31, 2007 and our report dated March
15, 2010 expressed an unqualified opinion.




/s/ Grant
Thornton LLP


Chicago,
Illinois


March 15,
2010


F-3


ESSEX
RENTAL CORP.


CONSOLIDATED
BALANCE SHEETS





Essex
      Rental Corp.
                
                
                Essex
      Holdings LLC(Successor)
                
                
                (Predecessor)December
      31,
                
                
                December
      31,
                
                
                October
      31,2009
                
                
                2008
                
                
                2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                
                $
                199,508
                
                
                $
                139,000
                
                
                $
                691,660Investment
      in Hyde Park common stock
                
                
                -
                
                
                
                -
                
                
                
                9,957,441Accounts
      receivable, net of allowances
                
                
                4,973,995
                
                
                
                11,350,561
                
                
                
                10,701,304Other
      receivables
                
                
                3,791,845
                
                
                
                3,167,773
                
                
                
                2,307,540Deferred
      tax assets
                
                
                1,724,621
                
                
                
                1,859,071
                
                
                
                2,357,290Prepaid
      expenses and other assets
                
                
                410,198
                
                
                
                440,879
                
                
                
                1,204,769TOTAL
      CURRENT ASSETS
                
                
                11,100,167
                
                
                
                16,957,284
                
                
                
                27,220,004Rental
      equipment, net
                
                
                260,767,678
                
                
                
                255,692,116
                
                
                
                133,172,649Property
      and equipment, net
                
                
                6,981,660
                
                
                
                8,176,143
                
                
                
                5,634,059Spare
      parts inventory, net
                
                
                3,556,236
                
                
                
                3,276,858
                
                
                
                1,804,042Identifiable
      finite lived intangibles, net
                
                
                2,160,239
                
                
                
                3,518,667
                
                
                
                -Loan
      acquisition costs, net
                
                
                1,897,177
                
                
                
                2,377,442
                
                
                
                1,566,262TOTAL
      ASSETS
                
                $
                286,463,157
                
                
                $
                289,998,510
                
                
                $
                169,397,016LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                
                $
                1,790,683
                
                
                $
                2,510,564
                
                
                $
                5,835,262Accrued
      employee compensation and benefits
                
                
                679,078
                
                
                
                2,160,960
                
                
                
                2,526,536Accrued
      taxes
                
                
                5,663,263
                
                
                
                5,203,485
                
                
                
                4,140,238Accrued
      interest
                
                
                303,186
                
                
                
                440,667
                
                
                
                596,566Accrued
      other expenses
                
                
                739,639
                
                
                
                1,390,864
                
                
                
                1,294,224Unearned
      rental revenue
                
                
                793,797
                
                
                
                2,176,906
                
                
                
                2,573,176Short-term
      debt obligations
                
                
                5,170,614
                
                
                
                -
                
                
                
                -Current
      portion of capital lease obligation
                
                
                6,269
                
                
                
                -
                
                
                
                -TOTAL
      CURRENT LIABILITIES
                
                
                15,146,529
                
                
                
                13,883,446
                
                
                
                16,966,002LONG-TERM
      LIABILITIESRevolving
      credit facility
                
                
                131,919,701
                
                
                
                137,377,921
                
                
                
                129,895,169Deferred
      tax liabilities
                
                
                62,935,535
                
                
                
                63,266,773
                
                
                
                13,829,704Interest
      rate swap
                
                
                2,306,294
                
                
                
                3,424,613
                
                
                
                -Capital
      lease obligation
                
                
                17,067
                
                
                
                -
                
                
                
                -TOTAL
      LONG-TERM LIABILITIES
                
                
                197,178,597
                
                
                
                204,069,307
                
                
                
                143,724,873TOTAL
      LIABILITIES
                
                
                212,325,126
                
                
                
                217,952,753
                
                
                
                160,690,875STOCKHOLDERS'
      EQUITYPreferred
      stock, $.0001 par value, Authorized 1,000,000 shares, none
      issued
                
                
                -
                
                
                
                -
                
                
                
                -Common
      stock, $.0001 par value, Authorized 40,000,000 shares; issued and
      outstanding 14,124,563 shares at December 31, 2009 and 14,106,886
      shares at December 31, 2008
                
                
                1,412
                
                
                
                1,410
                
                
                
                -Members'
      contributions
                
                
                -
                
                
                
                -
                
                
                
                40,270,000Paid
      in capital
                
                
                84,589,119
                
                
                
                84,383,579
                
                
                
                231,602Accumulated
      deficit
                
                
                (9,022,597
                )
                
                
                (10,218,403
                )
                
                
                (31,795,461
                )Accumulated
      other comprehensive loss, net of tax
                
                
                (1,429,903
                )
                
                
                (2,120,829
                )
                
                
                -TOTAL
      STOCKHOLDERS' EQUITY
                
                
                74,138,031
                
                
                
                72,045,757
                
                
                
                8,706,141TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                286,463,157
                
                
                $
                289,998,510
                
                
                $
                169,397,016





The
accompanying notes are an integral part of these financial
statements.


F-4


ESSEX
RENTAL CORP.


CONSOLIDATED
STATEMENTS OF OPERATIONS





Essex
      Rental Corp.
                      
                      
                      Essex
      Holdings LLC(Successor)
                      
                      
                      (Predecessor)For
      the Ten
                      
                      
                      For
      theMonths
      Ended
                      
                      
                      Year
      EndedFor
      the Years Ended December 31,
                      
                      
                      October
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007REVENUEEquipment
      rentals
                      
                      $
                      34,556,696
                      
                      
                      $
                      10,522,092
                      
                      
                      $
                      -
                      
                      
                      $
                      51,301,586
                      
                      
                      $
                      48,800,490Used
      rental equipment sales
                      
                      
                      6,478,197
                      
                      
                      
                      1,730,771
                      
                      
                      
                      -
                      
                      
                      
                      6,709,034
                      
                      
                      
                      13,232,768Transportation
                      
                      
                      4,909,346
                      
                      
                      
                      1,233,873
                      
                      
                      
                      -
                      
                      
                      
                      6,929,298
                      
                      
                      
                      8,667,849Equipment
      repairs and maintenance
                      
                      
                      6,140,153
                      
                      
                      
                      1,386,053
                      
                      
                      
                      -
                      
                      
                      
                      6,038,639
                      
                      
                      
                      7,420,972TOTAL
      REVENUE
                      
                      
                      52,084,392
                      
                      
                      
                      14,872,789
                      
                      
                      
                      -
                      
                      
                      
                      70,978,557
                      
                      
                      
                      78,122,079COST
      OF REVENUESSalaries,
      payroll taxes and benefits
                      
                      
                      6,006,715
                      
                      
                      
                      1,311,175
                      
                      
                      
                      -
                      
                      
                      
                      6,730,823
                      
                      
                      
                      7,320,488Depreciation
                      
                      
                      11,210,472
                      
                      
                      
                      1,809,623
                      
                      
                      
                      -
                      
                      
                      
                      6,908,980
                      
                      
                      
                      8,034,011Net
      book value of rental equipment sold
                      
                      
                      5,584,784
                      
                      
                      
                      1,439,677
                      
                      
                      
                      -
                      
                      
                      
                      3,186,106
                      
                      
                      
                      7,183,496Transportation
                      
                      
                      3,743,595
                      
                      
                      
                      952,861
                      
                      
                      
                      -
                      
                      
                      
                      5,774,802
                      
                      
                      
                      6,731,983Equipment
      repairs and maintenance
                      
                      
                      4,873,005
                      
                      
                      
                      1,236,482
                      
                      
                      
                      -
                      
                      
                      
                      5,411,272
                      
                      
                      
                      7,574,332Yard
      operating expenses
                      
                      
                      1,482,371
                      
                      
                      
                      306,174
                      
                      
                      
                      -
                      
                      
                      
                      1,533,099
                      
                      
                      
                      1,913,576TOTAL
      COST OF REVENUES
                      
                      
                      32,900,942
                      
                      
                      
                      7,055,992
                      
                      
                      
                      -
                      
                      
                      
                      29,545,082
                      
                      
                      
                      38,757,886GROSS
      PROFIT
                      
                      
                      19,183,450
                      
                      
                      
                      7,816,797
                      
                      
                      
                      -
                      
                      
                      
                      41,433,475
                      
                      
                      
                      39,364,193Selling,
      general and administrative expenses
                      
                      
                      10,547,405
                      
                      
                      
                      4,045,432
                      
                      
                      
                      456,661
                      
                      
                      
                      13,652,865
                      
                      
                      
                      9,111,874Goodwill
      impairment
                      
                      
                      -
                      
                      
                      
                      23,895,733
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Other
      depreciation and amortization
                      
                      
                      781,751
                      
                      
                      
                      139,943
                      
                      
                      
                      -
                      
                      
                      
                      110,019
                      
                      
                      
                      133,124INCOME
      (LOSS) FROM OPERATIONS
                      
                      
                      7,854,294
                      
                      
                      
                      (20,264,311
                      )
                      
                      
                      (456,661
                      )
                      
                      
                      27,670,591
                      
                      
                      
                      30,119,195OTHER
      INCOME (EXPENSES)Interest
      income
                      
                      
                      643
                      
                      
                      
                      1,405,637
                      
                      
                      
                      2,543,781
                      
                      
                      
                      -
                      
                      
                      
                      -Interest
      expense
                      
                      
                      (6,681,740
                      )
                      
                      
                      (1,124,398
                      )
                      
                      
                      -
                      
                      
                      
                      (7,666,179
                      )
                      
                      
                      (12,205,328
                      )Interest
      rate swap
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (524,259
                      )
                      
                      
                      (2,755,741
                      )TOTAL
      OTHER INCOME (EXPENSES)
                      
                      
                      (6,681,097
                      )
                      
                      
                      281,239
                      
                      
                      
                      2,543,781
                      
                      
                      
                      (8,190,438
                      )
                      
                      
                      (14,961,069
                      )INCOME
      (LOSS) BEFORE INCOME TAXES
                      
                      
                      1,173,197
                      
                      
                      
                      (19,983,072
                      )
                      
                      
                      2,087,120
                      
                      
                      
                      19,480,153
                      
                      
                      
                      15,158,126-PROVISION
      (BENEFIT) FOR INCOME TAXES
                      
                      
                      (22,609
                      )
                      
                      
                      (8,065,951
                      )
                      
                      
                      388,000
                      
                      
                      
                      8,063,079
                      
                      
                      
                      3,941,270NET
      INCOME (LOSS)
                      
                      $
                      1,195,806
                      
                      
                      $
                      (11,917,121
                      )
                      
                      $
                      1,699,120
                      
                      
                      $
                      11,417,074
                      
                      
                      $
                      11,216,856Weighted
      average shares outstanding:Basic
                      
                      
                      14,110,789
                      
                      
                      
                      13,517,010
                      
                      
                      
                      13,224,144Diluted
                      
                      
                      15,805,191
                      
                      
                      
                      13,517,010
                      
                      
                      
                      13,224,144Earnings
      (loss) per share:Basic
                      
                      $
                      0.08
                      
                      
                      $
                      (0.88
                      )
                      
                      $
                      0.13Diluted
                      
                      $
                      0.08
                      
                      
                      $
                      (0.88
                      )
                      
                      $
                      0.13





The
accompanying notes are an integral part of these financial
statements.


F-5





ESSEX
RENTAL CORP.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY





Essex
      Rental Corp.
                      (Successor)Accumulated
                    
                    
                    AccumulatedAdditional
                    
                    
                    (Deficit)
                    
                    
                    Other
                    
                    
                    Total
                    
                    
                    ComprehensiveCommon
      Stock
                    
                    
                    Paid-In
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    Stockholders'
                    
                    
                    IncomeShares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Earnings
                    
                    
                    Loss
                    
                    
                    Equity
                    
                    
                    (Loss)Balance
      - January 1, 2007
                    
                    
                    2,812,500
                    
                    
                    $
                    281
                    
                    
                    $
                    24,719
                    
                    
                    $
                    (402
                    )
                    
                    $
                    -
                    
                    
                    $
                    24,598Sale
      of 11,250,000 units, net of underwriter's discount and offering expenses
      (2,248,875 shares subject to possible redemption)
                    
                    
                    11,250,000
                    
                    
                    
                    1,125
                    
                    
                    
                    84,060,426
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    84,061,551Sale
      of 1,687,500 additional units, net of underwriters' discount and offering
      expenses (337,331 shares subject to possible redemption)
                    
                    
                    1,687,500
                    
                    
                    
                    169
                    
                    
                    
                    12,757,331
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,757,500Proceeds
      from issuance of underwriters' option
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    100
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    100Proceeds
      subject to possible redemption of 2,586,206 shares
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (19,932,029
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (19,932,029
                    )Sale
      of 1,500,000 warrants to initial stockholders
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,500,000
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,500,000Net
      income for the year ended December 31, 2007
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,699,120
                    
                    
                    
                    -
                    
                    
                    
                    1,699,120
                    
                    
                    
                    1,699,120Balance
      - December 31, 2007
                    
                    
                    15,750,000
                    
                    
                    
                    1,575
                    
                    
                    
                    78,410,547
                    
                    
                    
                    1,698,718
                    
                    
                    
                    -
                    
                    
                    
                    80,110,840
                    
                    
                    
                    1,699,120Reclassification
      of proceeds for 2,586,206 shares subject to possible redemption plus
      deferred interest
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    20,497,091
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    20,497,091Repurchase
      of shares from dissenting shareholders
                    
                    
                    (2,357,736
                    )
                    
                    
                    (236
                    )
                    
                    
                    (18,704,479
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (18,704,715
                    )Effective
      conversion of retained interest in Essex Holdings into common stock of
      Essex Rental
                    
                    
                    632,911
                    
                    
                    
                    63
                    
                    
                    
                    4,999,937
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5,000,000Issuance
      of common stock in exchange for transaction related
    services
                    
                    
                    132,911
                    
                    
                    
                    13
                    
                    
                    
                    923,721
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    923,734Repurchases
      and retirement of common stock
                    
                    
                    (63,500
                    )
                    
                    
                    (6
                    )
                    
                    
                    (291,939
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (291,945
                    )Repurchases
      and retirement of 1,418,519 warrants
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,506,380
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,506,380
                    )Common
      stock issued to employees
                    
                    
                    12,300
                    
                    
                    
                    1
                    
                    
                    
                    39,359
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    39,360Stock
      based compensation for stock options granted to executive
      management
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15,722
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15,722Change
      in fair value of interest rate swap, net of tax of
    $1,303,784
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,120,829
                    )
                    
                    
                    (2,120,829
                    )
                    
                    
                    (2,120,829
                    )Net
      loss for the year ended December 31, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (11,917,121
                    )
                    
                    
                    -
                    
                    
                    
                    (11,917,121
                    )
                    
                    
                    (11,917,121
                    )Balance
      - December 31, 2008
                    
                    
                    14,106,886
                    
                    
                    $
                    1,410
                    
                    
                    $
                    84,383,579
                    
                    
                    $
                    (10,218,403
                    )
                    
                    $
                    (2,120,829
                    )
                    
                    $
                    72,045,757
                    
                    
                    $
                    (14,037,950
                    )





The
accompanying notes are an integral part of these financial
statements.


F-6


ESSEX
RENTAL CORP.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)





Essex
      Rental Corp.(Successor)Accumulated
                    
                    
                    AccumulatedAdditional
                    
                    
                    (Deficit)
                    
                    
                    Other
                    
                    
                    Total
                    
                    
                    ComprehensiveCommon
      Stock
                    
                    
                    Paid-In
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    Stockholders'
                    
                    
                    IncomeShares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Earnings
                    
                    
                    Loss
                    
                    
                    Equity
                    
                    
                    (Loss)Repurchases
      and retirement of 323,200 warrants
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (378,896
                    )
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (378,896
                    )Common
      stock issued to employees and director
                    
                    
                    17,677
                    
                    
                    
                    2
                    
                    
                    
                    106,213
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    106,215Stock
      based compensation for stock options granted to executive
      management
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    478,223
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    478,223Change
      in fair value of interest rate swap, net of tax of
$427,393
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    690,926
                    
                    
                    
                    690,926
                    
                    
                    
                    690,926Net
      income for the year ended December 31, 2009
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,195,806
                    
                    
                    
                    -
                    
                    
                    
                    1,195,806
                    
                    
                    
                    1,195,806Balance
      - December 31, 2009
                    
                    
                    14,124,563
                    
                    
                    $
                    1,412
                    
                    
                    $
                    84,589,119
                    
                    
                    $
                    (9,022,597
                    )
                    
                    $
                    (1,429,903
                    )
                    
                    $
                    74,138,031
                    
                    
                    $
                    1,886,732





The
accompanying notes are an integral part of these financial
statements.


F-7


ESSEX
HOLDINGS LLC


CONSOLIDATED
STATEMENTS OF MEMBERS’ EQUITY (DEFICIT)





Essex
      Holdings LLC(Predecessor)TotalMembers'
                  
                  
                  Paid
      in
                  
                  
                  Accumulated
                  
                  
                  Members'Contributions
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Equity
      (Deficit)Balance
      - January 1, 2007
                  
                  $
                  40,270,000
                  
                  
                  $
                  -
                  
                  
                  $
                  (4,429,391
                  )
                  
                  $
                  35,840,609Member
      dividend distribution
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (50,000,000
                  )
                  
                  
                  (50,000,000
                  )Share
      based compensation
                  
                  
                  -
                  
                  
                  
                  34,740
                  
                  
                  
                  -
                  
                  
                  
                  34,740Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11,216,856
                  
                  
                  
                  11,216,856Balance
      - December 31, 2007
                  
                  
                  40,270,000
                  
                  
                  
                  34,740
                  
                  
                  
                  (43,212,535
                  )
                  
                  
                  (2,907,795
                  )Share
      based compensation
                  
                  
                  -
                  
                  
                  
                  196,862
                  
                  
                  
                  -
                  
                  
                  
                  196,862Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11,417,074
                  
                  
                  
                  11,417,074Balance
      - October 31, 2008
                  
                  $
                  40,270,000
                  
                  
                  $
                  231,602
                  
                  
                  $
                  (31,795,461
                  )
                  
                  $
                  8,706,141




The
accompanying notes are an integral part of these financial
statements.


F-8


ESSEX
RENTAL CORP.


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Essex
      Rental Corp.
                        
                        
                        Essex
      Holdings LLC(Successor)
                        
                        
                        (Predecessor)For
      the Ten
                        
                        
                        For
      theMonths
      Ended
                        
                        
                        Year
      EndedFor the Years Ended December
      31,
                        
                        
                        October 31,
                        
                        
                        December 31,2009
                        
                        
                        2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
                        
                        $
                        1,195,806
                        
                        
                        $
                        (11,917,121
                        )
                        
                        $
                        1,699,120
                        
                        
                        $
                        11,417,074
                        
                        
                        $
                        11,216,856Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
      and amortization of tangible assets
                        
                        
                        11,331,394
                        
                        
                        
                        1,828,233
                        
                        
                        
                        -
                        
                        
                        
                        7,018,999
                        
                        
                        
                        8,167,135Amortization
      of loan acquisition costsand
      other intangibles
                        
                        
                        1,155,744
                        
                        
                        
                        203,314
                        
                        
                        
                        -
                        
                        
                        
                        353,300
                        
                        
                        
                        1,088,182Gain
      on sale of rental equipment
                        
                        
                        (893,413
                        )
                        
                        
                        (291,094
                        )
                        
                        
                        -
                        
                        
                        
                        (3,522,928
                        )
                        
                        
                        (6,049,272
                        )Deferred
      income taxes
                        
                        
                        73,418
                        
                        
                        
                        (9,854,835
                        )
                        
                        
                        (28,000
                        )
                        
                        
                        7,103,541
                        
                        
                        
                        3,530,097Goodwill
      impairment
                        
                        
                        -
                        
                        
                        
                        23,895,733
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Share
      based compensation expense
                        
                        
                        584,438
                        
                        
                        
                        55,082
                        
                        
                        
                        -
                        
                        
                        
                        196,862
                        
                        
                        
                        34,740Change
      in fair value of interest rate swap
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        524,259
                        
                        
                        
                        2,755,741Changes
      in operating assets and liabilities:Accounts
      receivable, net
                        
                        
                        6,376,566
                        
                        
                        
                        (649,257
                        )
                        
                        
                        -
                        
                        
                        
                        1,106,901
                        
                        
                        
                        (847,279
                        )Other
      receivables
                        
                        
                        (517,030
                        )
                        
                        
                        (860,233
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (325,586
                        )Interest
      earned in trust fund
                        
                        
                        -
                        
                        
                        
                        (1,709,916
                        )
                        
                        
                        (2,767,634
                        )
                        
                        
                        -
                        
                        
                        
                        -Prepaid
      expenses and other assets
                        
                        
                        30,681
                        
                        
                        
                        (107,620
                        )
                        
                        
                        (33,418
                        )
                        
                        
                        (757,641
                        )
                        
                        
                        (39,801
                        )Increase
      in deferred interest
                        
                        
                        -
                        
                        
                        
                        (243,405
                        )
                        
                        
                        243,405
                        
                        
                        
                        -
                        
                        
                        
                        -Spare
      parts inventory
                        
                        
                        (279,378
                        )
                        
                        
                        (212,829
                        )
                        
                        
                        -
                        
                        
                        
                        (95,904
                        )
                        
                        
                        51,429Accounts
      payable and accrued expenses
                        
                        
                        (2,530,691
                        )
                        
                        
                        (416,317
                        )
                        
                        
                        311,329
                        
                        
                        
                        3,963,504
                        
                        
                        
                        2,196,687Unearned
      rental revenue
                        
                        
                        (1,383,109
                        )
                        
                        
                        (396,270
                        )
                        
                        
                        -
                        
                        
                        
                        416,065
                        
                        
                        
                        596,079NET
      CASH PROVIDED BY (USED IN)OPERATING
      ACTIVITIES
                        
                        
                        15,144,426
                        
                        
                        
                        (676,535
                        )
                        
                        
                        (575,198
                        )
                        
                        
                        27,724,032
                        
                        
                        
                        22,375,008CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      held in trust fund
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (99,710,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Payment
      of deferred costs
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (110,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Disbursements
      from the trust
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,550,000
                        
                        
                        
                        -
                        
                        
                        
                        -Investment
      in Hyde Park common stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (9,957,441
                        )
                        
                        
                        -Acquisition
      of business, net of cash acquired
                        
                        
                        -
                        
                        
                        
                        (77,711,958
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      sales of securities held in trust fund
                        
                        
                        -
                        
                        
                        
                        102,637,550
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Purchases
      of rental equipment
                        
                        
                        (17,164,399
                        )
                        
                        
                        (2,795,006
                        )
                        
                        
                        -
                        
                        
                        
                        (18,041,380
                        )
                        
                        
                        (18,783,592
                        )Purchases
      of property and equipment
                        
                        
                        (988,949
                        )
                        
                        
                        (158,721
                        )
                        
                        
                        -
                        
                        
                        
                        (2,972,681
                        )
                        
                        
                        (724,057
                        )Accounts
      receivable from rental equipment sales
                        
                        
                        (107,042
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        739,256
                        
                        
                        
                        (92,256
                        )Proceeds
      from sale of rental equipment
                        
                        
                        6,478,197
                        
                        
                        
                        1,730,771
                        
                        
                        
                        -
                        
                        
                        
                        6,709,034
                        
                        
                        
                        13,232,768NET
      CASH PROVIDED BY (USED IN)INVESTING
      ACTIVITIES
                        
                        
                        (11,782,193
                        )
                        
                        
                        23,702,636
                        
                        
                        
                        (98,270,000
                        )
                        
                        
                        (23,523,212
                        )
                        
                        
                        (6,367,137
                        )




The
accompanying notes are an integral part of these financial
statements.


F-9


ESSEX
RENTAL CORP.


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)




Essex
      Rental Corp.
                                                  
                                                  
                                                  Essex
      Holdings LLC(Successor)
                                                  
                                                  
                                                  (Predecessor)For
      the Ten
                                                  
                                                  
                                                  For
      theMonths
      Ended
                                                  
                                                  
                                                  Year
      EndedFor
      the Years Ended December 31,
                                                  
                                                  
                                                  October
      31,
                                                  
                                                  
                                                  December
      31,2009
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2007
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2007CASH
      FLOWS FROM FINANCING ACTIVITIESGross
      proceeds from initial public offering
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  103,500,000
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Proceeds
      from underwriter's purchase option
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  100
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Proceeds
      from issuance of warrants
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  1,500,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payment
      of costs of initial public offering
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (5,021,377
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Repayment
      of notes payable, stockholders
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (125,000
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Proceeds
      from short-term debt obligation
                                                  
                                                  
                                                  2,554,637
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Proceeds
      from revolving credit facility
                                                  
                                                  
                                                  58,100,748
                                                  
                                                  
                                                  
                                                  12,234,529
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  78,030,836
                                                  
                                                  
                                                  
                                                  133,423,462Payments
      on revolving credit facility
                                                  
                                                  
                                                  (63,558,968
                                                  )
                                                  
                                                  
                                                  (14,845,371
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (77,998,390
                                                  )
                                                  
                                                  
                                                  (81,931,350
                                                  )Payments
      on capital lease obligation
                                                  
                                                  
                                                  (4,595
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payments
      to reacquire common stocksubject
      to repurchase
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (18,704,715
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payments
      to repurchase common stock
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (291,945
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payments
      to repurchase warrants
                                                  
                                                  
                                                  (378,896
                                                  )
                                                  
                                                  
                                                  (1,506,380
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Payments
      for debt issuance costs
                                                  
                                                  
                                                  (14,651
                                                  )
                                                  
                                                  
                                                  (825,020
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (270,000
                                                  )
                                                  
                                                  
                                                  (1,977,997
                                                  )Payments
      on Junior Term B debt
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (15,528,133
                                                  )Payment
      to terminate interest rate swap
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (3,280,000
                                                  )
                                                  
                                                  
                                                  -Member
      distributions
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (50,000,000
                                                  )NET
      CASH PROVIDED BY (USED IN)FINANCING
      ACTIVITIES
                                                  
                                                  
                                                  (3,301,725
                                                  )
                                                  
                                                  
                                                  (23,938,902
                                                  )
                                                  
                                                  
                                                  99,853,723
                                                  
                                                  
                                                  
                                                  (3,517,554
                                                  )
                                                  
                                                  
                                                  (16,014,018
                                                  )NET
      INCREASE (DECREASE) IN CASHAND
      CASH EQUIVALENTS
                                                  
                                                  
                                                  60,508
                                                  
                                                  
                                                  
                                                  (912,801
                                                  )
                                                  
                                                  
                                                  1,008,525
                                                  
                                                  
                                                  
                                                  683,266
                                                  
                                                  
                                                  
                                                  (6,147
                                                  )CASH
      AND CASH EQUIVALENTS,BEGINNING
      OF PERIOD
                                                  
                                                  
                                                  139,000
                                                  
                                                  
                                                  
                                                  1,051,801
                                                  
                                                  
                                                  
                                                  43,276
                                                  
                                                  
                                                  
                                                  8,394
                                                  
                                                  
                                                  
                                                  14,541CASH
      AND CASH EQUIVALENTS,END
      OF PERIOD
                                                  
                                                  $
                                                  199,508
                                                  
                                                  
                                                  $
                                                  139,000
                                                  
                                                  
                                                  $
                                                  1,051,801
                                                  
                                                  
                                                  $
                                                  691,660
                                                  
                                                  
                                                  $
                                                  8,394SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING
      / FINANCING ACTIVITIESDeferred
      underwriters fee
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  1,552,500
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Deferred
      acquisition costs in accrued expenses
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  418,331
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Equipment
      obtained through capital lease
                                                  
                                                  $
                                                  27,931
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Equipment
      purchased directly throughshort-term
      debt obligation
                                                  
                                                  $
                                                  2,615,977
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Issuance
      of stock related to acquisition of business
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  5,923,734
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Unrealized
      (gain) loss on derivative instruments, net of tax
                                                  
                                                  $
                                                  (690,926
                                                  )
                                                  
                                                  $
                                                  2,120,829
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -SUPPLEMENTAL
      DISCLOSURE OF CASHFLOW
      INFORMATION:Cash
      paid for interest, swaps and debt issuance costs
                                                  
                                                  $
                                                  6,338,956
                                                  
                                                  
                                                  $
                                                  1,426,770
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  11,078,750
                                                  
                                                  
                                                  $
                                                  13,341,107Cash
      (received) paid for income taxes, net of refunds
                                                  
                                                  $
                                                  (122,435
                                                  )
                                                  
                                                  $
                                                  718,135
                                                  
                                                  
                                                  $
                                                  320,000
                                                  
                                                  
                                                  $
                                                  825,144
                                                  
                                                  
                                                  $
                                                  340,000




The
accompanying notes are an integral part of these financial
statements.


F-10


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            Business
      and Principles of Consolidation





The
accompanying consolidated financial statements include the accounts of Essex
Rental Corp. (“Essex Rental”), formerly known as Hyde Park Acquisition Corp.
("Hyde Park"), Essex Holdings, LLC ("Holdings") and its wholly owned
subsidiaries, Essex Crane Rental Corp. ("Essex Crane") and Essex Finance Corp.
(“Essex Finance”), (collectively the "Company" or
"Successor").  All significant intercompany accounts and transactions
have been eliminated in consolidation.





All
activity from August 21, 2006 (inception) through March 13, 2007 relates to
Essex Rental Corp’s formation and initial public offering described
below.  From March 13, 2007 through October 31, 2008, the Company’s
activities were limited to identifying prospective target businesses to acquire
and completing a business combination.  On October 31, 2008, Essex
Rental Corp. consummated the acquisition of Essex Holdings LLC, a Delaware
limited liability company, and its wholly-owned subsidiary, Essex Crane Rental
Corp., a Delaware corporation, which is described below, and as a result is no
longer in the development stage.





The
Company, through its subsidiary, Essex Crane, is now engaged primarily in
renting lattice boom crawler cranes and attachments to the construction industry
mainly throughout the United States of America and Canada for use in building
and maintaining power plants, refineries, bridge and road construction,
alternative energy, water treatment facilities and other industrial, commercial
and infrastructure related projects.





The
accompanying financial statements of Essex Rental Corp. include all adjustments
(consisting of normal recurring adjustments) which management considers
necessary for the fair presentation of the Company’s operating results,
financial position and cash flows as of and for all periods
presented.





Essex
Holdings, LLC - Predecessor





Essex
Holdings, LLC filed a certificate of formation in Delaware on May 4,
2000.  The consolidated financial statements include the accounts of
Essex Holdings, LLC and its wholly owned subsidiary, Essex Crane Rental Corp.
(collectively the “Predecessor”).  Essex Holdings, LLC is a holding
company whose only activity related to its investment in Essex Crane Rental
Corp.  All significant intercompany accounts and transactions have
been eliminated in consolidation.





Acquisition
of Predecessor





In
accordance with the purchase agreement (the “Purchase Agreement”) entered into
on March 6, 2008, and subsequently amended on May 9, 2008 and August 14, 2008,
among the Company, Essex Crane, the members of Holdings and KCP Services LLC
(the “Seller Representative”), on October 31, 2008 the Company acquired Holdings
through the acquisition of all of the membership interests of Holdings other
than membership interests which were retained by members of Holding’s senior
management, each of whom owned membership interests of Holdings prior to the
completion of the acquisition, and whom the Company sometimes refer to
collectively as the management members of Holdings or Essex Crane’s senior
management.





The
ownership interests in the Predecessor that were retained by the management
members (the “Retained Interests”), which consist of 632,911 Class A Units of
Holdings, the parent company of Essex Crane and a subsidiary of Essex Rental,
have been treated as effectively converted as they are only exchangeable for an
aggregate of 632,911 shares of the Company’s common stock, entitle the holder to
receive distributions on an “as exchanged” basis if Essex pays a dividend to its
common stockholders, are not transferable (subject to limited exceptions for
estate planning purposes) and the Retained Interests are not mandatorily
redeemable.  As provided in the Amended and Restated Limited Liability
Company Agreement of Holdings, dated October 31, 2008, among the Company and the
management members of Holdings, the Retained Interests do not carry any voting
rights but are entitled to distributions from Holdings if the Company pays a
dividend to its common stockholders, in which case a distribution on account of
the Retained Interests will be made on an “as exchanged”
basis.  Holders of the Retained Interests have agreed, subject to
certain exceptions, not to sell their Retained Interests in Holdings or their
shares of Essex Rental’s common stock issuable upon exchange of such Retained
Interests, for a period of two years following completion of the
acquisition.  The Company has granted certain registration rights to
the existing members of Holdings with respect to the shares of the Company’s
common stock issuable upon exchange of the Retained Interests pursuant to a
Registration Rights Agreement entered into by the Company and the holders of the
Retained Interests contemporaneously with the closing of the acquisition of
Essex.


F-11


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The fair
value of the Retained Interests accepted by Essex Crane’s officers in lieu of
cash was based on the enterprise value for Essex Holdings ascribed by the total
purchase price paid in the Essex acquisition.  The number of shares of
the Company’s common stock into which the Retained Interests could be converted
was based on the estimated per share cash in trust as of the acquisition closing
date and approximated the per share common stock price on the acquisition
agreement date.




Essex
Rental paid a gross purchase price of $225,268,657 excluding liabilities
except assumed debt of which $73,146,539 was paid in cash to sellers;
$7,492,225 funded the General Escrow Agreement and Compliance Escrow Agreement
and $8,810,990 was paid for transaction and other costs of the
acquisition.  Also, the purchase price included the fair value of the
Retained Interests of existing management of $5,000,000.  Lastly,
the purchase price included common stock with a fair value (based on the closing
price of Essex Rental Corp. stock on the acquisition date) of $923,734 for
transaction related services and assumed debt of $129,895,169.




The
Company used $82,118,675 of the proceeds of its initial public offering held in
its trust account as of the closing date, as well as $9,298,594 advanced under
the Essex Crane amended credit facility, to pay the net purchase price in the
acquisition.





The
purchase price paid by Essex Rental consisted of the following:





Cash
      paid to Sellers
                      
                      $
                      73,146,539Cash
      paid into escrow
                      
                      
                      7,492,225Cash
      paid for seller transaction and other costs
                      
                      
                      3,763,346Cash
      paid for buyer transaction costs
                      
                      
                      5,047,644Total
      cash paid
                      
                      
                      89,449,754Essex
      Rental common stock issued for transaction costs (132,911 shares)
      (1)
                      
                      
                      923,734Reservation
      of 632,911 shares of Essex Rental common stock forsellers'
      conversion of Retained Interest in Holdings (2)
                      
                      
                      5,000,000Essex
      Crane debt assumed at closing
                      
                      
                      129,895,169Total
      purchase price paid for net assets acquired
                      
                      $
                      225,268,657





(1)
            The
      common stock was valued at $6.95 per share, which approximates the quoted
      market price of the common stock on the date the acquisition
      closed.





(2)
            The
      common stock was valued at $7.90 per share, which approximates the quoted
      market price of the common stock at the time the acquisition was
      agreed.


F-12


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The fair
value of the assets acquired and liabilities assumed arising from the
acquisition as of October 31, 2008 were as follows:





Assets
      Acquired:Cash
                          
                          $
                          1,191,660Accounts
      receivable
                          
                          
                          10,701,304Other
      current assets
                          
                          
                          4,964,670Rental
      equipment
                          
                          
                          256,086,550Property
      and equipment
                          
                          
                          8,095,892Spare
      parts inventory
                          
                          
                          3,064,029Goodwill
                          
                          
                          23,895,733Other
      intangible assets
                          
                          
                          3,640,000Other
      assets
                          
                          
                          2,429,403Total
      Assets Acquired
                          
                          
                          314,069,241Liabilities
      Assumed:Accounts
      payable and accrued liabilities
                          
                          
                          13,848,973Deferred
      tax liabilities
                          
                          
                          74,951,611Total
      Liabilities Assumed
                          
                          
                          88,800,584Net
      Assets Acquired
                          
                          $
                          225,268,657





The
methodology in allocating the final adjusted purchase price of Holdings of
$225.3 million, including related includable transaction expenses, to the assets
acquired and liabilities assumed is described below as follows:





·
              The
      book value of cash, accounts receivable, other current assets, accounts
      payable and accrued liabilities were determined to approximate their fair
      value due to their short term
nature;





·
              An
      experienced and qualified third party assisted in the valuation of the
      Company’s rental equipment and property and equipment based in part on
      assumptions provided by
management;





·
              An
      experienced and qualified third party assisted in the valuation of
      intangible assets including customer relationship intangible and trademark
      based in part on assumptions provided by management;
  and





·
              The
      remaining excess purchase price paid over the net assets acquired, which
      included transaction costs incurred, was recorded as
    goodwill.





Pro
Forma Information (Unaudited)





The
following table contains unaudited pro forma consolidated income information of
the Company for the years ended December 31, 2008 and 2007 as if the acquisition
of Holdings had occurred at the beginning of each respective period
presented.  The pro forma adjustments recorded associated with the
fair value of assets acquired relate to additional depreciation
expense resulting from the increase in fair value of rental equipment
and property and equipment and additional interest expense associated with the
debt incurred to finance the acquisition:


F-13


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Year
      EndedDecember
      31,2008
                    
                    
                    2007Total
      revenues
                    
                    $
                    85,851,346
                    
                    
                    $
                    78,122,079Gross
      profit
                    
                    
                    47,406,908
                    
                    
                    
                    37,010,766Income
      from operations
                    
                    
                    4,817,554
                    
                    
                    
                    26,501,244Net
      (loss) income
                    
                    
                    (3,639,001
                    )
                    
                    
                    10,102,426Basis
      and diluted net income per common share
                    
                    
                    (0.26
                    )
                    
                    
                    0.73





The above
unaudited pro forma information is presented for illustrative purposes only and
is not intended to be, and may not be indicative of the results of operations
that would have actually occurred had the acquisition of Holdings occurred as
presented.  Also, future results may vary significantly from the
results reflected in such pro forma information.





Initial
Public Offering





On March
13, 2007, Essex Rental sold 11,250,000 units (“Units”) in the Initial Public
Offering (“Offering”) at $8.00 per Unit. On March 15, 2007, the Company
consummated the sale of an additional 1,687,500 Units which were subject to the
underwriter’s over-allotment option. Each Unit consists of one share of the
Company’s common stock, $.0001 par value, and one Redeemable Common Stock
Purchase Warrant (“Warrants”).  Each Warrant entitles the holder to
purchase from the Company one share of common stock at an exercise price of
$5.00 commencing on the later of the completion of a business combination or
March 5, 2008 and expiring March 4, 2011.  The Warrants will be
redeemable, at the Company’s option, with the prior consent of Early Bird
Capital, Inc., the representative of the underwriters in the Offering
(“Representative”), at a price of $0.01 per Warrant upon 30 days’ notice after
the Warrants became exercisable, only in the event that the last sale price of
the common stock is at least $11.00 per share for any 20 trading days within a
30 trading day period ending on the third day prior to the date on which notice
of redemption is given. If the Company redeems the Warrants as described above,
management will have the option to require any holder that wishes to exercise
his Warrant to do so on a “cashless basis.” In such event, the holder would pay
the exercise price by surrendering his Warrants for that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the product of the
number of shares of Common Stock underlying the Warrants, multiplied by the
difference between the exercise price of the Warrants and the “fair market
value” (defined below) by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the Common Stock for the 10
trading days ending on the third trading day prior to the date on which the
notice of redemption is sent to holders of Warrants. In accordance with the
warrant agreement relating to the Warrants sold and issued in the Offering, the
Company is only required to use its best efforts to maintain the effectiveness
of the registration statement covering the Warrants. The Company will not be
obligated to deliver securities, and there are no contractual penalties for
failure to deliver securities, if a registration statement is not effective at
the time of exercise. Additionally, in the event that a registration is not
effective at the time of exercise, the holder of such Warrant shall not be
entitled to exercise such Warrant and in no event (whether in the case of a
registration statement not being effective or otherwise) will the Company be
required to net cash settle the warrant exercise. Consequently, the Warrants may
expire unexercised and unredeemed.




Essex
Rental paid the underwriters in the Offering an underwriting discount of 5.5% of
the gross proceeds of the Offering and a non-accountable expense allowance of
0.5% of the gross proceeds of the Offering. However, the underwriters agreed
that 1.5% of the underwriting discount would be deferred and would not be paid
unless and until the Company consummated a business combination. Accordingly,
$1,552,500 was reflected as deferred underwriting fees at December 31, 2007 in
the accompanying balance sheets. In connection with the Offering, the Company
also issued an option (“Option”), for $100, to the Representative to purchase
600,000 Units at an exercise price of $8.80 per Unit. The Company accounted for
the fair value of the Option, inclusive of the receipt of the $100 cash payment,
as an expense of the Offering resulting in a charge directly to stockholders’
equity. The Company estimated that the fair value of the Option was
approximately $2,019,940 ($3.3549 per Unit) using a Black-Scholes option-pricing
model.


F-14


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The fair
value of the Option granted to the Representative was estimated as of the date
of grant using the following assumptions: (1) expected volatility of 43.78%, (2)
risk-free interest rate of 4.67% and (3) expected life of 5 years. The Option
may be exercised for cash or on a “cashless” basis, at the holder's option, such
that the holder may use the appreciated value of the Option (the difference
between the exercise prices of the Option and the underlying Warrants and the
market price of the Units and underlying securities) to exercise the option
without the payment of any cash.





The
Company will have no obligation to net cash settle the exercise of the Option or
the Warrants underlying the Option. The holder of the Option will not be
entitled to exercise the Option or the Warrants underlying the Option unless a
registration statement covering the securities underlying the Option is
effective or an exemption from registration is available. If the holder is
unable to exercise the Option or underlying Warrants, the Option or Warrants, as
applicable, will expire worthless.





Private Placement





Essex
Rental’s directors and certain special advisors and their members purchased
1,500,000 Warrants (‘‘Insider Warrants’’) at $1.00 per Warrant (for an aggregate
purchase price of $1,500,000) privately from the Company. These purchases took
place simultaneously with the consummation of the Offering in 2007. All of the
proceeds received from these purchases were placed in the Trust Account. The
Insider Warrants are identical to the Warrants underlying the Units sold in the
Offering except that if the Company calls the Warrants for redemption, the
Insider Warrants may be exercisable, at the Initial Stockholders’ option, on a
“cashless basis” so long as such securities are held by such Initial
Stockholders or their affiliates.





Trust
Fund and Common Stock Subject to Possible Redemption





Approximately
$99.7 million of the Offering proceeds was deposited in an interest-bearing
trust account ("Trust Fund") until the earlier of (i) the consummation of a
business combination or (ii) liquidation of the Company (the Company's
Certificate of Incorporation provided for mandatory liquidation of the Company
in the event that the Company did not consummate a business combination within
24 months from the date of the consummation of the Offering. Under the
agreement governing the Trust Fund, the proceeds were permitted to be invested
only in specified United States government securities or in specified money
market funds. Additionally, up to an aggregate of $1.5 million of interest
earned on the Trust Fund was permitted to be used to pay for business,
legal and accounting due diligence on prospective acquisitions and continuing
general and administrative expenses. At December 31, 2007, cash held in the
Trust Fund was approximately $100.9 million. Upon closing of the Transaction,
the balance in the Trust Fund, approximately $83.9 million, became available to
fund the acquisition of Holdings.





The
Company, after signing the Stock Purchase Agreement to acquire Holdings, was
required to submit the transaction for stockholder approval. In the event that
stockholders owning 20% or more of the shares sold in the Offering voted against
the transaction and exercised their redemption rights, the Transaction would not
be consummated. The transaction was submitted to the vote of stockholders in
October 2008, and was approved. However, stockholders voting against the
transaction requested the redemption of 2,357,736 shares of the Company's common
stock for $18.7 million, representing the dissenting stockholders' pro rata
share of the Trust Fund.





2.
            Significant
      Accounting Policies





The
Company’s significant accounting policies described in this note are the same
for the Successor and Predecessor except as specifically noted
otherwise.


F-15




ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Use
of Estimates





The
preparation of these financial statements requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures.  Accordingly, actual results could materially differ from
those estimates.  Significant estimates include the allowance for
doubtful accounts and credit memos, spare parts inventory obsolescence reserve,
useful lives for rental equipment and property and equipment, deferred income
taxes, personal property tax accrual, loss contingencies and the fair value of
interest rate swaps and other financial instruments.





Revenue
Recognition





The
Company recognizes revenue, including multiple element arrangements, in
accordance with the provisions of applicable accounting guidance.  We
generate revenue from Essex Crane’s rental of cranes and related equipment and
other services such as crane and equipment transportation and repairs and
maintenance.  In many instances, the Company provides some of the
above services under the terms of a single customer Equipment Rental
Agreement.





Revenue
arrangements with multiple elements are divided into separate units of
accounting based on vendor-specific objective evidence if available, third-party
evidence if vendor-specific objective evidence is not available, or estimated
selling price if neither vendor-specific objective evidence nor third-party
evidence is available.  The estimated selling prices of the individual
deliverables are not materially different than the terms of the Equipment Rental
Agreements.





Revenue
from equipment rentals are billed monthly in advance and recognized as earned,
on a straight line basis over the rental period specified in the associated
equipment rental agreement.  Rental contract terms span several months
or longer.  Because the term of the contracts can extend across
financial reporting periods, when rentals are billed in advance, we defer
recognition of revenue and record unearned rental revenue at the end of
reporting periods so that rental revenue is included in the appropriate
period.  Repair service revenue is recognized when the service is
provided.  Transportation revenue from rental equipment delivery
service is recognized for the drop off of rental equipment on the delivery date
and is recognized for pick-up when the equipment is returned to the Essex Crane
service center, storage yard or next customer location.  New and used
rental equipment sales are recognized upon acceptance by the customer and the
execution of a definitive sales agreement stipulating the date risk ownership is
transferred.





These
policies are directly related to our cash flow and earnings.  There
are estimates required in recording certain repair and maintenance revenues and
also in recording any allowances for doubtful accounts.  The estimates
have historically been accurate in all material respects and we do not
anticipate any material changes to our current estimates in these
areas.





Shipping and Handling Costs





The
Company classifies shipping and handling amounts billed to customers as revenues
and the corresponding expenses are included in cost of revenues in the
consolidated statements of operations.





Accounts
Receivable and Allowance for Doubtful Accounts





Accounts
receivable are recorded at the invoice price net of an estimate of allowance for
doubtful accounts and reserves for credit memos, and generally do not bear
interest.





The
allowance for doubtful accounts is the Company’s best estimate of the amount of
credit losses in accounts receivable and is included in selling, general and
administrative expenses in the consolidated statements of operations. The
Company periodically reviews the allowance for doubtful accounts and balances
are written off against the allowance when management believes it is probable
the receivable will not be recovered. The Company’s allowance for doubtful
accounts and credit memos was approximately $1,545,000 and $660,000 as of
December 31, 2009 and 2008, respectively.  The Successor charged
approximately $2,186,000 and $660,000 to net income for doubtful accounts during
the years ended December 31, 2009 and 2008, which represents the two month
post-acquisition period, respectively.  The Successor wrote-off
approximately $1,301,000 of the allowance balance against in conjunction with
the related receivables during the year ended December 31, 2009.  The
Predecessors allowance for doubtful accounts and reserve for credit
memos was $3,516,000 and $2,773,000 at October 31, 2008 and December 31, 2007,
respectively.  Bad debt expense was approximately $600,000 for the
year ended December 31, 2009.  The Company’s bad debt expense was
$160,000 for the year ended December 31, 2008, which represents Essex Crane
for the two month post-acquisition period.  For the ten month period
ended October 31, 2008 and the year ended December 31, 2007 the Predecessor’s
bad debt expense was $680,000 and $525,000, respectively.


F-16


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Concentrations
of Credit Risk





Financial
instruments that potentially subject the Company to a significant concentration
of credit risk consist primarily of cash and cash equivalents. The Company may
maintain deposits in federally insured financial institutions in excess of
federally insured limits. However, management believes the Company is not
exposed to significant credit risk due to the financial position of the
depository institutions in which those deposits are held.





Another
financial instrument account that potentially subjects the Company to a
significant concentration of credit risk primarily relates to accounts
receivable.  Concentrations of credit risk with respect to accounts
receivable is limited because a large number of geographically diverse customers
make up the Company’s customer base.





No single
customer represented more than 10% of total revenue or outstanding receivables
for any of the periods presented.





The
Company controls credit risk through credit approvals, credit limits and other
monitoring procedures. The Company also manages credit risk through bonding
requirements on its customers and/or liens on projects that the rental equipment
is used to complete.





Spare Parts
Inventory





Spare
parts inventory is used to service rental equipment and is stated at
cost.  Spare parts inventory is classified as a non-current asset as
it is primarily used to support rental equipment operations.  Usage is
recorded as repairs and maintenance expense in the period the parts were issued
to a repair project, or, usage is reclassified as additional cost of the rental
equipment if the repair project meets certain capitalization criteria as
discussed below.





The
carrying value of the spare parts inventory is reduced by a reserve representing
management’s estimate for obsolete and slow moving items. This obsolescence
reserve is an estimate based upon the Company’s analysis by type of inventory,
usage and market conditions at the consolidated balance sheet dates. The
obsolescence reserve was approximately $100,000 as of December 31,
2009.  No spare parts inventory obsolescence reserve was deemed
necessary at December 31, 2008 as this account was adjusted to fair value as of
the October 31, 2008 acquisition date. The Predecessor’s inventory obsolescence
reserve was approximately $4,100,000 and $4,800,000 at October 31, 2008 and
December 31, 2007, respectively.





Rental
Equipment





Rental
equipment is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
equipment, which range from 20 to 30 years.  Projects with costs in
excess of $20,000 for equipment improvements that extend the useful lives or
enhance a crane’s capabilities are capitalized in the period they are incurred
and depreciated using the straight line method over an estimated useful life of
7 years.  Individual rental equipment items purchased with costs in
excess of $5,000 are also capitalized and are depreciated over the useful lives
of the respective item purchased.  During the year ended December 31,
2009, the Successor capitalized rental equipment maintenance expenditures of
approximately $0.4 million.  During
the year ended December 31, 2008, which represents the two month
post-acquisition period, the Successor did not capitalize rental equipment
maintenance expenditures.During the ten months ended October 31,
2008, the Predecessor capitalized rental equipment maintenance expenditures of
approximately $1.6 million.





Gains and
losses on retirements and disposals of rental equipment are included in income
from operations. Ordinary repair and maintenance costs are included in cost of
revenues in the consolidated statements of operations.


F-17


ESSEX RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Property
and Equipment





Property
and equipment is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the assets’ estimated useful lives,
which are as follows:





Buildings
                30
      yearsBuilding
      improvements
                10
      yearsOffice
      equipment and improvements
                3
      to 7 yearsAutomobiles,
      trucks, trailers and yard equipment
                4
      to 5 yearsInformation
      systems equipment and software
                3
      yearsMachinery,
      furniture and fixtures
                4
      to 7 years





Expenditures
for betterments and renewals in excess of $5,000 that extend the useful lives or
enhance the assets’ capabilities are capitalized and are depreciated on the
straight line basis over the remaining lives of the assets (generally 7 years
for rental equipment betterments).  Gains and losses on retirements
and disposals of property and equipment are included in the consolidated
statements of operations.  During the years ended December 31, 2009
and 2008 (which represents the two month post-acquisition period), the Successor
capitalized property, plant and equipment expenditures, excluding capitalized
software costs, of approximately $1.0 million and $0.2 million,
respectively.  During the ten months ended October 31, 2008, the
Predecessor capitalized property, plant and equipment expenditures, excluding
capitalized software costs, of approximately $1.4 million.





External
costs incurred by the Successor and Predecessor to develop computer software for
internal use are capitalized in accordance with applicable accounting
guidance.  Capitalized software development costs include software
license fees, consulting fees and certain internal payroll costs and are
amortized on a straight line basis over their useful lives.  The
Company capitalized costs of approximately $672,490 associated with the
development of a new Enterprise Resource Planning system (“ERP
system”).  The ERP system implementation was completed early in 2010
and will be amortized on a straight line basis over its 3 year useful life
beginning in the first quarter of 2010.  The Predecessor’s cumulative
capitalized software was $926,619 and $922,043 and accumulated amortization was
$897,432 and $881,753 at October 31, 2008 and December 31, 2007,
respectively.  For the ten months ended October 31, 2008 and the year
ended December 31, 2007, the Predecessor’s amortization expense was $15,680 and
$14,438, respectively.





Loan
Acquisition Costs





Loan
acquisition costs include underwriting, legal and other direct costs incurred in
connection with the issuance of the Company’s debt in conjunction with the
business combination.  These costs are capitalized and amortized using
the straight line method over the remaining period of the debt and included in
interest expense.





Goodwill
and Other Intangible Assets





The
Company used the purchase method of accounting for its acquisition of Holdings.
The acquisition resulted in an allocation of purchase price to goodwill and
other intangible assets. The cost of Holdings was first allocated to
identifiable assets based on estimated fair values. The excess of the purchase
price over the fair value of identifiable assets acquired in the amount of
$23,895,733 was recorded as goodwill.





During
the fourth quarter of 2008, the Company determined that the weakening economy
and the global credit crisis resulted in a reduction in the Company’s market
capitalization (share price) below its total shareholders’ equity value, which
was an indication that its goodwill may be impaired.  As a result, the
Company performed an assessment of goodwill of its Essex Crane subsidiary as of
December 31, 2008 with the assistance of a third-party valuation specialist. The
impairment was the result of a significant decline in the Company’s stock price
(market capitalization), the weakening of the economy and credit crisis and the
likely potential impact on the Company’s future cash flows.  Based on
the analysis, the Company recorded a gross non-cash impairment charge of
$23,895,733 at December 31, 2008 which is included in the Company’s statement of
operations for the year ended December 31, 2008.  After recording this
impairment charge, the Company had no remaining goodwill at December 31,
2008.


F-18


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Other
intangible assets consist of customer relationships and trademarks obtained in
the acquisition of Holdings. The customer relationship intangible and trademark
assets are both being amortized on a straight-line basis over their estimated
useful lives of 5 years.





Long-lived
Assets





Long
lived assets are recorded at the lower of amortized cost or fair
value.  As part of an ongoing review of the valuation of long-lived
assets and finite-lived intangibles, the Company assesses the carrying value of
these assets if such facts and circumstances suggest that they may be
impaired.  If this review indicates the carrying value of these assets
may not be recoverable, as determined by an undiscounted cash flow analysis over
the remaining future life, the carrying value would be reduced to its estimated
fair value.  The Company determined that there was no impairment of
its long-lived assets as of December 31, 2009 and 2008.





Derivative
Financial Instruments and Hedging Activities





The
Company uses derivative financial instruments for the purpose of hedging the
risks associated with interest rate fluctuations on its revolving credit
facility with the objective of converting a targeted amount of its floating rate
debt to a fixed rate.  The Company has not entered into derivative
transactions for speculative purposes, and therefore holds no derivative
instruments for trading purposes.




The
Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk management objective and strategy for
undertaking each hedge transaction. All derivative instruments are carried at
fair value on the balance sheet in accordance with applicable accounting
guidance.





Cash flow
hedges are accounted for by recording the fair value of the derivative
instrument on the balance sheet as either a freestanding asset or liability,
with a corresponding offset recorded in accumulated other comprehensive income
within stockholders’ equity, net of tax. Amounts are reclassified from
accumulated other comprehensive income to the consolidated income statement in
the period or periods the hedged transaction affects earnings.





Derivative
gains and losses under cash flow hedges not effective in hedging the change in
fair value or expected cash flows of the hedged item are recognized immediately
within the statement of operations. At the hedge’s inception and at least
quarterly thereafter, a formal assessment is performed to determine whether
changes in the fair values or cash flows of the derivative instruments have been
highly effective in offsetting changes in fair values or cash flows of the
hedged items and whether they are expected to be highly effective in the future.
If it is determined a derivative instrument has not been or will not continue to
be highly effective as a hedge, hedge accounting is discontinued.  No
hedge ineffectiveness was recognized within the statement of operations during
the years ended December 31, 2009 or 2008.





The
Predecessor did not contemporaneously document the hedge designation on the date
of inception in order to quality for hedge accounting treatment.  As
such, the derivative financial instruments of the Predecessor have been recorded
at fair value in the accompanying consolidated balance sheets in long-term
liabilities with changes in the underlying fair value reported as a component of
other income (expenses) in the Company’s consolidated statements of
operations.





Income
Taxes





The
Company uses an asset and liability approach for financial accounting and
reporting of income taxes.  Deferred tax assets and liabilities are
computed using tax rates expected to apply to taxable income in the years in
which those assets and liabilities are expected to be realized. The effect on
deferred tax assets and liabilities resulting from a change in tax rates is
recognized as income or expense in the period that the change in tax rates is
enacted.


F-19


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Management
makes certain estimates and judgments in determining income tax expense for
financial statement purposes.  These estimates and judgments are
applied in the calculation of certain tax credits and in the calculation of the
deferred income tax expense or benefit associated with certain deferred tax
assets and liabilities.  Significant changes to these estimates may
result in an increase or decrease to the Company’s tax provision in a subsequent
period.





Management
assesses the likelihood that it will be able to recover its deferred tax
assets.  If recovery is not likely, the Company will increase its
provision for income taxes by recording a valuation allowance against the
deferred tax assets that are unlikely to be recovered.





The
Company adopted accounting guidance surrounding the accounting for uncertainty
in income taxes on January 1, 2007 which upon adoption had no impact on the
company’s consolidated financial statements as management has concluded that the
tax benefits related to its uncertain tax positions can be fully recognized. The
Successor and Predecessor recognize potential accrued interest and penalties
related to unrecognized tax benefits in income tax expense.





Stock
based compensation





Stock
based compensation is accounted for in accordance with generally accepted
accounting principles, which results in compensation expense being recorded over
the requisite service or vesting period based on the fair value of the share
based compensation at the date of grant.





Segment
Reporting





The
Company has determined that although it has several distinct revenue streams
including equipment rental and transportation, used equipment sales, and repairs
and maintenance, it has only on reportable segment.  This
determination was based upon how management allocates its resources and assesses
performance.





Reclassifications





The Company changed its presentation of
revenues and related costs associated with insurance recoveries for repair of
damage to equipment from accidents or natural disasters while on rent within the
Consolidated Statements of Operations to report these revenues and cost of
revenues gross within continuing operations to better reflect the nature of the
transactions and the fact that the Company is generally reimbursed by its
clients for damages incurred for all periods presented and reflecting the terms
within the rental agreements within the normal course of business.  It
had previously been presented on a net basis within Other Income
(Expense).


F-20


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




The following table provides a summary
of the reclassifications made in each period:




Successor
                        
                        
                        PredecessorFor the TenYear Ended
                        
                        
                        Months Ended
                        
                        
                        Year EndedDecember 31,
                        
                        
                        October 31,
                        
                        
                        December 31,2008
                        
                        
                        2008
                        
                        
                        2007Equipment
      repairs and maintenance revenue previously reported
                        
                        $
                        999,950
                        
                        
                        $
                        5,901,901
                        
                        
                        $
                        7,063,722Reclassification
      of insurance recovery revenue
                        
                        
                        386,103
                        
                        
                        
                        136,738
                        
                        
                        
                        357,250Equipment
      repairs and maintenance revenue
                        
                        $
                        1,386,053
                        
                        
                        $
                        6,038,639
                        
                        
                        $
                        7,420,972Equipment
      repairs and maintenance cost of revenues previously
      reported
                        
                        $
                        850,379
                        
                        
                        $
                        5,330,053
                        
                        
                        $
                        7,356,751Reclassification
      of insurance recovery expenses
                        
                        
                        386,103
                        
                        
                        
                        81,219
                        
                        
                        
                        217,581Equipment
      repairs and maintenance cost of revenues
                        
                        $
                        1,236,482
                        
                        
                        $
                        5,411,272
                        
                        
                        $
                        7,574,332Other
      income - net, insurance recoveries
                        
                        $
                        -
                        
                        
                        $
                        55,519
                        
                        
                        $
                        139,669Reclassification
      to income from operations
                        
                        
                        -
                        
                        
                        
                        (55,519
                        )
                        
                        
                        (139,669
                        )Other
      income - net, insurance recoveries
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -





Recently
Issued and Adopted Accounting Pronouncements





In
December 2007, the FASB issued a revision to the accounting for business
combinations.  Under the revised guidance, an acquiring entity will be
required to recognize the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited exceptions.
Specifically, the new guidance will change the accounting for acquisition costs,
noncontrolling interests, acquired contingent liabilities, restructuring costs
associated with a combination and certain tax-related items, as well as require
additional disclosures.  The new guidance applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008.  Because this standard was applied
prospectively, the effect of adoption on the Company’s financial statements will
depend primarily on specific transactions, if any, completed in 2009 or
thereafter.





In March
2008, the FASB issued a statement which establishes the disclosure requirements
for derivative instruments and for hedging activities with the intent to provide
financial statement users with an enhanced understanding of the entity’s use of
derivative instruments, the accounting of derivative instruments and related
hedged items and its related interpretations, and the effects of these
instruments on the entity’s financial position, financial performance and cash
flows.  This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2008. The Company’s adoption on
January 1, 2009 did not have a material impact on its consolidated financial
statement disclosures.  See the additional disclosures in Note
8.





In April
2008, the FASB issued an accounting standard which amended the list of factors
an entity should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets.  This new
standard applies to (1) intangible assets that are acquired individually or with
a group of other assets and (2) intangible assets acquired in both business
combinations and asset acquisitions.  Under this standard, entities
estimating the useful life of a recognized intangible asset must consider their
historical experience in renewing or extending similar arrangements, or, in the
absence of historical experience, must consider assumptions that market
participants would use about renewal or extension.  This standard
would apply to the Company if it were to acquire an intangible asset either
through a business combination or individually.


F-21


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


In April 2009, the FASB issued a
pronouncement that provides additional guidance for estimating fair value when
the volume and level of activity for the asset or liability have significantly
decreased.  In addition, the pronouncement amends previous guidance to
require that a reporting entity disclose in interim and annual periods the
inputs and valuation techniques used to measure fair value and a discussion of
changes in valuation techniques and related inputs, if any, during the
period.  The Company adopted the pronouncement as required during the
quarter ended June 30, 2009.  The adoption of this pronouncement
resulted in additional disclosures in Note 9.


In April 2009, the FASB issued
additional guidancewhich expands to
interim periods the fair value disclosures required for financial
instruments.  It also requires entities to disclose the method(s) and
significant assumptions used to estimate the fair value of financial instruments
in financial statements on an interim basis and to highlight any changes in the
methods and significant assumptions from prior periods.  The Company
adopted this guidance during the quarter ended June 30, 2009, which was applied
prospectively, resulted in additional disclosures contained in Note
9.





In
May 2009, the FASB issued a standard related to subsequent events that is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued.  Specifically, this standard
sets forth the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date.  The standard was effective for
fiscal years and interim periods ended after June 15, 2009 and is applied
prospectively.  The Company adopted the standard during the quarter
ended June 30, 2009.





In
June 2009 the FASB issued a standard that amends the GAAP
hierarchy.  On July 1, 2009 the FASB launched FASB’s new
Codification entitled The FASB
Accounting Standards Codificationwhich will supersede all existing
non-SEC accounting and reporting standards.  The Codification is
effective for fiscal years and interim periods ended after September 15,
2009 and had no effect on our unaudited consolidated financial statements upon
adoption other than current references to GAAP which were replaced with
references to the applicable codification paragraphs or described in plain
English.





In
October 2009, the FASB issued accounting guidance that provides application
guidance on whether multiple deliverables exist, how the deliverables should be
separated and how the consideration should be allocated to one or more units of
accounting.  This guidance establishes a selling price hierarchy for
determining the selling price of a deliverable.  The selling price
used for each deliverable will be based on vendor-specific objective evidence,
if available, third-party evidence if vendor-specific objective evidence is not
available, or estimated selling price if neither vendor-specific or third-party
evidence is available.  The Company would be required to apply this
guidance prospectively for revenue arrangements entered into or materially
modified after January 1, 2011; however, as earlier application is permitted,
the Company decided to apply this guidance retrospectively for all prior
periods.  The application of the new guidance had no impact on the
Company’s units of accounting, the allocation of arrangement consideration, the
pattern and timing of revenue recognition or the consolidated financial
statements.





In
January 2010, the FASB issued authoritative guidance that expands the required
disclosures about fair value measurements. This guidance provides for new
disclosures requiring the Company to (i) disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value
measurements and describe the reasons for the transfers and (ii) present
separately information about purchases, sales, issuances and settlements in the
reconciliation of Level 3 fair value measurements. This guidance also
provides clarification of existing disclosures requiring the Company to
(i) determine each class of assets and liabilities based on the nature and
risks of the investments rather than by major security type and (ii) for
each class of assets and liabilities, disclose the valuation techniques and
inputs used to measure fair value for both Level 2 and Level 3 fair
value measurements. This guidance will be effective on January 1, 2010,
except for the presentation of purchases, sales, issuances and settlements in
the reconciliation of Level 3 fair value measurements, which is effective
on January 1, 2011. This guidance is not expected to have a material impact
on the Company’s consolidated financial statements.


F-22


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





3.
            Rental
      Equipment





Rental
equipment consists of the following:




Successor
                            
                            
                            PredecessorDecember 31,
                            
                            
                            October 31,2009
                            
                            
                            2008
                            
                            
                            2008Rental
      Equipment
                            
                            $
                            273,199,851
                            
                            
                            $
                            257,436,079
                            
                            
                            $
                            187,039,562Less:
      accumulated depreciation
                            
                            
                            (12,432,173
                            )
                            
                            
                            (1,743,963
                            )
                            
                            
                            (53,866,913
                            )Rental
      Equipment, net
                            
                            $
                            260,767,678
                            
                            
                            $
                            255,692,116
                            
                            
                            $
                            133,172,649





Essex Rental’s depreciation expense
related to rental equipment was $10,821,685 for the year ended December 31, 2009
and is included in cost of revenues in the accompanying consolidated statements
of operations.  Essex Rental’s depreciation expense
related to rental equipment was $1,749,762 for the year ended December 31, 2008,
which represents Essex Crane for the two month post-acquisition period, and is
included in cost of revenues in the accompanying consolidated statements of
operations.





For the
ten months ended October 31, 2008 and the year ended December 31, 2007, the
Predecessor’s depreciation expense related to rental equipment was $6,635,454,
and $7,731,801, respectively.





Rental
periods on rental equipment commonly extend beyond the minimum rental period
required by each respective rental agreement due to construction delays, project
scope increases or other project related issues.  Future minimum
rental revenues as required by executed rental agreements as of December 31,
2009 are as follows:





2010
                  
                  $
                  5,857,0002011
                  
                  
                  306,000Total
      minimum rental revenue
                  
                  $
                  6,163,000





4.
            Property
      and Equipment





Property
and equipment consists of the following:


Successor
                                
                                
                                PredecessorDecember 31,
                                
                                
                                October 31,2009
                                
                                
                                2008
                                
                                
                                2008Land
                                
                                $
                                2,575,000
                                
                                
                                $
                                2,575,000
                                
                                
                                $
                                831,436Buildings
      and improvements
                                
                                
                                2,075,000
                                
                                
                                
                                2,075,000
                                
                                
                                
                                1,064,078Automobiles,
      trucks, trailers and yard equipment
                                
                                
                                985,650
                                
                                
                                
                                1,436,650
                                
                                
                                
                                1,802,356Information
      Systems equipment and software
                                
                                
                                29,187
                                
                                
                                
                                29,187
                                
                                
                                
                                926,619Office
      equipment
                                
                                
                                97,461
                                
                                
                                
                                57,343
                                
                                
                                
                                589,096Machinery,
      furniture and fixtures
                                
                                
                                666,077
                                
                                
                                
                                59,519
                                
                                
                                
                                484,241Construction
      in progress
                                
                                
                                1,141,464
                                
                                
                                
                                2,021,914
                                
                                
                                
                                3,001,023Total
      property and equipment
                                
                                
                                7,569,839
                                
                                
                                
                                8,254,613
                                
                                
                                
                                8,698,849Less:
      accumulated depreciation
                                
                                
                                (588,179
                                )
                                
                                
                                (78,470
                                )
                                
                                
                                (3,064,790
                                )Property
      and equipment, net
                                
                                $
                                6,981,660
                                
                                
                                $
                                8,176,143
                                
                                
                                $
                                5,634,059


F-23


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
amount of costs incurred and capitalized for projects not yet completed at
December 31, 2009 and 2008 were $1.1 million and $2.0 million, respectively, and
include funds deposited with rental equipment manufacturers to secure the
acquisition of assets of $0.3 million and $1.6 million,
respectively.  Essex Rental’s depreciation and amortization expense
related to property and equipment was $509,709 for the year ended December 31,
2009.  Essex Rental’s depreciation and amortization expense related to
property and equipment was $78,470 for the year ended December 31, 2008, which
represents Essex Crane for the two month post-acquisition period.  The
Predecessor’s depreciation expense related to property and equipment for the ten
months ended October 31, 2008 and year ended December 31, 2007 was $383,545 and
$435,334, respectively.





Depreciation
expense related to automobiles, trucks, trailers, yard equipment and machinery
has been included in cost of revenues in the accompanying consolidated
statements of operations as it is directly related to revenue generation while
the remaining categories are included in other operating expenses.





5.
            Loan
      Acquisition Costs





On
October 31, 2008, the Successor assumed the revolving credit facility and
related loan acquisition costs ($1,566,262) of Essex Crane and immediately
amended the agreement to expand the borrowing limit and extended the
term.  The Company is amortizing the remaining unamortized loan
acquisition costs over the new five year credit facility term as required when
the borrowing base of the new credit facility exceeds the borrowing base of
the old credit facility.  The Company incurred an additional
$907,811 of loan acquisition costs related to the amendment, which are being
amortized over the five year term of the new revolving credit
facility.





In
February 2007, the Predecessor refinanced all of its debt with the lead lender
of its previous revolver facility. New loan acquisition costs totaled $1,977,997
and were being amortized over 5 years.





Loan
acquisition costs consist of the following:




Successor
                            
                            
                            PredecessorDecember 31,
                            
                            
                            October 31,2009
                            
                            
                            2008
                            
                            
                            2008Gross
      carrying amount
                            
                            $
                            2,474,073
                            
                            
                            $
                            2,459,423
                            
                            
                            $
                            2,247,997Less:
      accumulated amortization
                            
                            
                            (576,896
                            )
                            
                            
                            (81,981
                            )
                            
                            
                            (681,735
                            )Loan
      costs, net
                            
                            $
                            1,897,177
                            
                            
                            $
                            2,377,442
                            
                            
                            $
                            1,566,262





The
Company’s loan acquisition costs amortized to interest expense for the year
ended December 31, 2009 was $494,915.  The Company’s loan acquisition
costs amortized to interest expense for the year ended December 31, 2008 was
$81,981, which represents Essex Crane for the two month post-acquisition
period.





The
Predecessor’s loan acquisition costs amortized to interest expense for the ten
months ended October 31, 2008 and the year ended December 31, 2007 were $353,300
and $1,088,182, respectively.





Estimated
future amortization expense related to loan acquisitions costs at December 31,
2009 are as follows for the years ending December 31:


2010
                      
                      $
                      494,9162011
                      
                      
                      494,9162012
                      
                      
                      494,9162013
                      
                      
                      412,429Total
                      
                      $
                      1,897,177


F-24


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




6.
            Intangible
      Assets





Goodwill
of $23,895,733 was recorded associated with the acquisition of Holdings on
October 31, 2008 for the excess of the purchase price over the fair value of
identifiable assets acquired, net of liabilities assumed.  The
goodwill was subsequently determined to be impaired as of December 31, 2008 upon
review of information up until the date the financial statements were issued and
was written off in full.





In
addition, a customer relationship intangible and trademark were recorded at fair
value associated with the acquisition of Holdings.  The following
table presents the gross carrying amount, accumulated amortization and net
carrying amount of the Company’s other identifiable intangible assets at
December 31, 2009:





Gross
                      
                      
                      
                      
                      
                      NetCarrying
                      
                      
                      Accumulated
                      
                      
                      CarryingAmount
                      
                      
                      Amortization
                      
                      
                      AmountOther
      identifiable intangible assets:Customer
      relationship intangible
                      
                      $
                      1,455,032
                      
                      
                      $
                      (386,783
                      )
                      
                      $
                      1,068,249Trademark
                      
                      
                      1,487,369
                      
                      
                      
                      (395,379
                      )
                      
                      
                      1,091,990$
                      2,942,401
                      
                      
                      $
                      (782,162
                      )
                      
                      $
                      2,160,239





The
following table presents the gross carrying amount, accumulated amortization and
net carrying amount of the Company’s other identifiable intangible assets at
December 31, 2008:





Gross
                      
                      
                      
                      
                      
                      NetCarrying
                      
                      
                      Accumulated
                      
                      
                      CarryingAmount
                      
                      
                      Amortization
                      
                      
                      AmountOther
      identifiable intangible assets:Customer
      relationship intangible
                      
                      $
                      1,800,000
                      
                      
                      $
                      (60,000
                      )
                      
                      $
                      1,740,000Trademark
                      
                      
                      1,840,000
                      
                      
                      
                      (61,333
                      )
                      
                      
                      1,778,667$
                      3,640,000
                      
                      
                      $
                      (121,333
                      )
                      
                      $
                      3,518,667





The
customer relationship intangible and trademark carrying amounts were reduced by
$344,968 and $352,631, respectively, for the year ended December 31, 2009
associated with the recognized tax deduction related to the excess tax
deductible goodwill.





The
Company’s amortization expense associated with other intangible assets was
$660,829 and $121,333 for the years ended December 31, 2009 and 2008,
respectively.





7.
            Short-term
      Debt Obligations and Revolving Credit
Facility





Short-term
Debt Obligations





Essex Finance entered into two
short-term debt obligations with a vendor related to the acquisition of two
cranes and related attachments during the year ended December 31,
2009.  These short-term obligations are interest free for six months
and then accrue interest at 3.0% for an additional six months and are
collateralized by the respective cranes and attachments purchased.  On
the six month anniversary of the origination of each obligation, a 10% principal
payment is due.  On the one year anniversary of the origination of
each obligation, the remaining unpaid principal balance is due, at which time
the Company will likely repay the entire remaining unpaid principal using
proceeds from the revolving credit facility discussed below.  The
unpaid principal balances of the individual obligations as of December 31, 2009
are $2,554,637 and $2,615,977 and mature on October 20, 2010 and November 20,
2010, respectively.


F-25


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




Revolving
Credit Facility





In
conjunction with the acquisition of Holdings on October 31, 2008, Essex Crane
amended its senior secured revolving line of credit facility (“revolving credit
facility”), which permits it to borrow up to $190.0 million.  The
maximum borrowing amount of the revolving credit facility may be increased by up
to $5.0 million any time prior to November 2010 subject to certain specified
terms and conditions in the credit agreement.  Essex Crane may borrow
up to an amount equal to the sum of 85% of eligible net receivables and 75% of
the net orderly liquidation value of eligible rental equipment.  The
revolving credit facility is scheduled to mature in October 2013 and is
collateralized by a first security interest in substantially all of the
Company’s assets.





Borrowings
under the revolving credit facility accrue interest at the borrower’s option of
either (a) the bank’s prime rate (3.25% at December 31, 2009) plus an applicable
margin or (b) a Eurodollar rate based on the rate the bank offers deposits of
U.S. Dollars in the London interbank market (“LIBOR”) (0.23% at December 31,
2009) plus an applicable margin.  The Company is also required to pay
a monthly commitment fee with respect to the undrawn commitments under the
revolving credit facility.  At December 31, 2009 the applicable prime
rate margin, euro-dollar LIBOR margin, and unused line commitment fee were
0.25%, 2.25% and 0.25%, respectively.  See Note 8 Derivatives and
Hedging Activities – Interest Rate Swap Agreement for additional
detail.





The
weighted average interest rate on the revolving credit facility at December 31,
2009 was 2.49%.





The
outstanding balance on the revolving credit facility was $131.9 million as of
December 31, 2009.  The maximum amount that could be borrowed under
the revolving credit facility, net of letters of credit, interest rate swaps and
other reserves was approximately $180.6 million as of December 31,
2009.  The Company’s available borrowing under the revolving credit
facility is approximately $48.7 million as of December 31, 2009.





Predecessor
Revolving Credit Facility





The
Predecessor refinanced its long-term debt in February 2007 with a new
asset-based senior secured revolving line of credit facility headed by the lead
lender of its previous revolving credit facility, which permitted it to borrow
up to $170.0 million.  The Predecessor could have borrowed up to an
amount equal to the sum of 85% of eligible net receivables and 75% to 80% of the
net orderly liquidation value of eligible rental equipment. The Predecessor had
the right to increase the maximum borrowing amount of the revolving credit
facility by up to $25.0 million any time prior to the second anniversary of the
facility origination date subject to certain specified terms and conditions in
the credit agreement. The revolving credit facility was previously scheduled to
mature in February 2012 and collateralized by first security interest in
substantially all of the Company’s assets.





Proceeds
from the 2007 revolving credit facility were used to pay-off the previously
existing revolving credit facility and its former Junior Term B lender, pay a
$50.0 million member dividend distribution and cover related
expenses.





Borrowings
under the revolving credit facility accrued interest of the borrower’s option at
either (a) the bank’s prime rate plus an applicable margin or (b) a Eurodollar
rate based the rate the bank offers deposits of U.S. Dollars in the London
interbank market plus an applicable margin.  The Predecessor was also
required to pay a monthly commitment fee with respect to the undrawn commitments
under the revolving credit facility. The applicable prime rate margin, LIBOR
rate, and unused line commitment fee vary based on the amount of monthly average
excess availability as defined in the credit agreement.  At October
31, 2008 the applicable prime rate margin, LIBOR margin, and unused line
commitment fee were 0.25%, 2.00% and 0.25%, respectively.





The
previously (prior to February 2007) existing revolving credit facility
(“previous credit facility”) permitted the Predecessor to borrow up to $110.0
million.  The previous credit facility was also an asset-based senior
secured facility with a first security interest in substantially all of the
assets of the Company, except the real estate which was a second secured
interest to that of the Junior Term B (“Term Loan”) debt
provider.  The senior lenders lent on a formula basis of 85% against
eligible receivables and 70% against eligible rental equipment.  The
Term Loan had a three year commitment.  The total $110.0 million
commitment had minimum annual reductions of $2.5 million per year and other
commitment reductions beyond that based upon the Company’s performance and the
level of proceeds from sale of rental equipment.


F-26


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
interest rate on the Predecessor’s revolving credit facility at October 31, 2008
was based primarily on a Prime based loan which was yielding
5.25%.  The interest rate on the revolving credit facility at December
31, 2007 was based primarily on LIBOR based loans which were yielding a weighted
effective average interest rate of 7.2%.





The
outstanding balance on Predecessor’s revolving credit facility was
$129,895,169 at October 31, 2008.  The maximum amount that could be
borrowed under the revolving credit facilities, net of letters of credit,
interest rate swaps and other reserves was $180,442,000 at October 31,
2008.





Predecessor
Junior Term B Debt





The
Predecessor’s Junior Term B debt (“Term B”) was a $15.0 million commitment that
was repaid in February 2007. The Term B debt was secured by a first security
interest in real estate and a second security interest in substantially all of
the other assets of the Predecessor.  In addition, there was a Put
Agreement providing a limited partial guarantee from the controlling partner of
Essex Holdings, LLC to the Term B debt lender.  The Term Loan had in
essence the same loan covenants as existed in the previous revolving credit
facility from the senior lenders.  There was an inter-creditor
agreement between the lenders for the previous revolving credit facility and the
Term B debt.  Additionally, the Term B debt had a 1.5% per annum
payment in kind interest factor that was added to the outstanding loan balance
which was repaid in full in February 2007.





Loan
Covenants and Compliance





As of
December 31, 2009 and for the year then ended, the Company was in compliance
with its covenants and other provisions of the revolving line of credit
facility.  Some of the financial covenants including a fixed charge
coverage ratio and rental equipment utilization ratio do not become active
unless the available borrowing falls below the $20.0 million
threshold.  The Company’s available borrowing base of approximately
$48.7 million well exceeded the threshold at December 31, 2009.  Any
failure to be in compliance with any material provision or covenant of these
agreements could have a material adverse effect on the Company’s liquidity and
operations.





8.  Derivatives
and Hedging Activities – Interest Rate Swap Agreement





Risk
Management Objective of Using Derivatives





The
Company is exposed to certain risks arising from both its business operations
and economic conditions.  The Company principally manages its
exposures to a wide variety of business and operational risks through management
of its core business activities.  The Company manages economic risks,
including interest rate, liquidity, and credit risk primarily by managing the
amount, sources, and duration of its debt funding and the use of derivative
financial instruments.  Specifically, the Company enters into
derivative financial instruments to manage exposures that arise from business
activities that result in the receipt or payment of future known and uncertain
cash amounts, the value of which are determined by interest
rates.  The Company’s derivative financial instruments are used to
manage differences in the amount, timing, and duration of the Company’s known or
expected cash receipts and its known or expected cash payments principally
related to the Company’s investments and borrowings.




Cash
Flow Hedges of Interest Rate Risk
 
 The
Company’s objectives in using interest rate derivatives are to add stability to
interest expense and to manage its exposure to interest rate movements. To
accomplish this objective, the Company primarily uses an interest rate swap as
part of its interest rate risk management strategy.  The interest rate
swap is designated as a cash flow hedge and involves receipt of variable-rate
amounts from a counterparty in exchange for the Company making fixed-rate
payments over the life of the agreement without exchange of the underlying
notional amount.


F-27


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
effective portion of changes in the fair value of derivatives designated and
that qualify as cash flow hedges is recorded in accumulated other comprehensive
income and is subsequently reclassified into earnings in the period that the
hedged forecasted transaction affects earnings. The ineffective portion of the
change in fair value of the derivatives is recognized directly in
earnings.  There was no hedge ineffectiveness recognized during the
years ended December 31, 2009 or 2008.





In
November 2008, the Company entered into an interest rate swap agreement with the
lead lender of its revolving credit facility to hedge its exposure to interest
rate fluctuations.  The swap agreement has a notional principal amount
of $100.0 million and matures in November 2012.  Under the agreement,
the Company pays a 2.71% fixed interest rate plus the applicable margin under
the revolving credit facility (or a total interest rate of 4.96%).





The swap
agreement established a fixed rate of interest for the Company and requires the
Company or the bank to pay a settlement amount depending upon the difference
between the 30 day floating LIBOR rate and the swap fixed rate of
2.71%.  The differential to be paid or received under the swap
agreement has been accrued and paid as interest rates changed and such amounts
were included in interest expense for the respective period.  Interest
payment dates for the revolving loan were dependent upon the interest rate
options selected by the Company.  Interest rates on the revolving
credit facility were determined based on Wachovia’s prime rate or LIBOR rate,
plus a margin depending on certain criteria in the agreement.  As of
December 31, 2009, the Company had effectively fixed through 2012, from a cash
flow perspective, the interest rate on approximately 76% of the Company’s credit
facility.  As of December 31, 2009, the interest rate on the
effectively fixed portion of the credit facility was 4.96% and the interest rate
on the portion of the credit facility not effectively fixed by interest rate
swap contracts, based on one month LIBOR, was 2.48%.





At
December 31, 2009, the interest rate swap liability had a fair value of
$2,306,294 and was included in long-term liabilities.  The associated
unrealized loss reported in accumulated other comprehensive income was
$1,429,903, which is net of tax of $876,391.





For the
year ended December 31, 2009, the change in net unrealized loss on derivatives
designated as cash flow hedges reported as a component of other accumulated
comprehensive income was a decrease of $1,118,319 ($690,926 net of
tax).  Amounts reported in accumulated other comprehensive income
related to derivatives will be reclassified to interest expense as interest
payments are made on the Company’s variable-rate debt.  During the
twelve month period ending December 31, 2010, the Company estimates that an
additional $2.2 million will be reclassified as an increase to interest
expense.





The
weighted average interest rate of the revolving credit facility, including the
impact of the interest rate swaps was 4.37% at December 31, 2009.  The
impact of the interest rate swap resulted in an increase in interest expense of
approximately $2.4 million for the year ended December 31, 2009.  The
weighted average interest rates of the revolving credit facility, including the
impact of the interest rate swaps, was approximately 4.53% at December 31,
2008.  The impact of the interest rate swap resulted in an increase in
interest expense of approximately $123,000 for the year ended December 31,
2008.





The table
below presents the fair value of the Company’s derivative financial instruments
as adjusted for the risk of non-performance as well as their classification on
the Balance Sheet as of December 31, 2009.




Disclosure of Fair Value of Liability Derivative


Fair Value as ofBalance Sheet
                                      
                                      December31,Location
                                      
                                      2009
                                      
                                      
                                      2008Derivatives
      designated as hedging instrumentsInterest
      Rate Swap
                                      
                                      Long-term
      Liabilities
                                      
                                      $
                                      2,306,294
                                      
                                      
                                      $
                                      3,424,613


F-28


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




The
tables below present the effect of the Company’s derivative financial
instruments on the Income Statement for the years ended December 31, 2009 and
2008.  These amounts are presented as other comprehensive income
(“OCI”).




Derivatives in Cash Flow
                  Hedging Relationships
                
                Amount ofGain
                  or (Loss)
                  Recognized in
                  OCI on
                  Derivative
                  (Effective
                  Portion)
                
                Location ofGain
                  or (Loss)
                  Reclassifiedfrom
                  AccumulatedOCI
                  into Income
                  (EffectivePortion)
                
                Amount ofGain
                  or (Loss)
                  Reclassifiedfrom
                  Accumulated
                  OCI intoIncome
                  (Effective
                  Portion)
                
                Location of Gain or
                  (Loss) Recognized in
                  Income on Derivative
                  (Ineffective Portion
                  and AmountExcluded
                  fromEffectiveness
                  Testing)
                
                Amount of Gainor
                  (Loss)Recognized
                  inIncome on
                  Derivative
                  (IneffectivePortion
                  andAmount
                  Excludedfrom
                  Effectiveness
                  Testing)For
      the Year Ended December 31, 2009Interest
      Rate Swap
                
                $
                1,281,650
                
                Interest
      expense
                
                $
                (2,399,969
                )
                Other
      income / (expense)
                
                $
                -For
      the Year Ended December 31, 2008Interest
      Rate Swap
                
                $
                (3,548,092
                )
                Interest
      expense
                
                $
                123,479
                
                Other
      income / (expense)
                
                $
                -





Credit-risk-related
Contingent Features





The
Company has agreements with each of its derivative counterparties that contain a
provision where if the Company defaults on any of its indebtedness,
including default where repayment of the indebtedness has not been
accelerated by the lender, then the Company could also be declared in
default on its derivative obligations.





As of
December 31, 2009, the fair value of derivatives in a net liability position,
which includes accrued interest but excludes any adjustment for nonperformance
risk, related to these agreements was approximately ($2.4
million).  As of December 31, 2009, the Company has not posted any
collateral related to these agreements.  If the Company had breached
any of these provisions at December 31, 2009, it would have been
required to settle its obligations under the agreements at their termination
value of approximately ($2.4 million).




Predecessor
Interest Rate Swap Agreement





In March
2007, the Predecessor entered into a derivative financial instrument with its
lead lender to hedge its exposure to interest rate fluctuations. The derivative,
known as a participative interest rate swap, took the form of a rate cap and
floor.  Under the agreement the Predecessor paid a maximum rental rate
based on LIBOR (5.27%) and participated in rate declines on a 40% sharing basis
of the notional principal amount for the period.  The notional
principal amounts under this three year instrument were $120.0 million, $100.0
million and $80.0 million for the first, second and third year,
respectively.





In
September 2007, the Predecessor entered into an interest rate swap agreement
with its lead lender to hedge its exposure to interest rate fluctuations and
replace the interest rate swap originated in March 2007 that was
terminated.  The initial notional principal amount was $120.0 million
through March 2009, at which time the notional principal amount was reduced to
$100.0 million for the remaining period though the original March 2010 maturity
date.  Under the agreement, the Predecessor paid a 5% fixed interest
rate.  The Predecessor subsequently terminated the swap agreement on
September 22, 2008, which resulted in the payment of a settlement amount of
$3,280,000.





The swap agreements established a fixed rate of interest for the
Predecessor and required the Predecessor or the bank to pay a settlement amount
depending upon the difference between the 30 day floating LIBOR rate and the
swap fixed rate.  The differential to be paid or received under the
swap agreements has been accrued and paid as interest rates changed and such
amounts were included in interest expense for the respective
period.  Interest payment dates for the revolving loan was dependent
upon the interest rate options selected by the Predecessor.  Interest
rates on the revolving credit facility are determined based on either Wachovia’s
prime rate or Eurodollar LIBOR rate, plus a margin depending on certain criteria
in the agreement.


F-29


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Predecessor did not contemporaneously document the hedge designation on the date
of inception in order to quality for hedge accounting treatment.  The
changes in fair value of the Predecessor’s swap for the year ended December 31,
2008 was an unrealized loss of ($524,259) and was reported as a component of
other income (expenses) in its consolidated statement of
operations.





9.  Fair
Value





The FASB
issued a statement on Fair Value Measurements which, among other things, defines
fair value, establishes a consistent framework for measuring fair value and
expands disclosure for each major asset and liability category measured at fair
value on either a recurring or nonrecurring basis and clarifies that fair value
is an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an
asset or liability.  As a basis for considering such assumptions, the
standard establishes a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value as follows:





·
            Level
      1 - Observable inputs such as quoted prices in active
    markets:


·
            Level
      2- Inputs, other than the quoted prices in active markets, that are
      observable either directly or indirectly;
and


·
            Level
      3 - Unobservable inputs in which there is little or no market data, which
      require the reporting entity to develop its own
    assumptions.





The
Company’s interest rate swap is recorded at fair value on a recurring basis and
had a liability fair value of approximately $2.3 million and $3.4 million at
December 31, 2009 and 2008, respectively.  The Company’s interest rate
derivative instrument is not traded on a market exchange and therefore, the fair
values are determined using valuation models which include assumptions about
interest rates based on those observed in the underlying markets (LIBOR swap
rate) and are classified within Level 2 of the valuation hierarchy.





The
carrying value of the Company’s total debt obligations including the revolving
credit facility and short-term debt obligations as of December 31, 2009 was
approximately $137.1 million.  The fair value of the Company’s debt
was approximately $129.4 million as of December 31, 2009 calculated using a
discounted cash flows approach at a market rate of interest.





The fair values of the Company’s
financial instruments, other than the interest rate swap and debt obligations,
including cash and cash equivalents approximate their carrying
values.  The Company bases its fair values on listed market prices or
third party quotes when available.  If not available, then the Company
bases its estimates on instruments with similar terms and
maturities.


F-30


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




10.  Earnings
per Share





The following tables set forth the
computation of basic and diluted earnings per share:





FortheYearsEndedDecember31,2009
                          
                          
                          2008
                          
                          
                          2007Net
      income (loss)
                          
                          $
                          1,195,806
                          
                          
                          $
                          (11,917,121
                          )
                          
                          $
                          1,699,120Weighted
      average shares outstanding:Basic
                          
                          
                          14,110,789
                          
                          
                          
                          13,517,010
                          
                          
                          
                          13,224,144Effect
      of dilutive securities:Warrants
                          
                          
                          1,694,402
                          
                          
                          
                          -
                          
                          
                          
                          -Options
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Diluted
                          
                          
                          15,805,191
                          
                          
                          
                          13,517,010
                          
                          
                          
                          13,224,144Basic
      earnings (loss) per share
                          
                          $
                          0.08
                          
                          
                          $
                          (0.88
                          )
                          
                          $
                          0.13Diluted
      earnings (loss) per share
                          
                          $
                          0.08
                          
                          
                          $
                          (0.88
                          )
                          
                          $
                          0.13





Basic
earnings per share ("EPS") is computed by dividing the net income by the
weighted average number of common shares outstanding during the
period.  Included in weighted average number of shares outstanding for
the years ended December 31, 2009 and 2008 is 632,911 shares of common stock for
the effective conversion of the retained interest in Holdings into common stock
of the Company.  Diluted EPS adjusts basic EPS for the effects of
Warrants, Units and Options; only in the periods in which such effect is
dilutive.  Potential common shares issuable from the assumed
conversion of Units and the exercise of Warrants and Options are automatically
anti-dilutive and therefore excluded from the diluted earnings per share
calculation as the Company has a net loss for the year ended December 31,
2008.





As part
of the initial public offering in March 2007, the Company issued an Underwriter
Purchase Option (“UPO”) to purchase 600,000 Units at an exercise price of $8.80
per unit.  Each unit consists of one share of the Company’s common
stock and one Warrant.  Each Warrant entitles the holder to purchase
from the Company one share of common stock.





Units
that could be converted into 1,200,000 weighted average common shares for the
year ended December 31, 2009 were outstanding but were not included in the
computation of diluted earnings per share because the effects would be
anti-dilutive.  Options that could be converted into 565,000 weighted
average shares for the year ended December 31, 2009 were outstanding but were
not included in the computation of diluted earnings per shares because the
effects would be anti-dilutive.





The
14,437,500 Warrants and the Underwriter Purchase Option (“UPO”) for
600,000 Units (the equivalent of 1,200,000 common shares) issued in
conjunction with the Company's Offering and private placement did not
become exercisable until October 31, 2008 (date of Holdings
acquisition).  Accordingly, since the exercisability of the Warrants
and UPO was contingent on a future event, the Warrants and UPO were not
reflected in the calculation of diluted EPS until the date of acquisition.





For the
year ended December 31, 2008, the entire UPO (the equivalent of 1,200,000
common shares) was not included in the computation of diluted EPS because to do
so would have been anti-dilutive.  For the year ended December 31,
2008, the 13,618,981 of warrants and 565,000 of stock options granted in 2008
were not reflected in the calculation of diluted EPS as the Company had a net
loss and therefore the effect would have been anti-dilutive.





As of
December 31, 2009, there were 12,695,781 Warrants, 565,000 Stock Options, and
the UPO for 600,000 Units (as described above) outstanding, which are
exercisable at $5.00, $4.50, and $8.80, respectively.


F-31


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




11.  Income
Taxes





Income
tax (benefit) expense consists of the following:





Successor
                            
                            
                            PredecessorTen MonthsEnded
                            
                            
                            Year EndedYears Ended December 31,
                            
                            
                            October 31,
                            
                            
                            December 31,2009
                            
                            
                            2008
                            
                            
                            2007
                            
                            
                            2008
                            
                            
                            2007Current
      income tax expense:Federal
                            
                            $
                            457,409
                            
                            
                            $
                            210,512
                            
                            
                            $
                            -
                            
                            
                            $
                            723,942
                            
                            
                            $
                            411,174State
      and local
                            
                            
                            144,160
                            
                            
                            
                            144,727
                            
                            
                            
                            416,000
                            
                            
                            
                            235,596
                            
                            
                            
                            -Deferred
      income tax (benefit) expense:Federal
                            
                            
                            (107,781
                            )
                            
                            
                            (7,805,827
                            )
                            
                            
                            -
                            
                            
                            
                            6,867,955
                            
                            
                            
                            3,569,423State
      and local
                            
                            
                            (516,397
                            )
                            
                            
                            (615,363
                            )
                            
                            
                            (28,000
                            )
                            
                            
                            235,586
                            
                            
                            
                            (39,327
                            )Total
      income tax (benefit) expense
                            
                            $
                            (22,609
                            )
                            
                            $
                            (8,065,951
                            )
                            
                            $
                            388,000
                            
                            
                            $
                            8,063,079
                            
                            
                            $
                            3,941,270




The
Successor’s current income tax expense for 2009 relates to 2008 tax return to
provision differences, an increase in uncertain tax positions and state and
local taxes.  The Successor’s deferred income tax benefit related
primarily to amortization of the Company’s tax deductible goodwill and a change
in estimate associated with the Company’s state income tax apportionments and
rates.  The Successor’s current income tax expense for 2008 relates to
Federal alternative minimum tax and state and local taxes while the deferred
income tax benefit relates primarily to the Company’s recognition of goodwill
impairment.  The Successor’s tax expense for the year ended December
31, 2007 relates to state and local taxes payable.





The
Predecessor’s current income tax expense for the ten months ended October 31,
2008 relates primarily to Federal alternative minimum tax, state taxes and
amounts recorded related to uncertain tax positions. The Predecessor’s current
income tax expense for the year ended December 31, 2007 is related primarily to
federal alternative minimum tax. The Predecessor’s deferred income tax expense
for the ten months ended October 31, 2008 and year ended December 31, 2007
primarily relate to the utilization of the net operating losses and the change
in deferred tax liability for rental equipment and property and
equipment.





The
following table is reconciliation between the federal statutory tax rate and the
Company’s actual effective tax rate:




Successor
                
                
                PredecessorTen MonthsEnded
                
                
                Year EndedYears Ended December 31,
                
                
                October 31,
                
                
                December 31,2009
                
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Federal
      statutory rate
                
                
                35.0
                %
                
                
                (35.0
                )%
                
                
                34.0
                %
                
                
                35.0
                %
                
                
                35.0
                %State
      and local taxes
                
                
                (40.7
                )%
                
                
                (2.6
                )%
                
                
                18.5
                %
                
                
                1.9
                %
                
                
                (0.3
                )%Change
      in valuation allowance
                
                
                4.7
                %
                
                
                (0.5
                )%
                
                
                4.4
                %
                
                
                0.0
                %
                
                
                (8.7
                )%Dividend
      income not taxable
                
                
                0.0
                %
                
                
                (2.3
                )%
                
                
                (38.3
                )%
                
                
                0.0
                %
                
                
                0.0
                %Non-deductible
      transaction costs
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                2.1
                %
                
                
                0.0
                %Uncertain
      tax positions
                
                
                4.7
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                2.1
                %
                
                
                0.0
                %Meals,
      entertainment and other
                
                
                (5.6
                )%
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                0.3
                %
                
                
                0.0
                %Effective
      income tax rate
                
                
                (1.9
                )%
                
                
                (40.4
                )%
                
                
                18.6
                %
                
                
                41.4
                %
                
                
                26.0
                %


F-32





ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Successor’s effective rate for the year ended December 31, 2009 was lower than
the statutory tax rate primarily due to state and local taxes.  The
Successor’s state deferred tax assets and liabilities were adjusted in 2009
associated with a change in estimate associated with its state income tax
apportionments and rates resulting in a net state tax benefit.  The
Successor’s effective rate for the year ended December 31, 2008 differed from
the statutory tax rate primarily due to state and local taxes and dividend
income that is not taxable.  The Successor’s effective rate for the
year ended December 31, 2007 was lower than the statutory tax rate due to
dividend income that is not taxable partially offset by state and local
taxes.





The
Predecessor’s effective tax rate for the ten months ended October 31, 2008 was
higher than the federal statutory tax rate primarily due to state and local
income taxes, non-deductible transaction costs and amounts recorded for
uncertain tax positions. The Predecessor’s effective tax rate for the year ended
December 31, 2007 was lower than the federal statutory tax rate primarily due to
the tax benefits associated with the valuation
allowance.





The tax
effects of temporary differences that give rise to deferred tax assets and
liabilities are as follows:





Successor
                          
                          
                          PredecessorDecember 31,
                          
                          
                          October 31,
                          
                          
                          December 31,2009
                          
                          
                          2008
                          
                          
                          2007
                          
                          
                          2008
                          
                          
                          2007Deferred
      tax assets:Accounts
      receivable
                          
                          $
                          778,856
                          
                          
                          $
                          1,179,233
                          
                          
                          $
                          -
                          
                          
                          $
                          944,245
                          
                          
                          $
                          220,487Accrued
      expenses
                          
                          
                          945,765
                          
                          
                          
                          679,838
                          
                          
                          
                          -
                          
                          
                          
                          1,413,047
                          
                          
                          
                          2,195,084Goodwill
      and other intangibles
                          
                          
                          6,643,801
                          
                          
                          
                          7,464,773
                          
                          
                          
                          -
                          
                          
                          
                          11,525,940
                          
                          
                          
                          13,060,088Net
      operating loss carry-forwards
                          
                          
                          20,092,357
                          
                          
                          
                          16,054,592
                          
                          
                          
                          22,700
                          
                          
                          
                          14,780,045
                          
                          
                          
                          20,461,566Tax
      credits and other
                          
                          
                          2,140,133
                          
                          
                          
                          2,571,747
                          
                          
                          
                          112,400
                          
                          
                          
                          1,357,605
                          
                          
                          
                          1,014,35630,600,912
                          
                          
                          
                          27,950,183
                          
                          
                          
                          135,100
                          
                          
                          
                          30,020,882
                          
                          
                          
                          36,951,581Valuation
      allowance
                          
                          
                          (68,567
                          )
                          
                          
                          (13,708
                          )
                          
                          
                          (107,100
                          )
                          
                          
                          (15,121
                          )
                          
                          
                          (10,216
                          )Total
      deferred tax assets, net
                          
                          
                          30,532,345
                          
                          
                          
                          27,936,475
                          
                          
                          
                          28,000
                          
                          
                          
                          30,005,761
                          
                          
                          
                          36,941,365Deferred
      tax liabilities:Rental
      equipment and property and equipment
                          
                          
                          (91,743,259
                          )
                          
                          
                          (89,344,177
                          )
                          
                          
                          -
                          
                          
                          
                          (41,478,175
                          )
                          
                          
                          (41,310,238
                          )Total
      deferred tax liabilities
                          
                          
                          (91,743,259
                          )
                          
                          
                          (89,344,177
                          )
                          
                          
                          -
                          
                          
                          
                          (41,478,175
                          )
                          
                          
                          (41,310,238
                          )Net
      deferred tax (liabilities) assets
                          
                          $
                          (61,210,914
                          )
                          
                          $
                          (61,407,702
                          )
                          
                          $
                          28,000
                          
                          
                          $
                          (11,472,414
                          )
                          
                          $
                          (4,368,873
                          )December 31,
                          
                          
                          October
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008
                          
                          
                          2007
                          
                          
                          2008
                          
                          
                          2007Amounts
      included in the consolidated balance sheets:Current
      deferred tax assets
                          
                          $
                          1,724,621
                          
                          
                          $
                          1,859,071
                          
                          
                          $
                          28,000
                          
                          
                          $
                          2,357,292
                          
                          
                          $
                          2,415,571Long-term
      deferred tax liabilities
                          
                          
                          (62,935,535
                          )
                          
                          
                          (63,266,773
                          )
                          
                          
                          -
                          
                          
                          
                          (13,829,706
                          )
                          
                          
                          (6,784,444
                          )Net
      deferred tax (liabilities) assets
                          
                          $
                          (61,210,914
                          )
                          
                          $
                          (61,407,702
                          )
                          
                          $
                          28,000
                          
                          
                          $
                          (11,472,414
                          )
                          
                          $
                          (4,368,873
                          )




The
Company establishes a valuation allowance when it is more likely than not that
it will not be able to realize the benefit of the deferred tax assets, or when
future deductibility is uncertain.  Periodically, the valuation
allowance is reviewed and adjusted based on management’s assessment of
realizable deferred tax assets.


F-33


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





At
December 31, 2006, the Predecessor anticipated that the majority of the federal
and state net operating loss carry-forwards and the other net deferred tax
assets would not be utilized due to a history of tax net operating losses and
only a recent generation of taxable income and, as such has recorded a valuation
allowance against the majority of the net deferred tax assets.  At
December 31, 2007, the valuation allowance was reversed for the entire amount of
the federal and the majority of the state net operating losses as the
Predecessor had generated taxable income in excess of $10.0 million in each of
the previous two years.  Management concluded at that time that it was
more likely than not that the deferred tax assets, except for certain state net
operating losses which have a history of expiring unused, will be
utilized.





At
December 31, 2009, the Successor had unused federal net operating loss
carry-forwards totaling approximately $54.0 million that begin expiring in
2021.  At December 31, 2009, the Company also had unused state net
operating loss carry-forwards totaling approximately $27.3 million that expire
between 2010 and 2029.  The net operating loss carry-forwards are
subject to internal revenue code section 382 limitations based upon the purchase
price and may be favorably impacted by built in tax gains on the sale of rental
equipment and property and equipment through October 2013 which were acquired in
the acquisition.





The
Successor also has remaining unrecorded excess tax goodwill of approximately
$5.2 million at December 31, 2009 associated with the acquisition of
Holdings.  The excess tax goodwill is amortized over the remaining six
year term as a reduction to the balance in other identifiable intangibles until
its balance is reduced to zero and then as a benefit to the income tax
provision.




The
Company adopted accounting guidance regarding uncertain tax positions on
January 1, 2007 and did not record any unrecognized income tax benefits as
a result of the implementation.  Neither the Company nor Predecessor
had any unrecognized tax benefit at December 31, 2007.  The
Predecessor had approximately $400,000 in unrecognized tax benefits, net of
federal benefit, at October 31, 2008.





The
Company had approximately $1.2 million and $1.1 million of unrecognized tax
benefits, net of federal income tax benefit, at December 31, 2009 and 2008,
respectively, all of which will impact the Company’s effective tax rate if
recognized.   None of the unrecognized tax benefits at December
31, 2009 are expected to reverse in 2010.




A
reconciliation of the approximate beginning and ending amounts of gross
unrecognized tax benefits is as follows:




Successor
                    
                    
                    PredecessorYear Ended December 31,
                    
                    
                    Ten Months Ended2009
                    
                    
                    2008
                    
                    
                    October 31, 2009Balance
      at beginning of year/period
                    
                    $
                    1,100,000
                    
                    
                    $
                    -
                    
                    
                    $
                    -Increases
      for tax positions taken in the current year/period
                    
                    
                    -
                    
                    
                    
                    1,100,000
                    
                    
                    
                    400,000Net
      increase for change to tax positions in prior year/period
                    
                    
                    100,000
                    
                    
                    
                    -
                    
                    
                    
                    -Balance
      at end of year/period
                    
                    $
                    1,200,000
                    
                    
                    $
                    1,100,000
                    
                    
                    $
                    400,000




The
Successor and Predecessor recognize potential accrued interest and penalties
related to unrecognized tax benefits in income tax expense. To the extent
interest is not assessed with respect to uncertain tax positions, amounts
accrued will be reduced and reflected as a reduction of the overall income tax
provision.  The Company had no accrual for interest or penalties for
the years ended December 31, 2009, 2008 and 2007 as the Company has
significant net operating loss carry-forwards which would be reduced if any
payment were due under audit.  The Predecessor had no accrual for
interest or penalties for the ten months ended October 31, 2008 or the year
ended December 31, 2007.




F-34




ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Successor and Predecessor filed separate income tax returns in the United States
federal jurisdiction and in numerous state jurisdictions in 2008.  In
2009, the Company expects the file consolidated tax returns in the United States
federal jurisdiction and in numerous state jurisdictions.  The
Successor is subject to federal and state examination for the years 2006 through
2009.  The Predecessor is no longer subject to U.S. federal or
state income tax examinations for years prior to 2006.





12.
Stock Based Compensation





The
Company may issue up to 1,575,000 shares of common stock pursuant to its 2008
Long-term Incentive Plan to employees, non-employee directors and consultants of
the Corporation.  Options to purchase shares of common stock are
granted at its market price on the grant date and expire ten years from
issuance.





The
Company issued 16,377 shares of common stock under the Hyde Park Acquisition
Corp. 2008 Long-term Incentive Plan during the year ended December 31, 2009 to
certain employees as compensation.  The weighted average grant price
of the shares was $6.16 per share.  The aggregate grant date fair
value of approximately $100,000 was recorded as compensation within selling,
general and administrative expenses and salaries, payroll taxes and benefits
with an offset recorded in additional paid in capital.  These shares,
which amount to 42% of the amount of reduced cash salaries, were issued as part
of a temporary salary reduction program pursuant to which our chief executive
officer, members of executive management and other key managers receiving
salaries elected to reduce the amount of their salaries paid in cash by 30
percent, 20 percent and 10 percent, respectively.  The shares issued
pursuant to the salary reduction program vested immediately upon grant and are
restricted from sale for a period of two years from the date of
grant.





On
December 18, 2008, the Successor granted to certain key members of management
options to purchase 565,000 shares of common stock at $4.50 per
share.  The weighted-average grant date fair value per share of
options granted was $2.54 resulting in a grant date fair value of
$1,434,671.  The stock options vest one-third annually beginning in
December 2009, and as such, 188,333 options were vested as of December 31,
2009.  Such options will expire and no longer be exercisable after
December 18, 2018.  The options outstanding as of December 31, 2009
have 9 years of remaining contractual life and there were no options granted,
exercised, forfeited or cancelled during the year ended December 31,
2009.





The fair
values of the stock options granted are estimated at the date of grant using the
Black-Scholes option pricing model.  The model is sensitive to changes
in assumptions which can materially affect the fair value estimate. The
Company’s method of estimating expected volatility was based on the volatility
of its peers since the Successor had only had operations for a short time as of
the date of grant. The expected dividend yield was estimated based on the
Company’s expected dividend rate over the term of the options. The expected term
of the options was based on management’s estimate, and the risk-free interest
rate is based on U.S. Treasuries with a term approximating the expected
life of the options. The expected volatility, dividend, term and risk free
interest rate used to value the stock options granted in 2008 were 61.0%, 0.0%,
6 years and 1.43%, respectively.





The
Company recorded $478,223 and $15,722 of non-cash compensation expense in
selling, general and administrative expenses for the years ended December 31,
2009 and 2008, respectively, which represents Essex Crane Rental for the two
month post-acquisition period with the offset recorded in additional paid in
capital. There was approximately $0.9 million of total unrecognized
compensation cost as of December 31, 2009 related to non-vested stock option
awards.  The remaining cost is expected to be recognized ratably over
the years ended December 31, 2010 and 2011.  Based on the Company’s
closing common stock price of $6.20 at December 31, 2009, all of the options
outstanding were in the money resulting in an aggregate intrinsic value of
approximately $1.0 million.


F-35


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




Predecessor
Executive Profits Interest





The Essex
Holdings, LLC Operating Agreement permitted the Company to grant up to a 10%
profits interest (“Management Profits Shares”) to key members of executive
management.  The Management Profits Shares were granted at fair value
which was equal to fair value of the Predecessor Company’s profits interest on
the grant date.  The Management Profit Shares have a pro-rata interest
in the company’s profits in excess of the fair value of the Predecessor Company
on the grant date of the awards.  The minimum equity threshold above
which the Management Profit Shares share in value of the Company is $30.0
million for the awards granted in 2007 and zero for the awards granted prior to
2004.  The minimum threshold amounts have been adjusted to account for
the $50.0 million cash distribution paid in 2007.





At
various dates between May 2000 and May 2003, the Predecessor awarded an
aggregate profits interest of 8.5% to key members of executive management which
were deemed to have a fair value of zero on the grant date.





In April
2007, the Predecessor awarded an aggregate additional profits interest of 1.5%
to key members of executive management which were deemed to have an aggregate
fair value of $232,000 on the grant date which was expensed ratably over the
vesting period.  The fair value of the profits interest was determined
based on the estimated fair value of the Predecessor on the grant
date.  In addition to the annual vesting provisions, these profits
interest awards also vest in full upon a change in control as defined as a
direct or indirect sale, lease, transfer or other disposition other than by way
of merger or consolidations of substantially all of the assets of the
Predecessor.





The
awards vested 20% annually on the anniversary of the grant date provided that
the individual remains in continuous employment as of such dates. Management
Profit Shares had been granted for 10.0% of profits interest in the Predecessor
at October 31, 2008.  The remaining unvested portion of the Management
Profit Shares interest vested on October 31, 2008 in conjunction with the
acquisition of Holdings by Essex Rental.





The
compensation expense recognized by the Predecessor was $196,861 and $34,740 for
the ten months ended October 31, 2008 and year ended December 31, 2007,
respectively, and reflects compensation expense for all estimated share-based
awards granted through October 31, 2008 based on the grant-date fair
value.





13.  Common
Stock and Warrants




In
October 2008, our Board of Directors authorized a stock and warrant repurchase
program, under which the Company may purchase, from time to time, in open market
transactions at prevailing prices or through privately negotiated transactions
as conditions permit, up to $12.0 million of the Company’s outstanding common
stock and warrants.  Repurchases of our common stock and warrants are
funded with cash flows of the business.





The
Company purchased 323,200 warrants to acquire common stock for $378,896 during
the year ended December 31, 2009.  The Company purchased 1,418,519
warrants to acquire common stock for $1,506,380 during the year ended December
31, 2008.  The Company repurchased 63,500 shares of common stock for
$291,945 during the year ended December 31, 2008.  There was
approximately $9.8 million remaining available for future common stock and
warrant purchases at December 31, 2009.




The
Company issued 1,300 shares of common stock during the year ended December 31,
2009 for director services.





14.  Commitments,
Contingencies and Related Party Transactions





The
Company leases real estate and office equipment under operating leases which
continue through 2010.  The Company’s rent expense under
non-cancelable operating leases totaled $394,963 for the year ended December 31,
2009.  The Company’s rent expense under non-cancelable operating
leases totaled $59,459 for the year ended December 31, 2008, which represents
Essex Crane Rental for the two month post-acquisition period.  The
Company had no rent expense for the year ended December 31,
2007.


F-36


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Predecessor’s rental expense under non-cancelable operating leases was $325,133
and $278,200 for the ten months ended October 31, 2008 and year ended December
31, 2007, respectively.





Future
minimum lease payments for the Company’s non-cancellable operating leases at
December 31, 2009 are as follows:




2010
                        
                        $
                        323,3342011
                        
                        
                        222,6782012
                        
                        
                        30,649Total
                        
                        $
                        576,661





The
Company occupies office space provided by ProChannel Management LLC, an
affiliate of Laurence S. Levy, our chairman of the board. Such affiliate has
agreed that it will make such office space, as well as certain office and
secretarial services, available to the Company, as may be required by the
Company from time to time. The Company has agreed to pay such entity $7,500 per
month for such services with the terms of such arrangement being reconsidered
from time to time.  The Company’s statements of operations for the
years ended December 31, 2009, 2008 and 2007 include $90,000 of expense related
to this agreement.





As of
December 31, 2009, the Company has an outstanding purchase commitment to
purchase a lattice-boom crawler crane with a total purchase price of
approximately $2.9 million.  $0.3 million of the total purchase price
has been paid to the manufacturer in the form of a deposit.  The
remaining $2.6 million will be remitted to the manufacturer when the Company
receives title to the rental equipment, which is expected to occur in
2010.





Management
services were provided to Essex Crane Rental Corp. by the general partner of one
of the members of Essex Holdings, LLC through October 31, 2008. Under terms of
an agreement, the Predecessor was required to pay management
fees.  The Predecessor was charged and paid $416,667 and $400,000 for
management fees for the ten months ended October 31, 2008 and year ended
December 31, 2007, respectively.  These costs are included in selling,
general and administrative expenses in the Predecessor’s accompanying
consolidated statements of operations.




The
Initial Stockholders and the holders of the Insider Warrants (or underlying
securities) will be entitled to registration rights with respect to their
founding shares or Insider Warrants (or underlying securities), as the case may
be. The holders of the majority of the founding shares are entitled to demand
that the Company register these shares at any time commencing three months prior
to the first anniversary of the consummation of a business combination. The
holders of the Insider Warrants (or underlying securities) are entitled to
demand that the Company register these securities at any time. In addition, the
Initial Stockholders and holders of the Insider Warrants (or underlying
securities) have certain ‘‘piggy-back’’ registration rights on registration
statements filed after the Company’s consummation of a Business
Combination.





In
connection with the closing of the acquisition of Essex Crane, Essex Rental
granted registration rights to Ronald Schad, Martin Kroll, William Erwin and
William O’Rourke, members of Essex Crane’s senior management, with respect to
the shares of common stock issuable upon exchange of their Retained
Interests.  Prior to October 31, 2010, Ronald Schad, Martin Kroll,
William Erwin and William O’Rourke will have piggyback registration rights with
respect to the 632,911 shares of common stock issuable upon exchange of their
Retained Interests, in connection with any registration of shares of common
stock held by Laurence Levy or Edward Levy and their respective
affiliates.  Following October 31, 2010, Messrs. Schad, Kroll, Erwin
and O’Rourke will have piggyback registration rights with respect to such shares
in connection with any registration of shares of Common Stock and the holders of
50% of the shares of Common Stock issuable upon exchange of the Retained
Interests held by Messrs. Schad, Kroll, Erwin and O’Rourke will be entitled to
one demand that Essex Rental register their shares Common
Stock.


F-37


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Holders
of the Company’s UPO, are entitled to registration rights pursuant to an
agreement with Essex Rental. The holders of the majority of these options and/or
the underlying Units and/or underlying shares of common stock are entitled to
make one demand that Essex Rental register such securities. The holders of the
majority of these securities can elect to exercise these registration rights at
any time until the fifth anniversary of the effective date of Essex Rental’s
initial public offering.   In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed
by Essex Rental until the seventh anniversary of the effectiveness of its
initial public offering.




Early
Bird Capital, Inc. was engaged by the Company to act as the Company’s
non-exclusive investment banker in connection with a proposed business
combination. For assisting the Company in structuring and negotiating the terms
of a business combination, the Company agreed to pay Early Bird Capital, Inc. a
cash transaction fee equal to 1% of the total consideration paid in connection
with the Business Combination, with a maximum fee to be paid of
$900,000.  The Company paid the $900,000 in fees and issued the
securities to the underwriters in the Offering as described in Note
1.




The
Company maintains reserves for personal property taxes.  These
reserves are based on a variety of factors including: duration of rental in each
county jurisdiction, tax rates, rental contract terms, customer filings,
tax-exempt nature of projects or jurisdictions, statutes of limitations and
potential related penalties and interest.  Additionally, most customer
rental contracts contain a provision that provides that personal property taxes
are an obligation to be borne by the lessee.  Where provided in the
rental contract, management will invoice the customer for any personal property
taxes paid by the Company.  An estimated receivable has been provided
in connection with this liability, net of an estimated
allowance.  This customer receivable has been presented as other
receivables in current assets while the property tax reserve has been included
in accrued taxes.




Management estimated the gross personal
property taxes liability and related contractual customer receivable of the
Company to be approximately $4.9 million and $3.7 million respectively, at
December 31, 2009.  Management estimated the gross personal
property taxes liability and related contractual customer receivable of the
Company to be approximately $4.1 million and $3.0 million respectively, at
December 31, 2008.  Management estimated the gross personal
property taxes liability and related contractual customer receivable of the
Predecessor to be approximately $3.0 million and $2.3 million, respectively, at
both October 31, 2008 and December 31, 2007.





A portion
of the sale proceeds of Holdings in the amount of $7,392,000 was placed into a
general escrow and compliance escrow of which, $1.0 million was related to a
working capital escrow and $492,255 was for environmental remediation projects
in process at the time the acquisition transaction closed.  The
remaining funds were related to other transaction related items estimated at the
time of close.  As of December 31, 2009, the Company had received
approximately $0.6 million from the escrow as reimbursement for environmental
remediation projects and the remaining funds were released from escrow to the
seller in accordance with the terms of the escrow agreement.





The
Predecessor had established a reserve of $55,986 and $130,000 at October 31,
2008 and December 31, 2007, respectively, for the estimated costs of
environmental remediation.  No reserve remained as of December 31,
2008 as all items had been remediated and no further payments were
pending.




The
Company is subject to a number of claims and proceedings that generally arise in
the normal conduct of business.  The Company believes that any
liabilities ultimately resulting from these claims will not, individually or in
the aggregate, have a material adverse effect on our financial position, results
of operations or cash flows.





15.  401(k)
Profit Sharing Plan and Medical Benefits





The
Successor and Predecessor have a defined contribution plan under Section 401(k)
of the Internal Revenue Code available to all eligible employees.  The
plan requires the Company to 100% match the first 3% of a participant’s
contributions and 50% match the next 2% of a participant’s contributions thereby
totaling a maximum matching 4% if an employee contributes 5% of their
compensation.  These contributions vest immediately upon
contribution.  Company 401(k) contributions were $172,244 for the year
ended December 31, 2009.  Company 401(k) contributions were $38,152
for the year ended December 31, 2008, which represents Essex Crane Rental
for the two month post-acquisition period.  Predecessor contributions
were $156,036, $164,595 and $139,448 for the ten months ended October 31, 2008
and years ended December 31, 2008 and 2007, respectively.


F-38


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Company provides medical benefits to its employees and their dependants and is
self-insured for annual individual claims of up to $50,000 at which time a stop
loss insurance policy covers any excess.





16.  Concentrations





Substantially
all of the Successor’s purchases of rental equipment and majority of spare parts
come from two vendors.  The loss of either of these vendors is not
expected to have a material negative impact on operations as there are other
manufacturers and sources from which the Company may acquire rental equipment
and spare parts, if necessary.





17.  Summarized
Quarterly Financial Data (Unaudited)





The Company was in the development
stage in pursuit of a business combination for the ten months ended October 31,
2008, the date when it acquired Holdings.  From that date forward, the
Company has been engaged primarily in renting lattice boom crawler cranes and
attachments to the construction industry.





The following is a summary of our
unaudited quarterly financial results of operations for the years ended December
31, 2009 and 2008:




First
                
                
                Second
                
                
                Third
                
                
                FourthQuarter
                
                
                Quarter
                
                
                Quarter
                
                
                Quarter2009Total
      revenues
                
                $
                17,348,147
                
                
                $
                14,533,243
                
                
                $
                11,114,888
                
                
                $
                9,088,114Gross
      profit
                
                
                8,311,240
                
                
                
                5,381,071
                
                
                
                3,270,371
                
                
                
                2,220,768Income
      from operations
                
                
                4,995,132
                
                
                
                2,453,422
                
                
                
                201,482
                
                
                
                204,258Income
      (loss) before provision for income taxes
                
                
                3,315,446
                
                
                
                779,305
                
                
                
                (1,472,027
                )
                
                
                (1,449,527
                )Net
      income (loss)
                
                
                2,050,023
                
                
                
                472,081
                
                
                
                (707,529
                )
                
                
                (618,769
                )Basic
      net income (loss) per share (2)
                
                $
                0.15
                
                
                $
                0.03
                
                
                $
                (0.05
                )
                
                $
                (0.04
                )Diluted
      net income (loss) per share (2)
                
                $
                0.15
                
                
                $
                0.03
                
                
                $
                (0.05
                )
                
                $
                (0.04
                )


F-39


ESSEX
RENTAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





First
                
                
                Second
                
                
                Third
                
                
                FourthQuarter
                
                
                Quarter
                
                
                Quarter
                
                
                Quarter2008Total
      revenues
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                14,872,789Gross
      profit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                7,816,797Income
      (loss) from operations (1)
                
                
                (149,157
                )
                
                
                (109,985
                )
                
                
                (160,834
                )
                
                
                (19,844,335
                )Income
      (loss) before provision for income taxes (1)
                
                
                356,771
                
                
                
                267,195
                
                
                
                281,827
                
                
                
                (20,888,865
                )Net
      income (loss) (1)
                
                
                251,071
                
                
                
                203,355
                
                
                
                223,467
                
                
                
                (12,595,014
                )Basic
      net income (loss) per share (2)
                
                $
                0.02
                
                
                $
                0.01
                
                
                $
                0.01
                
                
                $
                (0.86
                )Diluted
      net income (loss) per share (2)
                
                $
                0.02
                
                
                $
                0.01
                
                
                $
                0.01
                
                
                $
                (0.86
                )





(1)
During the fourth quarter of 2008, the Company recorded a non-cash goodwill
impairment charge of approximately $23.9 million.  See note 6 to the
consolidated financial statements for additional information.





(2)
Because of the method used in calculating per share data, the summation of
quarterly per share data may not necessarily total to the per share data
computed for the entire year.





18.  Subsequent
Events





The
Company has evaluated subsequent events through the date and time the financial
statements were issued.  Subsequent to December 31, 2009 and through
March 15, 2010,
the Company repurchased and retired 64,344 warrants for
$65,395.


F-40


Signatures




Pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




ESSEX
      RENTAL CORPDate:
            
            March
      15, 2010
            
            
            
            By:
            
            /s/ Ronald SchadRonald
      Schad, Chief Executive Officer




Pursuant
to the requirements of the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:




Signatures
              
              Title
              
              Date/s/ Laurence S.
      Levy
              
              Chairman
              
              March
      15, 2010Laurence
      S. Levy/s/ Edward Levy
              
              Director
              
              March
      15, 2010Edward
      Levy/s/ Daniel H.
    Blumenthal
              
              Director
              
              March
      15, 2010Daniel
      H. Blumenthal/s/ John G. Nestor
              
              Director
              
              March
      15, 2010John
      G. Nestor/s/ Ronald Schad
              
              Chief
      Executive Officer (Principal Executive Officer) and
    Director
              
              March
      15, 2010Ronald
      Schad/s/ Martin Kroll
              
              Chief
      Financial Officer (Principal Financial Officer and Principal Accounting
      Officer)
              
              March
      15, 2010Martin
      Kroll