UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549











FORM
10-K


þANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934




FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2008





 ̈    TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE


SECURITIES
EXCHANGE ACT F 1934




Commission
File Number:  000-52459




ESSEX
RENTAL CORP.





(Exact
Name of Registrant as specified in its Charter)







Delaware
            
            20-5415048(State
      or other Jurisdiction of
              Incorporation
      or Organization)
            
            (I.R.S.
      Employer Identification Nos.)




1110
      Lake Cook Road, Suite 220
              Buffalo
      Grove, Illinois
            
            60089(Address
      of Principal Executive Offices)
            
            (Zip
      code)


Registrants’
telephone number, including area code:847-215-6500




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




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


Common
Stock, $.0001 par value per share


Warrants
to purchase shares of Common Stock


Units
consisting of one share of Common Stock and one Warrant




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 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). (Check one):




Large Accelerated Filer
             ̈
            Accelerated Filer  ̈
            
            Non-Accelerated Filer   ̈
            
            Smaller Reporting Company  þ




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, 2008 was
$101,659,500.




The
number of shares of outstanding common stock of the Registrant as of March 27,
2009 was 13,475,275.




DOCUMENTS
INCORPORATED BY REFERENCE




Portions
of the registrant’s Definitive Proxy Statement with respect to the 2009 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
            
            11Item 1B
            
            Unresolved
      Staff Comments
            
            19Item
      2
            
            Properties
            
            19Item
      3
            
            Legal
      Proceedings
            
            20Item
      4
            
            Submission
      of Matters to a Vote of Security Holders
            
            21PART IIItem
      5
            
            Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            22Item
      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
            
            43Item
      9
            
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            
            43Item 9A
            
            Controls
      and Procedures
            
            43Item 9B
            
            Other
      Information
            
            44PART IIIItem 10
            
            Directors,
      Executive Officers and Corporate Governance of the
    Registrant
            
            44Item 11
            
            Executive
      Compensation
            
            44Item 12
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            44Item 13
            
            Certain
      Relationships and Related Transactions
            
            44Item 14
            
            Principal
      Accountant Fees and Services
            
            44PART IVItem 15
            
            Exhibits
      and Financial Statement Schedules
            
            45














CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS




This 2008
Annual Report on Form 10-K contains statements which constitute 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.  Such statements can often be identified by the use words
such as “believe,” “expect,” “may,” “might,” “will,” “should,” “seek,”
“on-track,” “plan,” “intend” or “anticipate,” or the negative thereof or
comparable terminology.  In addition, expressions or discussions of
our strategy, plans, prospects or future results are forward-looking statements.
These statements reflect management’s current views with respect to future
events and are subject to risks and uncertainties, both known and
unknown.  You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their date, and that any such
forward-looking statements are not guarantees of future
performance.  Our business and operations are subject to a variety of
risks and uncertainties and, consequently, our actual results may materially
differ from those projected or implied by any forward-looking statements.
Certain of such risks and uncertainties are discussed below under
Item 1A–Risk Factors. We make no commitment to revise or update any
forward-looking statements in order to reflect events or circumstances after the
date any such statement is made.




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.  We conduct our operations through Essex Crane.




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, Holdings and Essex Crane, unless the context otherwise
requires.





Item 1.
            Business




Background





Essex
Rental Corp. 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 for  $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 membership interests of Holdings for a gross purchase
price of $210,000,000 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 $5,000,000
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 for Essex Crane’s closing date working
capital and the dollar amount of crane purchases and sales by Essex Crane as of
October 31, 2008. 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
Company funded the net purchase price in the acquisition with proceeds of its
initial public offering as well as amounts advanced under a credit facility made
available to Essex Crane as of the closing date of the acquisition. In addition,
as was required under the Company’s certificate of incorporation, shortly after
completion of the acquisition approximately $18,705,000 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.  These 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 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





We
currently conduct substantially all of our operations through Essex
Crane.





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 more than 48 years of operation, Essex Crane has
steadily grown from a small, family-owned crane rental company to an industry
leader with national capabilities.




Essex
Crane’s fleet size currently stands at more than 350 crawler cranes and
attachments which are made available to clients in any location in the US and
Canada. The fleet of crawler cranes and attachments is diverse by lift capacity,
allowing Essex Crane to meet the crawler crane and attachment requirements of
its engineering and construction firm customer base. Essex Crane primarily rents
its crawler cranes and attachments “bare,” meaning without an Essex
Crane-supplied operator, and charges its customers for certain transportation
costs and repair costs while the equipment is on rent. This business model
allows Essex  Crane to leverage its concentrated crawler expertise and
to minimize headcount and operating costs.




Essex
Crane’s team of sales, marketing and maintenance professionals, through a
network of four main service centers, three smaller service locations and
several remote storage yards, serves a variety of customers engaged in
construction projects related to power generation, petro-chemical facilities,
refineries, water treatment and purification, bridges, highways, hospitals,
shipbuilding and commercial construction. Essex Crane has significantly
diversified its end-markets in recent years to minimize over-exposure to any one
sector of the construction segment. Essex Crane’s end-markets are characterized
by large construction projects with longer-lead times. Management believes that
these longer lead times, coupled with 6-18 month contracts, provide them better
visibility over future project pipelines and revenues.


2












Products
and Services




Our
principal products and services are described below.




Equipment
Rental.   We offer for rent 28 models of crawler crane and
attachment rental equipment on a monthly basis. The attachments are rented
separately and either increase the lifting capacity or the reach capabilities of
the base crawler crane.  Crawler cranes are long-lived assets with
actual lives of 50 years when properly maintained. The weighted-average age of
our fleet was 17 years at December 31, 2008 as compared to 18 years at
December 31, 2007.




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 requirement 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 types of ancillary services are our
current rental customers as well as those who purchase used equipment from
us.




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 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 purchase equipment
based on the following factors:





·
            a
      focus on their core construction services businesses rather than equipment
      ownership;·
            access
      to a 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:


3





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
      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




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.




Operations




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




·
            crawler
      crane and attachment rental;·
            repair
      and 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. Pro forma rental revenues generated from the
rental of cranes and attachments were $61.8 million in 2008 or approximately
72.5% of total pro forma revenue. Equipment is rented to customers under
contract, with an average length of nine months (contracts range from 6-18
months in general), which specifies a constant monthly rate for each piece of
equipment over the period of the contract. In 2008, Essex Crane’s average
monthly crane rental rate was $21,382 and crane utilization was 72.5% on the
“days” basis (or 77.0% if calculated using the “hits” method).  For a
discussion of the “hits” and “days” 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.


4








Essex
Crane’s on-line, real time information system provides visibility of the entire
crane rental fleet for the sales team including 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. Rental for the equipment usually begins when the first major
item for the crane is shipped 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 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). Pro forma revenues from such repair and
maintenance services totaled $6.9 million in 2008 or approximately 8.1% of pro
forma total revenue. While a piece of equipment is not rented, Essex Crane
assumes responsibility to ensure that its equipment is compliant with all the
manufacturer’s specifications and other regulations.




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. In 2008, pro forma
transportation revenue was $8.2 million or about 9.6% of pro forma 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 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 the impact of a sale on Essex Crane’s rental businesses and
cash flow.




Fleet
Overview




Essex
Crane’s fleet consists of over 350 lattice boom crawler cranes and attachments
manufactured solely by  Manitowoc and Liebherr. The fleet has a
maximum lifting capacity ranging from 100 to 440 tons and includes a range of
different aged equipment. As of December 31, 2008, Essex Crane’s fleet’s average
lifting capacity was 230 tons and average age was 17 years (weighted based on
orderly liquidation value). Essex Crane 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 230 tons
as of December 31, 2008. Attachments are rented by customers to enhance the
lifting capacity and reach of cranes. While Essex Crane’s cranes have lifting
capacities of up to 440 tons, its attachments increase the capacity to 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 have grown significantly over the same period.




5





Essex
Crane measures equipment utilization using what are referred to as the “hits”
method and the “days” method. In the hits method, a piece of equipment on rent
for anytime in 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 the entire month.
Our management believes that the “hits” utilization measurement has a less
direct correlation with equipment rental revenue.





In 2002,
Essex Crane implemented a new enterprise resource software
application, or ERP System, which fully integrated Essex Crane’s
operational and financial data.  Upon implementation of the ERP System,
Essex Crane began to measure utilization using the method referred to as the
“days” method. Our 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 Crane, and we
anticipate that the “days” method will be the basis for future disclosure of
utilization rates for Essex Crane’s cranes and attachments.




The
following table outlines utilization rates (calculated using the “days” and
“hits” methods) and monthly rental rates for the fleet over time:




Avg. Monthly
      Crane
                                              
                                              
                                              
                                              Avg. Crane
                                                Utilization Rate
                                              
                                              
                                              
                                              Avg. Monthly Attachment
                                              
                                              
                                              
                                              Avg.Attachment
                                                Utilization RateYear
                                              
                                              
                                              Rental
      Rate
                                              
                                              
                                              
                                              Days
                                              
                                              
                                              
                                              Hits
                                              
                                              
                                              
                                              Rental
      Rate
                                              
                                              
                                              
                                              Days
                                              
                                              
                                              
                                              Hits2006
                                              
                                              $
                                              13,779
                                              
                                              
                                              
                                              68.9
                                              %
                                              
                                              
                                              72.6
                                              %
                                              
                                              $
                                              8,039
                                              
                                              
                                              
                                              34.9
                                              %
                                              
                                              
                                              38.9
                                              %2007
                                              
                                              $
                                              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
                                              %






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. Properly
maintained these components retain their value over the life of the crane with
minimal ongoing expense.




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 or the next rental, another inspection is
made to assure 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 assure 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
principle crane suppliers. Essex Crane has developed strong long-term
relationships with these suppliers.


6





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 14 service centers and storage yards giving it the ability to
service customers throughout North America. Essex Crane employs a sales and
marketing team of 13 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 the 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 its 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 closely, 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.




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. Approximately 40% of Essex Crane’s revenues are
generated by large public works projects and 35% of revenues are derived from
repair and maintenance assignments as opposed to new building. Because of the
scale and duration of these projects, contract periods range from 6-18 months
and average approximately nine months. This provides us with substantial
future revenue visibility and project lead generation times. Essex Crane’s
revenue generation model and customer base can be contrasted to other equipment
rental companies that provide lighter lifting equipment (such a 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.




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
      – 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.




7





Our
management believes that demand for its crawler cranes has increased over the
last two years as a result of the growth in spending on infrastructure and other
key end-markets in the US during such time. Essex Crane’s 12-month revenue
backlog grew from approximately $23.4 million at December 31, 2006 to
approximately $33.5 million at December 31, 2007 and is approximately $30.3
million at December 31, 2008. As of December 31, 2008, Essex Crane’s estimated
revenue backlog stood at approximately 49% of its pro forma 2008
revenue. During the quarter ended December 31, 2008, Essex Crane’s backlog was
impacted by uncertainty in the end markets in which Essex Crane’s customers
operate caused by declining economic conditions and available
credit.




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, including potential for nuclear plants;·
            Continued
      higher energy costs will increase construction activity to improve and
      expand efficiencies and capacities at refineries, offshore production
      suppliers, and petrochemical facilities;·
            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 Crane 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;·
            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:


8




·
            continuing
      to re-position the fleet by selling older, lighter tonnage cranes and
      purchasing newer, heavier lifting 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. 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
crawler crane market.





We
believe that there are four key factors differentiating Essex Crane 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 Crane does not rent its equipment with an operator. While
      some other operators also rent equipment bare, generally equipment is
      rented with an operator; 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 intense 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 attachment 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.


9




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 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 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.




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.





Customers




Our
customer base is highly diversified and ranges from Fortune 500 companies to
small businesses and homeowners. Our largest customer accounted for less than 10
percent of our revenues in 2008 and our top 5 customers accounted for less than
16% percent of our revenues in 2008. Historically, we have typically retained
over 60% percent of our customer base year-over-year while adding new customers
as we grow our revenues.


10




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




•
            
            repair
      and maintenance to major renovation projects for owners of commercial and
      industrial facilities, such as power
companies.




Our
business is somewhat seasonal, with demand for our rental equipment tending to
be lower in the winter months.




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.




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 24.6% of our 2008 total purchases, including equipment for
rental, and that our 2 largest suppliers accounted for approximately 43.3% of
such purchases. We believe we have sufficient alternative sources of supply
available for each of our equipment.





Seasonality




Although
our business is not significantly impacted by seasonality, the demand for our
rental equipment tends to be lower in 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, 2008 Essex Crane had
128 employees, four of which are senior management, 16 of which are other
corporate office staff, nine of which are operational key management and 11 of
which are employed in the sales and marketing team. Approximately seven of Essex
Crane’s staff are affiliated with trade unions.  Essex Crane has not
experienced in the last 10 years any work stoppage as a result of issues with
labor or with unions and believes that its relationship with its employees is
good. There is not currently a campaign by any union to organize additional
employees of Essex Crane.




Availability
of Information


We file
annual, quarterly and current reports and other information with the Securities
and Exchange Commission (the “SEC”). The public may read and copy any materials
we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC. The address of that site is http://www.sec.gov.




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 revenues are 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 its end markets, Essex
Crane 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:


11




·
            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 common stock.





The
market price of our common stock has been and may continue to 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 to 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;




12




·
            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 common
stock, 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 common
stock.




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’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.





Essex
Crane’s 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 effect 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 is increasing, which
may cause Essex Crane 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 acquired by Essex Crane. Such changes may be
driven by a number of factors which include, but are not limited
to:


13




·
            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;





·
            US
      economy – 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 Essex Crane’s 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.





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 new credit facility 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 is restricted by Essex’s  new credit facility,
which became effective upon the closing of our acquisition of Essex. 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 their 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.




14





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 Crane
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 significantlylarger
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.




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, if our securities are listed on The NASDAQ
Capital Market or another national exchange, will be subject to the NASDAQ or
such other exchange’s rules. Many of Essex Crane’s principal competitors are not
subject to these disclosure and reporting requirements or the NASDAQ or such
other exchange 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.




Essex
Crane may encounter substantial competition in its efforts to expand its
operations.




An
element of Essex Crane’s growth strategy is to continue to expand by opening new
service centers and equipment storage yards. The success of Essex Crane’s 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.





Our
internal controls over financial reporting may be deficient in certain respects
and require remedial measures in order to ensure our ability to comply with
financial reporting laws and regulations and to publish accurate financial
statements.




Our
internal controls over financial reporting may be deficient in certain respects
and such deficiencies could adversely affect our ability to record, process, and
summarize and report financial data consistent with the assertions of management
in the financial statements.  Any failure to effectively address any
such deficiency could disrupt our ability to process key components of our
result of operations and financial condition timely and accurately and cause us
to fail to meet our reporting obligations under rules of the Securities and
Exchange Commission.


15







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 damages to 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, 2008,
Essex Crane has a revolving credit facility which provides for an aggregate debt
facility of $190 million of which $137 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 sufficient 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.





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.





16





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 interest.




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 its 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.




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 its 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.


17







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 effect 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
following the listing of our common stock on the NASDAQ Capital Market or
another national securities exchange.





In
addition, warrants to purchase an aggregate of 15,037,500 shares of our common
stock issued to our initial stockholders, purchasers in our initial public
offering and EarlyBirdCapital, Inc. 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 will be released from escrow on October 31, 2009,
or earlier if we  engage in a transaction resulting in our
stockholders having the right to exchange their shares for cash or other
securities, and will be 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 exchange of the retained interests for our
common stock or exercise of 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.




If
we are unable to receive a listing of our securities on NASDAQ or another
national securities exchange, then it may be more difficult for our stockholders
to sell their securities.




Shares of
our common stock, warrants and units are currently traded in the
over-the-counter market and quoted on the OTCBB. We applied to have our common
stock, warrants and units included on The NASDAQ Capital Market. There can be no
assurance that the listing of our common stock, warrants or units on the NASDAQ
Capital Market will be obtained. If we are unable to receive a listing or
approval of trading of our securities on NASDAQ or another national securities
exchange, then it may be more difficult for its stockholders to sell their
securities.


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
11,171,333 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, 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 :




·
            Essex
      Crane owns 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.




·
            Essex
      Crane owns 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.




·
            Essex
      Crane owns 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.




·
            Essex
      Crane owns 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:




·
            Satellite
      service center comprising 33,500 square feet of outside storage space
      located at 6048 193rd Avenue SW, Rochester, Washington
    98579.




·
            Satellite
      service center comprising 74,476 square feet of outside storage space
      located at 1072 Harrisburg Pike, Carlisle, PA
  17103.




·
            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.





19





Essex
Crane also has agreements which allow it to store equipment at seven additional
storage yards located strategically throughout 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 Midatlantic regions and
intends to investigate potential additional facilities in those regions.
We  have not identified specific locations for any such new
facilities.




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.





20





Item 4.
            Submission
      of Matters to a Vote of Security Holders





The
following proposals were submitted to our stockholders present at a Special
Meeting of Stockholders held on October 31, 2008:





•
            The
      proposal to adopt, and approve the transactions contemplated by, the
      purchase agreement, dated as of March 6, 2008, as amended on May 9, 2008
      and August 14, 2008, among the Company, Holdings, Essex Crane, KCP
      Services LLC, as seller representative, and the members of Holdings, which
      we refer to as the acquisition proposal.  The acquisition
      proposal was approved by holders of 12,947,445 shares of our common stock,
      with holders of 2,357,736 shares voting against the acquisition proposal,
      no shares abstaining from the vote and no broker
  non-votes.





•
            The
      proposal to adopt amendments to our certificate of incorporation to change
      our name from “Hyde Park Acquisition Corp.”  to “Essex Rental
      Corp.” and to delete certain provisions of our certificate of
      incorporation that were applicable to us only prior to the completion of a
      business combination transaction, which we refer to as the amendment
      proposal.  The amendment proposal was approved by holders of
      12,880,170 shares of our common stock, with holders of 1,731,798 shares
      voting against the amendment proposal, holders of 693,213 shares
      abstaining from the vote and no broker
  non-votes.





•
            The
      proposal to adopt the Hyde Park 2008 Long-Term Incentive Plan (an
      equity-based incentive compensation plan), which we refer to as the plan
      proposal.  The plan proposal was approved by holders of
      12,678,820 shares of our common stock, with holders of 1,933,148 shares
      voting against the plan proposal,  holders of 693,213 shares
      abstaining from the vote and no broker
  non-votes.


21




PART
II




Item 5.
            Market
      For Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities




Market
Information





Our
units, common stock and warrants are traded on the Over-the-Counter Bulletin
Board under the symbols, HYDQU, HYDQ and, HYDQW 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.





Units
                    
                    
                    Common
      Stock
                    
                    
                    WarrantsHigh
                    
                    
                    Low
                    
                    
                    High
                    
                    
                    Low
                    
                    
                    High
                    
                    
                    LowYear
      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
                    
                    
                    
                    0.60Year
      ended December 31, 2007First
      Quarter
                    
                    $
                    8.80
                    
                    
                    $
                    8.00
                    
                    
                    $
                    7.27
                    
                    
                    $
                    7.25
                    
                    
                    $
                    1.45
                    
                    
                    $
                    1.40Second
      Quarter
                    
                    
                    9.00
                    
                    
                    
                    8.68
                    
                    
                    
                    7.35
                    
                    
                    
                    7.24
                    
                    
                    
                    1.65
                    
                    
                    
                    1.35Third
      Quarter
                    
                    
                    9.00
                    
                    
                    
                    8.40
                    
                    
                    
                    7.43
                    
                    
                    
                    7.27
                    
                    
                    
                    1.62
                    
                    
                    
                    1.13Fourth
      Quarter
                    
                    
                    8.48
                    
                    
                    
                    8.20
                    
                    
                    
                    7.40
                    
                    
                    
                    7.28
                    
                    
                    
                    1.25
                    
                    
                    
                    0.92





As of
March 27, 2009, there were approximately 136 holders of record of our common
stock, four 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 future investment and use in
business operations.  Accordingly, our board of directors does not
anticipate declaring any dividends in the foreseeable future on our common
stock.


22








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.





The
shares issued prior to our initial public offering will be held in escrow with
Continental Stock Transfer & Trust Company, as escrow agent, until October
31, 2009. Such shares may be released from escrow earlier than that date if,
prior to October 31, 2009, we consummate a liquidation, merger, stock exchange
or other similar transaction which results 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 will not be able
to sell or transfer their securities except for limited exceptions.





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.


23







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 were 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 will be used for general corporate purposes.




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
2008:




Period
                                                  
                                                  Total Number of
                                                    Warrants
      Purchased
                                                  
                                                  
                                                  Average
      Price
                                                    Paid
      Per Warrant
                                                  
                                                  
                                                  Total Number of Common
                                                    Shares Purchased
                                                  
                                                  
                                                  Average Price
                                                    Paid per ShareOctober 1,
      2008 to October 31, 2008 (a)
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,,357,736
                                                  
                                                  
                                                  $
                                                  7.93November 1,
      2008 to November 30, 2008
                                                  
                                                  
                                                  619,500
                                                  
                                                  
                                                  
                                                  1.11
                                                  
                                                  
                                                  
                                                  2,000
                                                  
                                                  
                                                  
                                                  6.68December 1,
      2008 to December 31, 2008
                                                  
                                                  
                                                  799,019
                                                  
                                                  
                                                  
                                                  1.03
                                                  
                                                  
                                                  
                                                  61,500
                                                  
                                                  
                                                  
                                                  4.53Total
                                                  
                                                  
                                                  1,418,519
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  2,421,236





(a)
              Represents
      shares issued in our initial public offering with respect to which holders
      voted against theacquisition
      of Essex Crane and exercised their conversion
  rights.




Equity
Compensation Plans





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








Item 6.
            Selected
      Financial Data




This
information is not required for a smaller reporting company.





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
 
 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.  For
more information regarding the acquisition of Holdings and Essex Crane, see note
2 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 48 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.


25




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 and
provides the customer with a more flexible situation where they control the
crane operator’s work schedule.
  Through a
network of 4 main service centers, 3 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 they serve in recent years to avoid over-exposure to any one sector
of the construction segment. Essex Crane uses its significant investment in
modern ERP systems and business process methods to help its management
assimilate information more quickly than others in their industry, thereby
providing real time visibility of the factors they have to effectively manage to
achieve their 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 6 and 18 months, provide them more visibility over future
project pipelines and revenues.
 
 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 6 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 contract 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
      carrying 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 historically 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 future gain on
sale;
  ·
              Transportation
      revenue – transportation 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


26




·
              Equipment
      repair and maintenance revenue – while crawler cranes or attachments are
      on rent, most 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, 72.5% of pro forma total revenue for the year ended December 31, 2008
was generated through equipment rental, 9.9% through pro forma used rental
equipment sales, 9.6% through pro forma transportation services
and  8.1% through pro forma repair and maintenance
services.
  Fleet
utilization and average rental rates both have increased over the three year
period presented (both of which are considered by management to be fundamental
indicators of business performance), in part as a result of the improvement of
the crane and attachment fleet through used rental equipment sales and new
rental equipment purchases.
  Historically,
Essex Crane measured equipment utilization using what was referred to as the
“hits” method. In this method, a piece of equipment on rent for anytime in 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 had a less
direct correlation with equipment rental revenue.
 
 After
Essex Crane implemented a new ERP system in 2002, it began to measure
utilization using the method referred to as the “days” method. Essex Crane'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 Crane, and Essex Crane
anticipates that the “days” method will be the basis for future disclosure of
utilization rates for Essex Crane’s cranes and attachments.
  Essex
Crane’s investment decisions contributed greatly to the repositioning Essex
Crane’s fleet to further enhance its utilization rates and the associated gains
in average rental rates. During the periods reported:
  ·
                  utilization rates of cranes
      improved from 68.9% (or 72.6%, if calculated using the “hits” method) in
      2006 to 72.5% (or 77.0%, if calculated using the “hits” method) in 2008 on
      a pro forma basis;
 ·
                      average crane rental rates
      increased from $13,779 in 2006 to $21,382 in 2008, and average attachment
      rental rates increased from $8,039 in 2006 to $16,051 in 2008 on a pro
      forma basis;
 ·
                          utilization
      rates of attachments increased from 34.9% (or 38.9% if calculated using
      the “hits” method) in 2006 to 42.0% (or 44.2% if calculated using the
      “hits” method) in 2008 on a pro forma
basis.
 These
improvements are also reflected in Essex Crane’s operating results and cash
flow. During the period from December 31, 2006 through December 31,
2008:
  ·
                  Revenue increased by 38.4%
      from $61.6 million in 2006 to $85.3 million on a pro forma basis in 2008
      and equipment rental revenue increased by 48.6% from $41.6 million in 2006
      to $61.8 million on a pro forma basis in
2008;




27


·
                cost
      of revenue increased by 19.8% from $31.7 million in 2006 to $38.0 million
      on a pro forma basis in 2008, but decreased as a percentage of total
      revenue from 51.4% to 44.5%;
  ·
                selling,
      general and administrative expenses increased by 102.6% from $8.7 million
      in 2006 to $17.7 million on a pro forma basis in 2008, but this included
      $6.2 million of acquisition transaction related costs. As a percentage of
      total revenue these costs increased from 14.2% to 20.7%; however,
      excluding these acquisition transaction related costs they increased
      by 31.7% from 2006 to the combined 2008 and were 13.5% of pro forma total
      revenues for 2008.
  Many of
the market sectors served by Essex Crane were not as adversely affected by the
weakening economy as the residential and light commercial sectors, which are not
significant markets for Essex Crane. 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 similar future growth
trends.  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.


Results
of Operations


Essex Rental
Corp.– Year ended
December 31, 2008 compared to year ended December 31, 2007 and year
ended December 31, 2007 compared to the period from inception (August 21, 2006)
to December 31, 2006
 
 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
through March 13, 2007 related to the formation and initial public offering.
From March 13, 2007 until October 31, 2008, the Company had been searching for
prospective target businesses to acquire and, on October 31, 2008, we acquired
Essex Crane through the acquisition of substantially all of the membership
interests in Holdings.  For more information regarding the acquisition
of Essex Crane, see note 2 to our financial statements.
 
 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 include the operations of Essex Crane for the
two month post acquisition period.  Total revenue, cost of revenues
and gross profit were $14.5 million, $6.7 million and $7.8 million,
respectively.  Selling general and administrative expenses of $4.0
million was composed primarily of salaries, payroll taxes benefits, sales and
marketing, insurance, professional fees, rent and travel expenses and included
$1.1 million transaction costs.  Interest income from cash held in
trust was $1.4 million while interest expense related to Essex Crane’s revolving
credit facility was $1.0 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.
  For the
period from inception (August 21, 2006) to December 31, 2006, Essex Rental had a
net loss of $402 related to interest income of $1,148 offset by operating
expenses of $1,550 related to formation and franchise taxes.
 
 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 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 the
such pro forma comparison provides a more meaningful comparison of our
business’s results of operations for the years ended December 31, 2007 and
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 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.




28


Unaudited
      Pro-formaYears
      Ended December 31,2008
                                                          
                                                          
                                                          2007Total
      revenue
                                                          
                                                          $
                                                          85,328,505
                                                          
                                                          
                                                          $
                                                          77,764,829Cost
      of revenues
                                                          
                                                          
                                                          (37,977,116
                                                          )
                                                          
                                                          
                                                          (40,893,732
                                                          )Gross
      profit
                                                          
                                                          
                                                          47,351,389
                                                          
                                                          
                                                          
                                                          36,871,097Other
      operating expenses
                                                          
                                                          
                                                          42,589,354
                                                          
                                                          
                                                          
                                                          10,509,522Income
      from operations
                                                          
                                                          
                                                          4,762,035
                                                          
                                                          
                                                          
                                                          26,361,575Other
      expenses, net
                                                          
                                                          
                                                          (9,469,424
                                                          )
                                                          
                                                          
                                                          (12,097,124
                                                          )(Loss)
      income before income taxes
                                                          
                                                          
                                                          (4,707,389
                                                          )
                                                          
                                                          
                                                          14,264,451(Benefit)
      Provision for income taxes
                                                          
                                                          
                                                          (1,068,388
                                                          )
                                                          
                                                          
                                                          4,162,025Net
      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 recorded in 2008.
  Unaudited
      Pro-formaYears
      Ended December 31,2008
                                                          
                                                          
                                                          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
                                                          
                                                          
                                                          6,901,851
                                                          
                                                          
                                                          
                                                          7,063,722TOTAL
      REVENUE
                                                          
                                                          $
                                                          85,328,505
                                                          
                                                          
                                                          $
                                                          77,764,829
  Pro forma
revenue for the year ended December 31, 2008 was $85.3 million, a 9.7% increase
from $77.8 million for the year ended December 31, 2007.  Pro forma
revenue was comprised of the following components:
 
 ·
              Pro
      forma equipment rental revenue, which represented 72.5% of total pro forma
      revenue, was $61.8 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 larger, higher
      rental rate cranes as Essex Crane continues to manage the fleet toward
      larger lifting capacities;


29




·
              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 9.9% 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 23 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 rental rates on the capital costs and enable Essex to
      improve its strategic position of its rental fleet for the
      future;
  ·
              Pro
      forma transportation revenue, which represented 9.6% of total pro forma
      revenues, was $8.2 million for the year ended December 31, 2008, a 5.7%
      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 repair and maintenance revenue (including rigging and other
      services), which represented 8.1% of total revenue, was $5.9 million for
      the year ended December 31, 2008, a 2.3% decrease from $7.1 million for
      the year ended December 31, 2007. This decrease is attributed to a
      decrease in demand for repair, maintenance and other
    services.
  Pro-formaYears
      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
                        
                        
                        6,180,432
                        
                        
                        
                        7,356,751Yard
      operating expenses
                        
                        
                        1,839,273
                        
                        
                        
                        1,913,576TOTAL
      COST OF REVENUES
                        
                        $
                        37,977,116
                        
                        
                        $
                        40,893,732
 
 (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 revenue for the year ended December 31, 2008 was $38.0 million for the
year ended December 31, 2008, a 7.1% decrease from $40.9 million for the year
ended December 31, 2007.  Pro forma cost of revenue was 44.5% 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 expenses for  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:




30




·
              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
      and the higher relative asset basis for the sales occurring after the fair
      value acquisition accounting.
 ·
                Pro forma equipment repairs
      and maintenance expenses decreased 16.0% to $6.2 million for the year
      ended December 31, 2008, from $7.4 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 divided 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 also 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.
  Unaudited
      Pro-formaYears
      Ended December 31,2008
                        
                        
                        2007OTHER
      OPERATING EXPENSESSELLING
      GENERAL AND ADMINISTRATIVE
                        
                        $
                        17,698,297
                        
                        
                        $
                        9,568,535GOODWILL
      IMPAIRMENT
                        
                        
                        23,895,733
                        
                        
                        
                        -NON-RENTAL
      DEPRECIATION (a)
                        
                        
                        995,324
                        
                        
                        
                        940,987TOTAL
      OTHER OPERATING EXPENSES
                        
                        $
                        42,589,354
                        
                        
                        $
                        10,509,522
 
 (a)
              Adjustments
      to non-rental depreciation expense of $0.9 million and $0.8 million was
      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.




31




Pro forma selling, general and
administrative expenses for the year ended December 31, 2008 was $17.7 million,
a 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 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 20.7% (13.5% 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 one-time 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 note 2 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-formaYears
      Ended December 31,2008
                        
                        
                        2007OTHER
      INCOME (EXPENSES), NETOther
      income, net - insurance recoveries
                        
                        $
                        55,519
                        
                        
                        $
                        139,669Interest
      expense (a)
                        
                        
                        (9,524,943
                        )
                        
                        
                        (12,236,793
                        )TOTAL
      OTHER INCOME (EXPENSES), NET
                        
                        $
                        (9,469,424
                        )
                        
                        $
                        (12,097,124
                        )
  (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 reversal of substantially all of the valuation reserve 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.
 32


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, 2008





Total
revenue for the ten months ended October 31, 2008 was a $70.8 million compared
to $77.8 million for the year ended December 31, 2007. The decline in total
revenue was primarily due to a two month shorter period in 2008. Total revenue
was comprised of the following components:





·
            Equipment rental revenue, which
      represented 72.4% of total revenue, was $51.3 million for
      the  ten months ended October 31, 2008 compared to $48.8 million
      or 62.8% 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 17% 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 revenues, was $5.9 million for the ten months
      ended October 31, 2008 compared to $8.7 million or 11.1% total revenues
      for the year ended December 31,
2007.




·
            Repair
      and maintenance revenue (including rigging and other services), which
      represented 8.3% of total revenue, was $5.9 million for the  ten
      months ended October 31, 2008 compared to $7.1 million or 9.1% of total
      revenue for the year ended December 31,
2007.





Cost of
revenue for the ten months ended October 31, 2008 was $29.5 million compared to
$38.5 million in the year ended December 31, 2007.  Cost of revenue
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.


33








·
            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 $5.3 million for the ten months ended October
      31, 2008 compared to $7.4 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.


·
            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
sales 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
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 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 a the lower market interest rates.  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 or 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.





34


Essex
Holdings LLC - Year
ended December 31, 2007 compared to year ended December 31, 2006




The
following is a discussion of the key factors that impact the consolidated
operating results for the year ended December 31, 2007 compared to the year
ended December 31, 2006 and should be read in conjunction with Holdings’
consolidated financial statements and the notes thereto.





Net income for the year ended December
31, 2007 was $11.2 million, a 20.8% increase from $9.3 million in the year ended
December 31, 2006, The increase in net income was a direct result of higher
operating income related to the rental business of $5.9 million and greater gain
on used rental equipment sales of $3.0 million, offset by higher interest
expense of $0.7 million, higher swap liability expense of $2.8 million and
higher tax provision expense of $3.4 million primarily to due the reversal of
the valuation allowance.




Total
revenue for the year ended December 31, 2007 was $77.8 million, a 26.2% increase
from $61.6 million for the year ended December 31, 2006. Total revenue was
comprised of the following components:





·
            Equipment rental revenue, which
      represented 62.8% of total revenue, was $48.8 million, a 17.4% increase
      from $41.6 million for the fiscal year ended December 31, 2006. This
      increase was driven by an increase in crane utilization to 72.1% (or 76.3%
      if calculated using the “hits” method) in the year ended December 31, 2007
      from 68.9% (or 72.6% if calculated using the “hits” method) in the year
      ended December 31, 2006, and an increase in the average crane rental rate
      of cranes on rent of 18.0%, to $16,266 (per crane per rental month) in the
      year ended December 31, 2007 relative to $13,779 in the year ended
      December 31, 2006. 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;




·
            Attachment rental revenue,
      included in rental revenue described above, was $3.4 million, a 20.0%
      increase from $2.9 million for the fiscal year ended December 31, 2006.
      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 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 24.6% (or 27.3% if calculated using the
      “hits” method) for the year ended December 31, 2007 and 34.9% (or 39.0% if
      calculated using the “hits” method) for the year ended December 31, 2006,
      thus substantiating the point that rental revenue grew despite lower
      utilization because of a greater number of higher priced attachments on
      rental;




·
            Used equipment sale revenue,
      which represented 17.0% of total revenue, was $13.2 million for the year
      ended December 31, 2007, a 121.3% increase from $6.0 million for the year
      ended December 31, 2006. This increase was driven by the high demand in
      infrastructure construction activity which requires the heavier lifting
      capacity of lattice boom crawler cranes offered by Essex. This has
      presented Essex 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 increased to 45 for the year ended December
      31, 2007 from 18 units for the year ended December 31, 2006. For the year
      ended December 31, 2007, 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 rental rates on the capital costs and
      enable Essex to improve its strategic position of its rental fleet for the
      future;




35







·
            Transportation revenue, which
      represented 11.1% of total revenues, was $8.7 million for the year ended
      December 31, 2007, a 14.5% increase from $7.6 million for the year ended
      December 31, 2006. This increase was driven by an increase in crane
      utilization rates, the combination of cranes and attachments rented and
      the specific distances that equipment had to move for various rentals
      thereby resulting in an increase in demand for transportation of cranes
      and attachments to construction sites;
  and




·
            Repair and maintenance revenue
      (including rigging and other services), which represented 9.1% of total
      revenue, was $7.1 million for the year ended December 31, 2007, an 8.5%
      increase from $6.5 million for the year ended December 31, 2006. This
      increase was driven by the increase in crane and attachment utilization
      rates resulting in an increase in demand for repair, maintenance and other
      services.





Cost of
revenue for the year ended December 31, 2007 was $38.5 million, a 21.6% increase
from $31.7 million in the year ended December 31, 2006. Cost of revenue was
49.6% of total revenue for the year ended December 31, 2007, relative to 51.4%
for the year ended December 31, 2006. The increase in cost of revenues resulted
primarily from increases in expenses for salaries, payroll taxes and benefits,
depreciation, net book value of equipment sold, equipment repairs and
maintenance; transportation expenses; and yard operating expenses.




·
            Salary,
      payroll tax and benefit expenses increased 11.9% to $7.3 million for the
      year ended December 31, 2007, from $6.5 million for the year ended
      December 31, 2006. 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 along with the headcount increases noted
  below.





·
            Depreciation expense related to
      rental equipment increased 3.6% to $8.0 million for the year ended
      December 31, 2007, from $7.8 million for the year ended December 31, 2006.
      The increase in depreciation expense was driven by additional investment
      in lattice-boom crawler cranes and attachments during 2007 as Holdings
      enhanced the size and capacity of its
  fleet.





·
            Net book value of rental
      equipment sold increased 141.6% to $7.2 million or 9.2% of total revenue
      for the year ended December 31, 2007, from $3.0 million for the year ended
      December 31, 2006. The increase in net book value of equipment sold was
      driven by the increase in the number of units sold during 2007 as more
      fully described in used equipment sale
  revenue.





·
            Transportation expense increased
      by 8.5% to $6.7 million in the year ended December 31, 2007, from $6.2
      million in the year ended December 31, 2006. This increase was a direct
      result of the increase in transportation activities as a result of the
      increase in crane utilization, mix of rented equipment and the particulars
      of the total distance equipment had to move between
      rentals.





·
            Equipment repairs and maintenance
      expenses increased 10.9% to $7.4 million in the year ended December 31,
      2007, from $6.6 million in the year ended December 31, 2006. The increase
      was a direct result of the increase in the repair and maintenance
      activities, a result of the increased crane utilization and combination of
      equipment rented.





·
            Yard operating expense increased
      by 20.9% to $1.9 million for the year ended December 31, 2007, from $1.6
      million for the year ended December 31, 2006, as Holdings invested in its
      facilities during the period to enhance its capabilities and productivity
      including a $0.2 million increase in costs for environmental
      remediation.





36


Essex’s
gain on the sale of used rental equipment was $6.0 million and $3.0 million for
the years ended December 31, 2007 and 2006, respectively, as the fair value of
the equipment was significantly higher than its net book value. The gain on sale
of used rental equipment may not be indicative of future results in light of
Essex’s pending acquisition since the rental equipment would be adjusted to fair
value as of the closing date of the acquisition, thereby reducing future gain on
sale. Also, Essex’s depreciation expense for the years ended December 31, 2007
and 2006 may not be indicative of future results in light of Essex’s pending
acquisition as the higher fair value of the rental equipment will be depreciated
over the estimated useful life of the assets, thereby increasing future
depreciation expense.




Selling,
general and administrative expenses for the year ended December 31, 2007 were
$9.2 million, an increase of 4.3% from $8.9 million in the year ended December
31, 2006. This increase was primarily the result of higher employee bonus costs
and insurance expenses, but was partially offset by lower consulting expenses
and telecommunication expenses. Selling, general and administrative expenses
were 11.9% of total revenue for the year ended December 31, 2007, an improvement
from 14.4% for the year ended December 31, 2006. Key components of
administrative expenses include: salaries, payroll taxes and benefits, insurance
and selling and marketing expenses.





·
            Salary, payroll tax and benefit
      expenses increased by 17.3% to $3.5 million for the year ended December
      31, 2007, from $3.0 million for the year ended December 31, 2006 due to
      higher Company defined earnings before interest and taxes based employee
      bonus costs.




·
            Insurance expenses increased by
      12.1% to $1.6 million in the year ended December 31, 2007, from $1.4
      million in the year ended December 31, 2006. The increase was due to
      higher business volumes and property and equipment values, but was
      partially offset by lower per unit premium
  rates.




·
            Selling and marketing expenses
      increased by 12.9% to $0.7 million for the year ended December 31, 2007,
      from $0.6 million for the year ended December 31, 2006. The increase was
      primarily due to higher commissions related to higher rental
      revenue.




As a
result of the factors outlined above, income from operations was $30.0 million
for the year ended December 31, 2007, an increase of 42.2% from $21.1 million in
the year ended December 31, 2006. Income from operations as a percentage of
revenue was 38.6% for the year ended December 31, 2007, an increase from 34.2%
for the year ended December 31, 2006. Income from operations was favorably
impacted by the larger gain on used rental equipment sales which was $6.0
million for the year ended December 31, 2007 compared to $3.0 million for the
year ended December 31, 2006.




Interest
expense was $12.2 million in year ended December 31, 2007, a 6.3% increase from
$11.5 million in the year ended December 31, 2006. This increase resulted from a
refinancing on February 23, 2007, which increased Holdings’ outstanding debt to
$145.6 million immediately after the refinancing and a $50 million dividend paid
to Holdings’ equity holders. Holdings then reduced the debt balance to $129.9
million by December 31, 2007 which was higher than the December 31, 2006 balance
of $93.9 million.




Other
income (expense) includes the effects of marking the interest rate swap to
market as of December 31, 2007 which caused a $2.8 million non-cash expense to
earnings. This represents the present value of the future cash settlement
payments under the swap agreement.




Holdings’
provision for income taxes was $3.9 million for the year ended December 31,
2007, compared to $0.5 million in the year ended December 31, 2006. Holdings has
had two consecutive years of significant net income before tax and expects
similar or improved 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
of $5.4 million 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.







37


Liquidity
and Capital Resources
  Essex
Crane has substantial liquidity from its cash flow from operations as its
markets and rental activity have remained at higher levels, as well as under its
revolving credit facility. As described below, between December 31, 2006 and
December 31, 2008, net cash provided by operating activities increased from
$14.6 million to $26.6 million for the combined periods in 2008 ($-676,535 plus
$27,284,032). In addition to cash flow from operations, Essex Crane borrows
under its $190 million revolving credit facility to purchase equipment and
attachments for its rental fleet. As of December 31, 2008, Essex Crane had $38.1
million in available borrowing capacity under this facility. Simultaneously with
the closing of the acquisition, Essex Crane entered into a new revolving credit
facility (replacing the existing facility) which will provide for up to $190
million in available credit through October 31, 2013.  We believe that
these two sources of cash should adequately fund the investment needs of the
business for the foreseeable future. Essex Crane has a $100 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 offset in 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 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 and 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
$4.2 million.  The cash flows from operating activities were also
reduced by $1.7 million of cash earned trust fund, an increase in receivables of
$1.5 million, an 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.
 
 Cash
Flow from Investing Activities
 
 For the year ended December 31,
2008, cash provided by investing activities was approximately
$24.0 million.  This is primarily the result of the sale of all
the cash held in Trust Fund ($102.6 million), the majority of which was used to
fund the acquisition of Holdings, 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.
 
 Cash
flow from financing activities
 
 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.  Total borrowings during the year under the revolving
credit facility were $12.2 million and total payments were
$14.8 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.
 
 Revolving
Credit Facility
 
 The following information discusses
significant events during the year ended December 31, 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.
 
 38
 
 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 million.  The maximum borrowing amount
of the revolving credit facility may be increased by up to $5 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
$175,497,000 at December 31, 2008, which was limited by the eligible borrowing
base.  The Company’s available borrowing under the revolving credit
facility is $38,119,079 at December 31, 2008.
  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 Holdings’ 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.
  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 in paragraph 11(a) of Financial Accounting Standard (FAS) 133 and are
accordingly not accounted for as derivatives for purposes of FAS 133, but
instead are accounted for as equity.
 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 2008 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 SFAS 13,
Accounting for Leases
(“SFAS 13”), Staff Accounting Bulletin No. 104 and Emerging Issues Tax Force
00-21 “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). 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, Holdings provides some of the above services
under the terms of a single customer Equipment Rental Agreement. When a rental
agreement involves multiple elements, the items included in the arrangement are
evaluated under EITF 00-21.
  39
  Revenue arrangements with multiple
elements are divided into separate units of accounting if certain criteria are
met, including whether the delivered item has value to the customer on a
stand-alone basis and whether there is objective and reliable evidence of the
fair value of the undelivered item(s). In general, vendor specific objective
evidence (“VSOE”) or objective and reliable evidence of fair value of the
undelivered item(s) exists, however, no such evidence exists for the delivered
item.
 
 We use the residual method to allocate
the arrangement consideration and as such, VSOE of fair value or objective and
reliable evidence of fair value of the undelivered elements is deferred and the
residual is recognized as revenue related to the delivered element.
 
 Revenue from equipment rentals are
billed monthly in advance and recognized as earned, on the straight line basis
over the rental period, in accordance with SFAS 13 as 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, for rentals billed in advance we 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 of transferring the risk of
ownership.
 
 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 as required. 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. The unearned rental revenue is recorded as a
deferral in the balance sheet in order to match the customer’s rental equipment
possession and usage with the corresponding period.
 
 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 in accordance with SFAS No. 141 “Business
Combinations” 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. Given the average life of the existing crane fleet is 20 to
30 years, the useful life adopted is considered appropriate. 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.
  40
  Purchase Price
Allocation.
  The Company allocates the cost of the
acquired enterprise to the assets acquired and liabilities assumed based on
their respective fair values at the date of acquisition. With the exception of
goodwill, long-lived fixed assets generally represent the largest component of
any acquisition. The long-lived fixed assets that we acquire are primarily
rental equipment.   All of the rental equipment that was acquired
in the purchase business combinations has been classified as “Held and Used”,
rather than as “Held for Sale”. Equipment that we acquire is recorded at
fair value, as determined by replacement cost to the Company of such
equipment.   The Company uses a third party valuation expert to
help calculate replacement cost.
  In addition to long-lived fixed assets,
the Company also acquires other assets and assume liabilities. These other
assets and liabilities typically include, but are not limited to, parts
inventory, accounts receivable, accounts payable and other working capital
items. Because of their short-term nature, the fair values of these other assets
and liabilities generally approximate the book values reflected on the acquired
entities’ balance sheets. However, when appropriate, the Company adjusts these
book values for factors such as collectibility and existence. The intangible
assets that we have acquired are primarily goodwill, customer relationships and
trademarks.  Goodwill is calculated as the excess of the cost of the
acquired entity over the net of the amounts assigned to the assets acquired and
the liabilities assumed.
 
 Income
Taxes
 
 The
Company uses an asset and liability approach, as required by SFAS No. 109
“Accounting for Income Taxes” 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 adopted the provisions of FIN 48, “Accounting for Uncertainty in Income
Taxes”, on
January 1, 2007 which 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 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.  With limited exception, the Company is
no longer subject to U.S. federal or state income tax examinations for years
prior to 2005.
 
 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.
  At
December 31, 2006, Holdings’ management concluded that neither the Federal and
state net operating loss carryforwards nor the other net deferred tax assets
were more likely than not to be utilized due to a history of tax net operating
losses and, as such, recorded a valuation allowance against substantially all of
the Company’s 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 Essex has now generated taxable income in
excess of $10,000,000 in each of the past two years.  Essex’s
management has concluded that at December 31, 2008, October 31, 2008 and
December 31, 2007 it is more likely than not that the deferred tax assets,
except for certain state net operating losses that have a history of expiring
unused, will be utilized.
 
 At
December 31, 2008, the Company had unused federal net operating loss
carry-forwards totaling approximately $43.6 million that begin expiring in
2020.  At December 31, 2008, the Company also had unused state net
operating loss carry-forwards totaling approximately $26.2 million that expire
between 2009 and 2020.  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.
  41
 
 Impairment of Goodwill and
Indentifiable Intangible Assets
  As a result of acquisition of Holdings,
the Company has acquired goodwill and identifiable intangible assets. Goodwill
represents the cost of acquired companies in excess of the fair value of net
assets, including identifiable intangible assets, at the acquisition
date.  Intangible assets consist of customer relationships and
trademarks.
 
 Under SFAS No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”), we evaluate goodwill for impairment at the
reporting unit level at least annually, or more frequently if triggering events
occur or other impairment indicators arise which might impair recoverability.
Management has determined that it has only one reporting unit, Essex Crane. To
determine if there is any impairment, management determined whether the fair
value of the reporting unit is greater than its carrying value. If the fair
value of a reporting unit is less than its carrying value, then the implied fair
value of goodwill must be estimated and compared to its carrying value to
measure the amount of impairment, if any.
 
 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 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 has no
remaining goodwill at December 31, 2008.The Company also performed an assessment
of other identifiable intangible assets and concluded that there was no
impairment at December 31 2008.
  Impairment
of long-lived assets
  Essex
accounts for the impairment of long-lived assets under the provisions of SFAS
No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets,”
which requires the impairment losses related to long-lived assets to be recorded
where indicators of impairment are present and the estimated undiscounted cash
flows to be generated by the asset 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 appraise the value of the crane and attachment fleet on an annual
basis. We considered 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. Holdings does not enter into derivative transactions for speculative
purposes, and therefore holds no derivative instruments for trading
purposes.
  Holdings
has historically been privately held and previously reported its financial
statements on a basis other than generally accepted accounting principles (GAAP)
(modified tax basis). Accordingly, Holdings did not contemporaneously document
the hedge designation on the date of inception in order to quality for hedge
accounting treatment in accordance with SFAS No. 133 “Accounting for Derivative
Instruments and Hedging Activities.” Accordingly, the derivative financial
instruments are 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 Holdings’ consolidated
statements of operations.
 42
  Item 7A.
              Quantitative
      and Qualitative Disclosures About Market
Risk
  This information is not required for a smaller reporting
company.
  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.
  Item 9A.
              Controls
      and Procedures
  Evaluation
of Disclosure Controls and Procedures
  In
accordance with Item 307 of Regulation S-K, based on management's
evaluation, with the participation of our Chief Executive Officer and Chief
Financial Officer, as of the end of the period covered by this report, our
Company has concluded that our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended), are effective to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in SEC rules and forms, and is accumulated and communicated to
management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure.
  Management’s
Report on Internal Control over Financial Reporting
  This
annual report does not include a report by management as to internal control
over financial reporting, which is required under the rules applicable to annual
reports on Form 10-K. Management notes that the internal control over
financial reporting relating to the business that produced all of the revenues
reported in the financial statements contained herein is the internal control
over financial reporting of the business acquired by us in our initial business
combination transaction on October 31, 2008.  Before that date,
we were a blank check company with no business operations, no operating assets
other than cash held in a trust account pending the consummation of a business
combination, and no purpose other than to seek to effect a merger, acquisition or other similar business combination with an operating
business.
  Substantially
all of the internal control over financial reporting that existed
prior to October 31, 2008 no longer exists and has been replaced by the
internal control over financial reporting of Essex Crane, our operating
subsidiary which we acquired in our initial business combination on that date.
Prior to October 31, 2008, Essex was a private company not required to
prepare an annual report on Form 10-K and therefore its management had no
reason to make an assessment of, or consider the preparation of a management
report on, internal control over financial reporting as required by this
Form 10-K. In addition, there was a relatively short period of time between
the date of our business combination and the end of our fiscal year on
December 31, 2008 during which our management could make an assessment of
the acquired company's internal control over financial reporting; and during
that time, as well as since December 31, 2008, management has focused on
the operation of our continuing business as well as other business activities
including efforts to expand our business as described elsewhere in this annual
report. Because of the foregoing, our management has determined that it would
not be practicable to perform an assessment of our internal control over
financial reporting as it existed on October 31, 2008 as a result of our
initial business combination and continued to exist on December 31,
2008.  Our management has also determined that an assessment of our
internal control over financial reporting as in effect prior to our
October 31, 2008 business combination would not be meaningful due to the
essentially complete change in our internal control over financial reporting
that occurred on that date. Therefore, management has determined that it is
appropriate to exclude from this annual report on Form 10-K any report or
evaluation regarding ourinternal control over financial
reporting, both relating to the business we acquired on October 31, 2008
and relating to our operations before that acquisition.
  We
are actively preparing for full compliance with the requirements of
Item 308 of Regulation S-K for our 2009 Form 10-K. In connection
with our recent implementation of various corporate governance initiatives, our
Board established an audit committee, and appointed three independent directors
to that committee. The chairman of the audit committee has been working with our
principal financial officer to retain the services of a competent and
experienced accounting firm to assist management in documenting, reviewing and
assessing our internal control over financial reporting, identifying any
material weaknesses in such internal control over financial reporting and
assisting in the development of any remedial actions, if necessary. We are in
the process of retaining an accounting firm for this purpose. In this way, we
are making arrangements to make an assessment of internal control over financial
reporting for inclusion in our annual report on Form 10-K for the year
ended December 31, 2009.
   
 43
   We intend
to fully comply with all applicable Items required by Form 10-K in our
annual report on such Form with respect to the fiscal year ending
December 31, 2009, including any requirements relating to an assessment of
internal control over financial reporting.
  The
Company’s financial statements as of December 31, 2008 and for the year then
ended included in this Annual Report on Form 10-K have been audited by Grant
Thornton LLP, an independent registered public accounting firm.  This
Annual Report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only a management’s report
which we have excluded from this Annual Report for the reasons noted
above.
  Item 9B.
              Other
      Information
  None.
  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 2009 Annual Meeting of
Stockholders (the “2009 Proxy Statement”), which will be filed with the SEC on
or before April 29, 2009.
  Item 11.
              Executive
      Compensation
  The
information required by this Item is incorporated by reference to the applicable
information in the 2009 Proxy Statement, which will be filed with the SEC on or
before April 29, 2009.
  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, 2008, 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
                              
                              565,000
                              
                              $4.50
                              
                              1,010,000Equity
      plans not approved by security holders (1)
                              
                              -
                              
                              -
                              
                              -Total
                              
                              565,000
                              
                              $4.50
                              
                              1,010,000
 
 (1)  Following
the acquisition of Essex Crane, we issued 100 shares of our common stock to each
of Essex Crane’s employees, other than members of Essex’s senior management, or
12,300 shares in the aggregate, pursuant to the Essex Rental Corp. Special
Incentive Plan.  Such Special Incentive Plan authorized the issuance
of up to 20,000 shares of our common stock to employees of the Company and its
subsidiaries, other than officers of the Company and its subsidiaries with the
title of Vice President, President, Chief Executive Officer or Chief Financial
Officer.  The Special Incentive Plan terminated on December 31, 2008
and accordingly there are no shares available for issuance under such
plan.
  The
additional information required by this Item is incorporated by reference to the
applicable information in the 2009 Proxy Statement, which will be filed with the
SEC on or before April 29, 2009.
  Item 13.
              Certain
      Relationships and Related
Transactions
  The
information required by this Item is incorporated by reference to the applicable
information in the 2009 Proxy Statement, which will be filed with the SEC on or
before April 29, 2009.
  Item 14.
              Principal
      Accountant Fees and Services
  The
information required by this Item is incorporated by reference to the applicable
information in the 2009 Proxy Statement, which will be filed with the SEC on or
before April 29, 2009.
  44
 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, 2008 and
2007
  Essex
Holdings, LLC and Subsidiary Consolidated Balance Sheets—October 31, 2008 and
December 31, 2007
  Essex
Rental Corp. Consolidated Statements of Operations for the years ended
December 31, 2008 and 2007 and period from August 21, 2006 (inception) to
December 31, 2006
  Essex
Holdings, LLC and Subsidiary Consolidated Statements of Operations for the
ten months ended October 31, 2008, and years ended December 31, 2007 and
2006
  Essex
Rental Corp. Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2008 and 2007 and period from August 21, 2006 (inception) to
December 31, 2006
  Essex
Holdings, LLC and Subsidiary Essex Rental Corp. Consolidated Statements of
Stockholders’ Equity for the ten months ended October 31, 2008, and the years
ended December 31, 2008 and 2007
  Essex
Rental Corp. Consolidated Statements of Cash Flows for the years ended
December 31, 2008 and 2007 and period from August 21, 2006 (inception) to
December 31, 2006
  Essex
Holdings, LLC and Subsidiary Essex Rental Corp. Consolidated Statements of Cash
Flows for the ten months ended October 31, 2008, and the years ended
December 31, 2007 and 2006
  Notes to
consolidated financial statements
  Schedules
other than those listed are omitted as they are not applicable or the required
or equivalent information has been included in the financial statements or notes
thereto.
  (3)
Exhibits: The exhibits to this report are listed in the exhibit index
below.
  (b)
Description of Exhibits
  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)
 
 
 45
 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 the
                    Registrant.
      (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)
 
 46
 
 16
                    
                    Letter
      from McGladrey & Pullen, LLP to the Securities and Exchange
      Commission, dated  December 16, 2008. (5)21
                    
                    Subsidiaries
      of Registrant31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 200232.2
                    
                    Certification
      of 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.
   47
  REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
 
 
 Board of
Directors and Stockholders
 Essex
Rental Corp.
 
 We have
audited the accompanying consolidated balance sheet of Essex Rental Corp. (a
Delaware corporation) and Subsidiaries (collectively the “Company”) as of
December 31, 2008, and the related consolidated statement of operations,
stockholders’ equity, and cash flows for the year then ended.  We have
also audited the consolidated balance sheets of Essex Holdings, LLC and
Subsidiary (the “Predecessor”) as of October 31, 2008 and December 31, 2007
and the related consolidated statements of operations, members’ equity and cash
flows for the period from January 1, 2008 through October 31, 2008, and the
years ended December 31, 2007 and 2006.  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.  The
Company and its Predecessor are not required to have, nor were we engaged to
perform an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, 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 consolidated financial position of Essex Rental Corp. and
Subsidiaries as of December 31, 2008, and the consolidated results of their
operations and their cash flows for the year then ended, and the consolidated
financial position of Essex Holdings, LLC and Subsidiary as of October 31, 2008
and December 31, 2007 and the consolidated results of their operations and their
cash flows for the period from January 1, 2008 through October 31, 2008 and the
years ended December 31, 2007 and 2006, in conformity with accounting principles
generally accepted in the United States of America.
 
 /s/ Grant
Thornton LLP
 Chicago,
Illinois
 March 30,
2009
 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 balance sheet of Essex Rental Corp. f/k/a Hyde Park
Acquisition Corp. (a corporation in the development stage) as of December 31,
2007, and the related statements of operations, stockholders' equity, and cash
flows for the year then ended and the cumulative period from August 21, 2006
(inception) to 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
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 financial position of Essex Rental Corp. f/k/aHyde
Park Acquisition Corp. as of December 31, 2007, and the results of its
operations and its cash flows for the year then ended and the cumulative period
from August 21, 2006 (inception) to 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
   ESSEX
RENTAL CORP.
 CONSOLIDATED
BALANCE SHEETS
  ESSEX
      RENTAL CORP.
                
                
                ESSEX
      HOLDINGS LLC(Successor)
                
                
                (Predecessor)December
      31,
                
                
                December
      31,
                
                
                October
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                
                $
                139,000
                
                
                $
                1,051,801
                
                
                $
                691,660
                
                
                $
                8,394Cash
      held in Trust Fund
                
                
                -
                
                
                
                100,927,634
                
                
                
                -
                
                
                
                -Investment
      in Hyde Park common stock
                
                
                -
                
                
                
                -
                
                
                
                9,957,441
                
                
                
                -Accounts
      receivable, net of allowances
                
                
                11,350,561
                
                
                
                -
                
                
                
                10,701,304
                
                
                
                11,808,205Accounts
      receivable from rental equipment sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                739,256Other
      receivables
                
                
                3,167,773
                
                
                
                -
                
                
                
                2,307,540
                
                
                
                2,307,540Deferred
      tax assets
                
                
                1,859,071
                
                
                
                28,000
                
                
                
                2,357,290
                
                
                
                2,415,571Prepaid
      expenses and other assets
                
                
                440,879
                
                
                
                33,418
                
                
                
                1,204,769
                
                
                
                447,128TOTAL
      CURRENT ASSETS
                
                
                16,957,284
                
                
                
                102,040,853
                
                
                
                27,220,004
                
                
                
                17,726,094Rental
      equipment, net
                
                
                255,692,116
                
                
                
                -
                
                
                
                133,172,649
                
                
                
                124,950,463Property
      and equipment, net
                
                
                8,176,143
                
                
                
                -
                
                
                
                5,634,059
                
                
                
                3,047,289Spare
      parts inventory, net
                
                
                3,276,858
                
                
                
                -
                
                
                
                1,804,042
                
                
                
                1,708,138Deferred
      costs
                
                
                -
                
                
                
                528,331
                
                
                
                -
                
                
                
                -Goodwill
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Other
      identifiable intangibles, net
                
                
                3,518,667
                
                
                
                -
                
                
                
                -
                
                
                
                -Loan
      acquisition costs, net
                
                
                2,377,442
                
                
                
                -
                
                
                
                1,566,262
                
                
                
                1,649,562TOTAL
      ASSETS
                
                $
                289,998,510
                
                
                $
                102,569,184
                
                
                $
                169,397,016
                
                
                $
                149,081,546
    F-3
 ESSEX
RENTAL CORP.
 CONSOLIDATED
BALANCE SHEETS (continued)
 Essex
      Rental Corp.
                                
                                
                                ESSEX
      HOLDINGS LLC(Successor)
                                
                                
                                (Predecessor)December
      31,
                                
                                
                                December
      31,
                                
                                
                                October
      31,
                                
                                
                                December
      31,2008
                                
                                
                                2007
                                
                                
                                2008
                                
                                
                                2007LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                
                                $
                                2,510,564
                                
                                
                                $
                                -
                                
                                
                                $
                                5,835,262
                                
                                
                                $
                                3,077,801Accrued
      employee compensation and benefits
                                
                                
                                2,160,960
                                
                                
                                
                                -
                                
                                
                                
                                2,526,536
                                
                                
                                
                                1,906,652Accrued
      taxes
                                
                                
                                5,203,485
                                
                                
                                
                                -
                                
                                
                                
                                4,140,238
                                
                                
                                
                                3,784,910Accrued
      interest
                                
                                
                                440,667
                                
                                
                                
                                -
                                
                                
                                
                                596,566
                                
                                
                                
                                812,437Accrued
      other expenses
                                
                                
                                1,390,864
                                
                                
                                
                                730,410
                                
                                
                                
                                1,294,224
                                
                                
                                
                                847,522Unearned
      rental revenue
                                
                                
                                2,176,906
                                
                                
                                
                                -
                                
                                
                                
                                2,573,176
                                
                                
                                
                                2,157,111Deferred
      underwriting fees
                                
                                
                                -
                                
                                
                                
                                1,552,500
                                
                                
                                
                                -
                                
                                
                                
                                -Deferred
      interest
                                
                                
                                -
                                
                                
                                
                                243,405
                                
                                
                                
                                -
                                
                                
                                
                                -TOTAL
      CURRENT LIABILITIES
                                
                                
                                13,883,446
                                
                                
                                
                                2,526,315
                                
                                
                                
                                16,966,002
                                
                                
                                
                                12,586,433LONG-TERM
      LIABILITIESRevolving
      credit facility
                                
                                
                                137,377,921
                                
                                
                                
                                -
                                
                                
                                
                                129,895,169
                                
                                
                                
                                129,862,723Deferred
      tax liabilities
                                
                                
                                63,266,773
                                
                                
                                
                                -
                                
                                
                                
                                13,829,704
                                
                                
                                
                                6,784,444Interest
      rate swap
                                
                                
                                3,424,613
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,755,741TOTAL
      LONG-TERM LIABILITIES
                                
                                
                                204,069,307
                                
                                
                                
                                -
                                
                                
                                
                                143,724,873
                                
                                
                                
                                139,402,908TOTAL
      LIABILITIES
                                
                                
                                217,952,753
                                
                                
                                
                                2,526,315
                                
                                
                                
                                160,690,875
                                
                                
                                
                                151,989,341Common
      stock, subject to possible conversion, 2,586,206 shares
                                
                                
                                -
                                
                                
                                
                                19,932,029
                                
                                
                                
                                -
                                
                                
                                
                                -STOCKHOLDERS'
      EQUITY AND MEMBERS' EQUITY (DEFICIT)Preferred
      stock, $.0001 par value, Authorized 1,000,000 shares; none
      issued
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, $.0001 par value, Authorized 40,000,000
                                  shares;
      issued and outstanding 14,106,886 shares in 2008
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -and
      15,750,000 shares (including 2,586,206 shares subject
                                  to
      possible conversion) in 2007
                                
                                
                                1,410
                                
                                
                                
                                1,575
                                
                                
                                
                                -
                                
                                
                                
                                -Members'
      contributions
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                40,270,000
                                
                                
                                
                                40,270,000Paid
      in capital
                                
                                
                                84,383,579
                                
                                
                                
                                78,410,547
                                
                                
                                
                                231,602
                                
                                
                                
                                34,740Accumulated
      (deficit) earnings
                                
                                
                                (10,218,403
                                )
                                
                                
                                1,698,718
                                
                                
                                
                                (31,795,461
                                )
                                
                                
                                (43,212,535
                                )Accumulated
      other comprehensive loss, net of tax
                                
                                
                                (2,120,829
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -TOTAL
      STOCKHOLDERS' EQUITY AND MEMBERS' EQUITY (DEFICIT)
                                
                                
                                72,045,757
                                
                                
                                
                                80,110,840
                                
                                
                                
                                8,706,141
                                
                                
                                
                                (2,907,795
                                )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY AND MEMBERS' EQUITY
      (DEFICIT)
                                
                                $
                                289,998,510
                                
                                
                                $
                                102,569,184
                                
                                
                                $
                                169,397,016
                                
                                
                                $
                                149,081,546
  The
accompanying notes are an integral part of these financial
statements
  
 F-4
 ESSEX RENTAL CORP.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
  ESSEX
      RENTAL CORP.

                  (Successor)
              
              
              ESSEX
      HOLDINGS LLC
                (Predecessor)For
      the YearsEnded
                December
      31,
              
              
              For
      the Period from inception(August 21, 2006)to
      December 31,
              
              
              For
      the TenMonths
      Ended October 31,
              
              
              For
      the Years Ended
                December
      31,2008
              
              
              2007
              
              
              2006
              
              
              2008
              
              
              2007
              
              
              2006REVENUEEquipment
      rentals
              
              $
              10,522,092
              
              
              $
              -
              
              
              $
              -
              
              
              $
              51,301,586
              
              
              $
              48,800,490
              
              
              $
              41,578,414Used
      rental equipment sales
              
              
              1,730,771
              
              
              
              -
              
              
              
              -
              
              
              
              6,709,034
              
              
              
              13,232,768
              
              
              
              5,980,213Transportation
              
              
              1,233,873
              
              
              
              -
              
              
              
              -
              
              
              
              6,929,298
              
              
              
              8,667,849
              
              
              
              7,571,149Equipment
      repairs and maintenance
              
              
              999,950
              
              
              
              -
              
              
              
              -
              
              
              
              5,901,901
              
              
              
              7,063,722
              
              
              
              6,509,559TOTAL
      REVENUE
              
              
              14,486,686
              
              
              
              -
              
              
              
              -
              
              
              
              70,841,819
              
              
              
              77,764,829
              
              
              
              61,639,335COST
      OF REVENUESSalaries,
      payroll taxes and benefits
              
              
              1,311,175
              
              
              
              -
              
              
              
              -
              
              
              
              6,730,823
              
              
              
              7,320,488
              
              
              
              6,540,734Depreciation
              
              
              1,809,623
              
              
              
              -
              
              
              
              -
              
              
              
              6,908,980
              
              
              
              8,034,011
              
              
              
              7,758,332Net
      book value of rental equipment sold
              
              
              1,439,677
              
              
              
              -
              
              
              
              -
              
              
              
              3,186,106
              
              
              
              7,183,496
              
              
              
              2,973,649Transportation
              
              
              952,861
              
              
              
              -
              
              
              
              -
              
              
              
              5,774,802
              
              
              
              6,731,983
              
              
              
              6,204,656Equipment
      repairs and maintenance
              
              
              850,379
              
              
              
              -
              
              
              
              -
              
              
              
              5,330,053
              
              
              
              7,356,751
              
              
              
              6,630,698Yard
      operating expenses
              
              
              306,174
              
              
              
              -
              
              
              
              -
              
              
              
              1,533,099
              
              
              
              1,913,576
              
              
              
              1,582,934TOTAL
      COST OF REVENUES
              
              
              6,669,889
              
              
              
              -
              
              
              
              -
              
              
              
              29,463,863
              
              
              
              38,540,305
              
              
              
              31,691,003GROSS
      PROFIT
              
              
              7,816,797
              
              
              
              -
              
              
              
              -
              
              
              
              41,377,956
              
              
              
              39,224,524
              
              
              
              29,948,332Selling,
      general and administrative expenses
              
              
              4,045,432
              
              
              
              456,661
              
              
              
              1,550
              
              
              
              13,652,865
              
              
              
              9,111,874
              
              
              
              8,732,266Goodwill
      impairment
              
              
              23,895,733
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Other
      depreciation and amortization
              
              
              139,943
              
              
              
              -
              
              
              
              -
              
              
              
              110,019
              
              
              
              133,124
              
              
              
              128,687(LOSS)
      INCOME FROM OPERATIONS
              
              
              (20,264,311
              )
              
              
              (456,661
              )
              
              
              (1,550
              )
              
              
              27,615,072
              
              
              
              29,979,526
              
              
              
              21,087,379
   F-5
 ESSEX
RENTAL CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS (continued)
 ESSEX
      RENTAL CORP.
                  (Successor)
                
                
                ESSEX
      HOLDINGS LLC
                  (Predecessor)For
      the Period From inception(August
      21, 2006)
                
                
                For
      the TenFor
      the Years Ended
                  December
      31,
                
                to
      December 31,
                
                
                Months
      Ended October 31,
                
                
                For
      the Years Ended
                  December
      31,2008
                
                
                2007
                
                
                2006
                
                
                2008
                
                
                2007
                
                
                2006OTHER
      INCOME (EXPENSES)Other
      income, net - insurance recoveries
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                55,519
                
                
                
                139,669
                
                
                
                128,867Interest
      income
                
                
                1,405,637
                
                
                
                2,543,781
                
                
                
                1,148
                
                
                
                -
                
                
                
                -
                
                
                
                -Interest
      expense
                
                
                (1,124,398
                )
                
                
                -
                
                
                
                -
                
                
                
                (7,666,179
                )
                
                
                (12,205,328
                )
                
                
                (11,478,016
                )Interest
      rate swap
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (524,259
                )
                
                
                (2,755,741
                )
                
                
                48,781TOTAL
      OTHER INCOME (EXPENSES)
                
                
                281,239
                
                
                
                2,543,781
                
                
                
                1,148
                
                
                
                (8,134,919
                )
                
                
                (14,821,400
                )
                
                
                (11,300,368
                )(LOSS)
      INCOME BEFORE INCOME TAXES
                
                
                (19,983,072
                )
                
                
                2,087,120
                
                
                
                (402
                )
                
                
                19,480,153
                
                
                
                15,158,126
                
                
                
                9,787,011(BENEFIT)
      PROVISION FOR INCOME TAXES
                
                
                (8,065,951
                )
                
                
                388,000
                
                
                
                -
                
                
                
                8,063,079
                
                
                
                3,941,270
                
                
                
                503,587NET
      (LOSS) INCOME
                
                $
                (11,917,121
                )
                
                $
                1,699,120
                
                
                $
                (402
                )
                
                $
                11,417,074
                
                
                $
                11,216,856
                
                
                $
                9,283,424(Loss)
      Earnings Per Common ShareBasic
      and Diluted
                
                $
                (0.88
                )
                
                $
                0.13
                
                
                $
                (0.00
                )Weighted
      Average Common Shares OutstandingBasic
      and Dilutive
                
                
                13,517,010
                
                
                
                13,224,144
                
                
                
                2,812,500
 The
accompanying notes are an integral part of these financial
statements
   F-6
  ESSEX
RENTAL CORP. CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY Years
Ended December 31, 2008 and 2007 and Period from Inception (August 21, 2006) to
December 31, 2006
 ESSEX
      RENTAL CORP.(Successor)Accumulated
                      
                      
                      AccumulatedAdditional
                      
                      
                      (Deficit)
                      
                      
                      Other
                      
                      
                      Total
                      
                      
                      ComprehensiveCommon
      Stock
                      
                      
                      Paid-In
                      
                      
                      Retained
                      
                      
                      Comprehensive
                      
                      
                      Stockholders'
                      
                      
                      IncomeShares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Earnings
                      
                      
                      Loss
                      
                      
                      Equity
                      
                      
                      (Loss)Issuance
      of common stock to initial share­holders on August 21, 2006 at $0.0089
      per share
                      
                      
                      2,812,500
                      
                      
                      $
                      281
                      
                      
                      $
                      24,719
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      25,000Net
      loss for period ended December 31, 2006
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (402
                      )
                      
                      
                      -
                      
                      
                      
                      (402
                      )BALANCE
      - DECEMBER 31, 2006
                      
                      
                      2,812,500
                      
                      
                      
                      281
                      
                      
                      
                      24,719
                      
                      
                      
                      (402
                      )
                      
                      
                      -
                      
                      
                      
                      24,598Sale
      of 11,250,000 units, net of underwriter'sdiscount
      and offering expenses (2,248,875shares
      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
 
   
 F-7
 ESSEX
RENTAL CORP.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
 Years
Ended December 31, 2008 and 2007 and Period from Inception (August 21, 2006) to
December 31, 2006
 ESSEX
      RENTAL CORP.(Successor)Accumulated
                      
                      
                      AccumulatedAdditional
                      
                      
                      (Deficit)
                      
                      
                      Other
                      
                      
                      Total
                      
                      
                      ComprehensiveCommon
      Stock
                      
                      
                      Paid-In
                      
                      
                      Retained
                      
                      
                      Comprehensive
                      
                      
                      Stockholders'
                      
                      
                      IncomeShares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Earnings
                      
                      
                      Loss
                      
                      
                      Equity
                      
                      
                      (Loss)Reclassification
      of proceeds for 2,586,206 sharessubject
      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 EssexHoldings
      into common stock in Essex Rental
                      
                      
                      632,911
                      
                      
                      
                      63
                      
                      
                      
                      4,999,937
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,000,000Issuance
      of common stock in exchange for transactionrelated
      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 optionsgranted
      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-8
  ESSEX HOLDINGS LLC
 CONSOLIDATED
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
 Ten
Months Ended October 31, 2008 and Years Ended December 31, 2007 and
2006
  ESSEX
      HOLDINGS LLC(Predecessor)Members'
                  
                  
                  Paid
      in
                  
                  
                  Accumulated
                  
                  
                  Total
      Members'Contributions
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  Equity
      (Deficit)BALANCE
      - JANUARY 1, 2006
                  
                  $
                  40,270,000
                  
                  
                  $
                  -
                  
                  
                  $
                  (13,712,815
                  )
                  
                  $
                  26,557,185Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,283,424
                  
                  
                  
                  9,283,424BALANCE
      - DECEMBER 31, 2006
                  
                  
                  40,270,000
                  
                  
                  
                  -
                  
                  
                  
                  (4,429,391
                  )
                  
                  
                  35,840,609Member
      distributions
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (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-9
 ESSEX
RENTAL CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS
 ESSEX
      RENTAL CORP.
                      
                      
                      ESSEX
      HOLDINGS LLC(Successor)
                      
                      
                      (Predecessor)For
      the Years Ended December 31,
                      
                      
                      Period
      from inception
                        (August
      21, 2006) to December 31,
                      
                      
                      For
      the Ten Months Ended October 31,
                      
                      
                      For
      the Years Ended December 31,2008
                      
                      
                      2007
                      
                      
                      2006
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss) income
                      
                      $
                      (11,917,121
                      )
                      
                      $
                      1,699,120
                      
                      
                      $
                      (402
                      )
                      
                      $
                      11,417,074
                      
                      
                      $
                      11,216,856
                      
                      
                      $
                      9,283,424Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization of tangible assets
                      
                      
                      1,828,233
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,018,999
                      
                      
                      
                      8,167,135
                      
                      
                      
                      7,887,019Amortization
      of loan acquisition costs and other intangibles
                      
                      
                      203,314
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      353,300
                      
                      
                      
                      1,088,182
                      
                      
                      
                      1,139,620Gain
      on sale of rental equipment
                      
                      
                      (291,094
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (3,522,928
                      )
                      
                      
                      (6,049,272
                      )
                      
                      
                      (3,006,564
                      )Deferred
      income taxes
                      
                      
                      (9,854,835
                      )
                      
                      
                      (28,000
                      )
                      
                      
                      -
                      
                      
                      
                      7,103,541
                      
                      
                      
                      3,530,097
                      
                      
                      
                      278,032Goodwill
      impairment
                      
                      
                      23,895,733
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Share
      based compensation expense
                      
                      
                      55,082
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      196,862
                      
                      
                      
                      34,740
                      
                      
                      
                      -Paid
      in-kind interest on Junior B debt
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      234,223Change
      in fair value of interest rate swap
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      84,259
                      
                      
                      
                      2,755,741
                      
                      
                      
                      (48,781
                      )Changes
      in operating assets and liabilities:
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Accounts
      receivable, net
                      
                      
                      (649,257
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,106,901
                      
                      
                      
                      (847,279
                      )
                      
                      
                      (1,844,398
                      )Other
      receivables
                      
                      
                      (860,233
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (325,586
                      )
                      
                      
                      (147,019
                      )Interest
      earned in trust fund
                      
                      
                      (1,709,916
                      )
                      
                      
                      (2,767,634
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Prepaid
      expenses and other assets
                      
                      
                      (107,620
                      )
                      
                      
                      (33,418
                      )
                      
                      
                      -
                      
                      
                      
                      (757,641
                      )
                      
                      
                      (39,801
                      )
                      
                      
                      49,511Deferred
      interest
                      
                      
                      (243,405
                      )
                      
                      
                      243,405
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Spare
      parts inventory
                      
                      
                      (212,829
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (95,904
                      )
                      
                      
                      51,429
                      
                      
                      
                      86,242Accounts
      payable and accrued expenses
                      
                      
                      (416,317
                      )
                      
                      
                      311,329
                      
                      
                      
                      750
                      
                      
                      
                      3,963,504
                      
                      
                      
                      2,196,687
                      
                      
                      
                      630,547Unearned
      rental revenue
                      
                      
                      (396,270
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      416,065
                      
                      
                      
                      596,079
                      
                      
                      
                      12,432NET
      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
                      
                      
                      (676,535
                      )
                      
                      
                      (575,198
                      )
                      
                      
                      348
                      
                      
                      
                      27,284,032
                      
                      
                      
                      22,375,008
                      
                      
                      
                      14,554,288CASH
      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
                      
                      
                      (2,795,006
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (18,041,380
                      )
                      
                      
                      (18,783,592
                      )
                      
                      
                      (6,003,586
                      )Purchases
      of property and equipment
                      
                      
                      (158,721
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (2,972,681
                      )
                      
                      
                      (724,057
                      )
                      
                      
                      (511,877
                      )Accounts
      receivable from rental equipment sales
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      739,256
                      
                      
                      
                      (92,256
                      )
                      
                      
                      (45,381
                      )Proceeds
      from sale of rental equipment
                      
                      
                      1,730,771
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,709,034
                      
                      
                      
                      13,232,768
                      
                      
                      
                      5,980,213NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                      
                      
                      23,702,636
                      
                      
                      
                      (98,270,000
                      )
                      
                      
                      -
                      
                      
                      
                      (23,523,212
                      )
                      
                      
                      (6,367,137
                      )
                      
                      
                      (580,631
                      )
 
 F-10
   ESSEX RENTAL CORP.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
 ESSEX
      RENTAL CORP.
                                                                            
                                                                            
                                                                            ESSEX
      HOLDINGS LLC(Successor)
                                                                            
                                                                            
                                                                            (Predecessor)For
      the Years Ended December 31,
                                                                            
                                                                            
                                                                            Period
      from inception
                                                                              (August
      21, 2006) to December 31,
                                                                            
                                                                            
                                                                            For
      the Ten Months Ended October 31,
                                                                            
                                                                            
                                                                            For
      the Years Ended December 31,2008
                                                                            
                                                                            
                                                                            2007
                                                                            
                                                                            
                                                                            2006
                                                                            
                                                                            
                                                                            2008
                                                                            
                                                                            
                                                                            2007
                                                                            
                                                                            
                                                                            2006CASH
      FLOWS FROM FINANCING ACTIVITIESGross
      proceeds from initial public offering
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            103,500,000
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -Proceeds
      form underwriters purchase option
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            100
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Proceeds
      from issuance of warrants
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            1,500,000
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Payment
      of costs of initial public offering
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (5,021,377
                                                                            )
                                                                            
                                                                            
                                                                            (107,072
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Proceeds
      from notes payable, stockholders
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            125,000
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Repayment
      of notes payable, stockholders
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (125,000
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Proceeds
      from sale of common stock
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Proceeds
      from revolving credit facility
                                                                            
                                                                            
                                                                            12,234,529
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            78,030,836
                                                                            
                                                                            
                                                                            
                                                                            133,423,462
                                                                            
                                                                            
                                                                            
                                                                            50,331,696Payments
      on revolving credit facility
                                                                            
                                                                            
                                                                            (14,845,371
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (77,998,390
                                                                            )
                                                                            
                                                                            
                                                                            (81,931,350
                                                                            )
                                                                            
                                                                            
                                                                            (64,859,534
                                                                            )Payments
      to reacquire common stock subject to repurchase
                                                                            
                                                                            
                                                                            (18,704,715
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Payments
      to repurchase of common stock
                                                                            
                                                                            
                                                                            (291,945
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Payments
      to repurchase of warrants
                                                                            
                                                                            
                                                                            (1,506,380
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Payments
      for debt issuance costs
                                                                            
                                                                            
                                                                            (825,020
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (270,000
                                                                            )
                                                                            
                                                                            
                                                                            (1,977,997
                                                                            )
                                                                            
                                                                            
                                                                            -Payments
      on Junior Term B debt
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (15,528,133
                                                                            )
                                                                            
                                                                            
                                                                            -(Payment)
      Proceeds from interest rate swap termination
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (2,840,000
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            563,027Member
      distributions
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (50,000,000
                                                                            )
                                                                            
                                                                            
                                                                            -NET
      CASH (USED IN) PROVIDED DY FINANCING ACTIVITIES
                                                                            
                                                                            
                                                                            (23,938,902
                                                                            )
                                                                            
                                                                            
                                                                            99,853,723
                                                                            
                                                                            
                                                                            
                                                                            42,928
                                                                            
                                                                            
                                                                            
                                                                            (3,077,554
                                                                            )
                                                                            
                                                                            
                                                                            (16,014,018
                                                                            )
                                                                            
                                                                            
                                                                            (13,964,811
                                                                            )NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                                                                            
                                                                            
                                                                            (912,801
                                                                            )
                                                                            
                                                                            
                                                                            1,008,525
                                                                            
                                                                            
                                                                            
                                                                            43,276
                                                                            
                                                                            
                                                                            
                                                                            683,266
                                                                            
                                                                            
                                                                            
                                                                            (6,147
                                                                            )
                                                                            
                                                                            
                                                                            8,846CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                                            
                                                                            
                                                                            1,051,801
                                                                            
                                                                            
                                                                            
                                                                            43,276
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            8,394
                                                                            
                                                                            
                                                                            
                                                                            14,541
                                                                            
                                                                            
                                                                            
                                                                            5,695CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                                                            
                                                                            $
                                                                            139,000
                                                                            
                                                                            
                                                                            $
                                                                            1,051,801
                                                                            
                                                                            
                                                                            $
                                                                            43,276
                                                                            
                                                                            
                                                                            $
                                                                            691,660
                                                                            
                                                                            
                                                                            $
                                                                            8,394
                                                                            
                                                                            
                                                                            $
                                                                            14,541
 SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING/FINANCING ACTIVITIES:Deferred
      underwriters fee
                  
                  $
                  -
                  
                  
                  $
                  1,552,500
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Deferred
      acquisition costs in accrued expenses
                  
                  $
                  -
                  
                  
                  $
                  418,331
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for interest
                  
                  $
                  1,426,770
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  11,078,750
                  
                  
                  $
                  13,341,107
                  
                  
                  $
                  10,314,959Cash
      paid for income taxes
                  
                  $
                  718,135
                  
                  
                  $
                  320,000
                  
                  
                  $
                  -
                  
                  
                  $
                  825,144
                  
                  
                  $
                  340,000
                  
                  
                  $
                  240,000Issuance
      of stock related to acquisition of business
                  
                  $
                  5,923,734
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Unrealized
      comprehensive loss on interest rate swap, net of tax
                  
                  $
                  2,120,829
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
  The
accompanying notes are an integral part of these financial
statements
  F-11
 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") (a holding company whose only
activity relates to its investment in Essex Crane Rental Corp.) and its wholly
owned subsidiary, Essex Crane Rental Corp. ("Essex Crane"), (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 complete 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.
 
 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 relates to its investment in Essex Crane Rental
Corp, which is engaged primarily in renting lattice boom crawler cranes and
attachments to the construction industry 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. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
 
 Essex
Crane was incorporated in Delaware on April 7, 2000 as Essex Holdings, Inc. and
in June 2000 changed its legal name to Essex Crane Rental Corp.
 
 In May
2000, Essex Holdings, LLC entered into an Asset Purchase Agreement and acquired
substantially all the assets, liabilities and operations of Essex Crane Rental
Corp.  This acquisition has been accounted for using the purchase
method of accounting, and accordingly, the purchase price has been allocated to
the assets purchased and the liabilities assumed based upon the fair values at
the date of acquisition.  The fair value of net assets acquired
exceeded the purchase price.  The excess of the net fair values of
assets acquired and liabilities assumed over the purchase price has been
recorded as a pro-rata reduction to the fair value of long term assets (rental
equipment, property and equipment and spare parts inventory).
 
 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.
 
  
 F-12
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 The
acquisition was consummated on October 31, 2008. Accordingly, the
accompanying consolidated financial statements reflect the consolidated
financial position of the Company as of December 31, 2008 and the
consolidated results of operations and cash flows of the Successor for the year
then ended and the results of operations and cash flows of the Predecessor from
November 1, 2008 to December 31, 2008.
 
 The
ownership interests in the Predecessor that were retained by the management
members (the “Retained Interests”), consist of 632,911 Class A Units of
Holdings, the parent company of Essex Crane and a subsidiary of Essex Rental,
and are only exchangeable for an aggregate of 632,911 shares of the Company’s
common stock. 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 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 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.
  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 transactions and other costs of the
acquisition. In addition, the Company paid $5,000,000 for the stated value
of the Retained Interests of existing management, common stock with a fair
value 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
                            
                            $
                            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-13
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
 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
 
 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
Holding’s acquisition 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 :
  Year
      EndedDecember
      31,2008
                    
                    2007Total
      revenues
                    
                    $
                    85,328,505
                    
                    
                    $
                    77,764,829Gross
      profit
                    
                    
                    47,351,389
                    
                    
                    
                    36,871,097Operating
      income
                    
                    
                    4,762,035
                    
                    
                    
                    26,361,575Net
      (loss) income
                    
                    
                    (3,639,001)
                    
                    
                    
                    10,102,426Basic
      and diluted net income per common share
                    
                    
                    (0.26)
                    
                    
                    
                    0.73
 
 
 The above
unaudited pro forma information is presented for illustrative purposes only and
may not be indicative of the results of operations that would have actually
occurred had the Holding’s acquisition occurred as presented. Also, future
results may vary significantly from the results reflected in such pro forma
information.
 
 F-14
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 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 Representative, Inc. 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.
 
 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.
 
 F-15
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 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. 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
18 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 stockholders' pro rata share of the
Trust Fund.
 
 
 
 F-16
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 2.
                Summary
      of 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.
 
 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 Staff Accounting Bulletin No. 104 and Emerging
Issues Tax Force 00-21 “Revenue Arrangements with Multiple Deliverables” (EITF
00-21). The Company generates revenue from the 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.  When a rental agreement involves multiple elements, the
items included in the arrangement are evaluated under EITF 00-21.
 
 Revenue
arrangements with multiple elements are divided into separate units of
accounting if certain criteria are met, including whether the delivered item has
value to the customer on a stand-alone basis and whether there is objective and
reliable evidence of the fair value of the undelivered item(s). The Company
determines if objective and reliable evidence of fair value for the items
included in the Equipment Rental Agreement exists based on whether the Company
has vendor specific objective evidence (“VSOE”) of the price that its sells an
item for on a stand alone basis or objective and reliable evidence of fair value
determined based upon the price charged by a competitor selling a comparable
service.  The Company determined it has VSOE or objective and reliable
evidence for all undelivered items.
 
 The
Company uses the residual method to allocate the arrangement consideration, and
as such, VSOE of fair value or objective and reliable evidence of fair value of
the undelivered elements is deferred and the residual is recognized as revenue
related to the delivered element.
 
 Revenue
from equipment rentals and other services are billed monthly in advance and
recognized as earned, generally on the straight line basis over the rental
period, in accordance with 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, for rentals billed in advance the Company defers recognition
of 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 when the delivery has occurred.  New and used
rental equipment sales are recognized upon acceptance by the customer and the
execution of a definitive sales agreement stipulating the date of transferring
the risk of ownership.
 
 Other
Income, Net - Insurance Recoveries
 
 Insurance
recoveries are included in other income, net on the consolidated
statement of operations and relates to payments from customers and their
insurance companies for damage to equipment from accidents or natural disasters
while on rent, in accordance with the terms of the Equipment Rental
Agreement.
 
 
 F-17
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Shipping
and Handling Costs
 
 The
Company classifies shipping and handling amounts billed to customers as
revenues. The corresponding expenses are included in cost of revenues in the
consolidated statements of operations.
 
 Sales
Tax
 
 The
Company collects sales tax from customers and remits these amounts to the
applicable tax authority.  The Company’s policy is to present any tax
assessed by a governmental authority that is directly imposed on a
revenue-producing transaction between the Company and a customer on a net basis
in accordance with EITF No. 06-3 “How Taxes Collected from Customers and
Remitted to Government Authorities Should Be Presented in the Income Statement
(That Is Gross versus Net Presentation)”.
 
 Cash
Equivalents
 
 The
Company considers all highly liquid cash investment instruments purchased with a
maturity of three months or less to be cash equivalents.
 
 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 $525,000 at December 31, 2008.  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 of the Successor was $160,000 for the
year ended December 31, 2008, which includes Essex Crane for the two month post
acquisition period.  For the ten month period ended October 31, 2008
and the years ended December 31, 2007 and 2006 Predecessor’s bad debt expense
was $680,000, $525,000 and $480,000, respectively.
 
 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 receivable
for any of the preiods 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.
 
 F-18
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 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 in rental equipment.  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.
 
 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. 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. Equipment improvements that extend
the useful lives or enhance a crane’s capabilities are capitalized when they
meet the Company’s capitalization criteria and are depreciated using the
straight line method over the estimated useful life of 7 years.
 
 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.
 
 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 that extend the useful lives or enhance the assets’
capabilities are capitalized when they meet the Company’s capitalization
criteria and are depreciated on the straight line basis over the remaining lives
of the assets.  Gains and losses on retirements and disposals of
property and equipment are included in the consolidated statements of
operations.
 
 External
costs incurred by the Predecessor to develop computer software for internal use
are capitalized in accordance with American Institute of Certified Public
Accountants Statement of Position 98-1, “Accounting for Costs of Computer
Software Developed or Obtained for Internal Use.”  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 life.  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 years ended December 31, 2007 and 2006,
the Predecessor’s amortization expense was $15,680, $14,438, and $20,438,
respectively.
 
 F-19
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 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 was recorded as
goodwill.
 
 Under
SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), we
evaluate goodwill for impairment at the reporting unit level at least annually,
or more frequently if triggering events occur or other impairment indicators
arise which might impair recoverability. Management has determined that it has
only one reporting unit, Essex Crane.  To determine if there is any
impairment, management determined whether the fair value of the reporting unit
is greater than its carrying value.  If the fair value of a reporting unit
is less than its carrying value, then the implied fair value of goodwill must be
estimated and compared to its carrying value to measure the amount of
impairment, if any.
 
 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 has no remaining goodwill at December 31,
2008.
 
 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 has determined that there is no impairment of
its long-lived assets as of December 31, 2008.
 
 
 F-20
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 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 the requirements of
SFAS 133, Accounting for
Derivative Instruments and Hedging Activities(“SFAS 133”).
 
 Cash flow
hedges are accounted for under the requirements of FAS 133 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
in the income statement. 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.
 
 The
Predecessor did not contemporaneously document the hedge designation on the date
of inception in order to quality for hedge accounting treatment in accordance
with SFAS No. 133.  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, as required by SFAS No. 109
“Accounting for Income Taxes” 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 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.
 
 
 F-21
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 The
Company adopted the provisions of FIN 48, “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.
 
 The
Successor and Predecessor file income tax returns in the United States federal
jurisdiction and in most state jurisdictions.  With limited exception,
the Company is no longer subject to U.S. federal or state income tax
examinations for years prior to 2005.
 
 Preferred
Stock
 
 The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
 
 Stock
Repurchase Program
 
 In
October 2008, the Company's board of directors authorized a stock repurchase
program, under which from time to time, in open market transactions at
prevailing prices or through privately negotiated transactions as conditions
permit, the Company may purchase of up to $12 million of the Company's common
stock and publicly-traded warrants.
  Warrants
  
 Equity
Based Compensation
 
 The Company
follow SFAS No. 123(R), “Share-Based Payment”, which requires the
measurement and recognition of stock based compensation expense, based on
estimated fair values at the grant date of the award, for all share-based awards
made to employees and directors.
 
 Fair
Value of Financial Instruments
 
 The
carrying amounts reported in the consolidated balance sheets for accounts
receivable, accounts payable, accrued expenses, and unearned rental income
approximate fair value due to the immediate short-term maturity of these
financial instruments. The fair values of the revolving credit facility are
determined using current interest rates for similar instruments and approximate
the carrying value of these financial instruments due to the fact that the
underlying instruments include provisions to adjust rates to approximate fair
market value.
 
 Advertising
Costs
 
 Advertising
costs are generally expensed as incurred and are included within selling,
general and administrative expenses.
 
 Segment
Reporting
 
 The
Company has determined based on SFAS No. 131, “Disclosures about Segments
of an Enterprise and Related Information,” that although it has several distinct
revenue streams including equipment rental and transportation, used equipment
sales, and repairs and maintenance, it has only one reportable segment. This
determination was based upon how management allocates its resources and assesses
performance.
 Comprehensive
Income
 
 The
Company reports comprehensive income, which is defined as the change in equity
of a business from transactions and other events from non-owner sources.
Comprehensive income includes net income and other non-owner changes in equity
which bypass the statement of earnings and are reported as a separate component
of equity. Other comprehensive income includes unrealized losses on derivative
instruments that qualify as cash flow hedges.
 
 F-22
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 Recently
Adopted Accounting Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. In February 2008, the FASB issued FASB Staff
Position (FSP) 157-2, which delays the effective date of FAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP 157-2 delay the effective date
of SFAS 157 for the Company to January 1, 2009. In January 2008, the
Company adopted SFAS No.157 except as it applies to those nonfinancial assets
and nonfinancial liabilities as noted in proposed FSP FAS 157-b. The partial
adoption of SFAS No.157 on January 1, 2008 did not have a material impact on the
Successor’s or Predecessor’s consolidated financial position, results of
operations or cash flows.
 
 In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities,which allows companies to report
certain financial assets and liabilities at fair value with the changes in fair
value included in earnings. In general, a company may elect the fair value
option for an eligible financial asset or financial liability when it first
recognizes the instrument on its balance sheet or enters into an eligible firm
commitment. A company may also elect the fair value option for eligible items
that exist on the effective date of FAS 159. A Company’s decision to elect the
fair value option for an eligible item is irrevocable. The Company did not elect
the fair value option for eligible financial assets or financial liabilities
upon adoption.
 
 Recently
Issued Accounting Pronouncements
 
 In
December 2007, the FASB issued a revision to SFAS No. 141, Business Combinations(“SFAS
No. 141R”). SFAS No. 141R revises the accounting for business combinations.
Under SFAS No. 141(R), 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, SFAS No.
141(R) will change the accounting for acquisition costs, noncontrolling
interests, acquired contingent liabilities, in-process research and development,
restructuring costs associated with a combination and certain tax-related items,
as well as require additional disclosures. SFAS No. 141(R) 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. Earlier adoption is prohibited. The Company will be
required to apply SFAS No. 141(R) to any acquisitions subsequent to
December 31, 2008.
 
 F-23
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS
160”). SFAS 160 establishes accounting and reporting standards for
noncontrolling interests in subsidiaries. This statement requires the reporting
of all noncontrolling interests as a separate component of stockholders’ equity,
the reporting of consolidated net income (loss) as the amount attributable to
both the parent and the noncontrolling interests and the separate disclosure of
net income (loss) attributable to the parent and to the noncontrolling
interests. In addition, this statement provides accounting and reporting
guidance related to changes in noncontrolling ownership interests. Other than
the reporting requirements described above which require retrospective
application, the provisions of SFAS 160 are to be applied prospectively in the
first annual reporting period beginning on or after December 15,
2008.  Management does not expect the adoption of SFAS No. 160
will have a material impact on its consolidated results of operations or
financial position.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No.
133.” SFAS No. 161 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
under SFAS No. 133 and its related interpretations, and the effects of these
instruments on the entity’s financial position, financial performance and cash
flows. SFAS No. 161 is effective for financial statements issued for fiscal
years beginning after November 15, 2008. The Company does not expect its
adoption will have a material impact on its consolidated financial statement
disclosures.
 
 In
April 2008, the FASB issued FASB Staff Position 142-3, “Determination of
the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). The
intent of FSP 142-3 is to improve the consistency between the useful life of a
recognized intangible assets under FAS 142 and the period of expected cash flows
used to measure the fair value of the asset under FAS 141(R) and other U.S.
generally accepted accounting principles. FSP 142-3 will be effective for our
interim and annual financial statements beginning in 2009 and early adoption is
prohibited.  The Company does not expect the adoption of FSP 142-3 to have
a material impact on its consolidated financial statements.
 
 3.
                Rental
      Equipment
 
 Rental
equipment consists of the following:
 Successor
                                
                                
                                PredecessorDecember
      31,
                                
                                
                                October
      31,
                                
                                
                                December
      31,2008
                                
                                
                                2008
                                
                                
                                2007Rental
      equipment
                                
                                $
                                257,436,079
                                
                                
                                $
                                187,039,562
                                
                                
                                $
                                173,943,468Less
      accumulated depreciation
                                
                                
                                (1,743,963
                                )
                                
                                
                                (53,866,913
                                )
                                
                                
                                (48,993,005
                                )Total
                                
                                $
                                255,692,116
                                
                                
                                $
                                133,172,649
                                
                                
                                $
                                124,950,463
  Essex
Rental’s depreciation expense related to rental equipment was $1,749,762 for the
year ended December 31, 2008, which includes Essex Crane for the two month post
acquisition period, which was included in cost of revenues in the accompanying
consolidated statements of operations.
 
 For the
ten months ended October 31, 2008 and the years ended December 31, 2007 and
2006, the Predecessor’s depreciation expense related to rental equipment was
$6,635,454, $7,731,801 and $7,523,158, respectively.
 
 
 F-24
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 4.
                Property
      and Equipment
 
 Property
and equipment consists of the following:
 
 Successor
                        
                        
                        PredecessorDecember
      31,
                        
                        
                        October
      31,
                        
                        
                        December
      31,2008
                        
                        
                        2008
                        
                        
                        2007Land
                        
                        $
                        2,575,000
                        
                        
                        $
                        831,436
                        
                        
                        $
                        831,436Buildings
      and improvements
                        
                        
                        2,075,000
                        
                        
                        
                        1,064,078
                        
                        
                        
                        1,064,078Automobiles,
      trucks, trailers and yard equipment
                        
                        
                        1,436,650
                        
                        
                        
                        1,802,356
                        
                        
                        
                        1,546,955Information
      systems equipment and software
                        
                        
                        29,187
                        
                        
                        
                        926,619
                        
                        
                        
                        922,043Office
      equipment
                        
                        
                        57,343
                        
                        
                        
                        589,096
                        
                        
                        
                        528,357Machinery,
      furniture and fixtures
                        
                        
                        59,519
                        
                        
                        
                        484,241
                        
                        
                        
                        452,121Construction
      in progress
                        
                        
                        2,021,914
                        
                        
                        
                        3,001,023
                        
                        
                        
                        384,0168,254,613
                        
                        
                        
                        8,698,849
                        
                        
                        
                        5,729,006Less
      accumulated depreciation and amortization
                        
                        
                        (78,470
                        )
                        
                        
                        (3,064,790
                        )
                        
                        
                        (2,681,717
                        )Property
      and equipment, net
                        
                        $
                        8,176,143
                        
                        
                        $
                        5,634,059
                        
                        
                        $
                        3,047,289
 Essex
Rental’s depreciation and amortization expense related to property and equipment
was $78,470 for the year ended December 31, 2008, which includes 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 years ended December 31, 2007 and 2006 was $383,545 $435,334 and
$363,861, 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.  In accordance with EITF 98-14 “Debtor’s Accounting for Changes
on Line-of-Credit or Revolving Debt Arrangements”, 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 $893,161 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.
 
 
 F-25
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Loan
acquisition costs consist of the following:
 
 Successor
                          
                          
                          PredecessorDecember
      31,
                          
                          
                          October
      31,
                          
                          
                          December
      31,2008
                          
                          
                          2008
                          
                          
                          2007Gross
      carrying amount
                          
                          $
                          2,459,423
                          
                          
                          $
                          2,247,997
                          
                          
                          $
                          1,977,997Accumulated
      amortization
                          
                          
                          (81,981
                          )
                          
                          
                          (681,735
                          )
                          
                          
                          (328,435
                          )Net
      carrying amount
                          
                          $
                          2,377,442
                          
                          
                          $
                          1,566,262
                          
                          
                          $
                          1,649,562
 
 The
Company’s loan acquisition costs amortized to interest expense for the year
ended December 31, 2008 was $81,981, which includes 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 years ended December 31, 2007 and 2006
were $353,300, $1,088,182 and $1,139,620, respectively.
 
 Estimated
future amortization expense related to loan acquisitions costs at December 31,
2008 are as follows for the years ending December 31,
 2009
                          
                          $
                          491,8852010
                          
                          
                          491,8852011
                          
                          
                          491,8852012
                          
                          
                          491,8852013
                          
                          
                          409,902$
                          2,377,442
 
 6.
                Goodwill
      and Other Identifiable Intangible
Assets
 
 Goodwill
of $23,895,733 was recorded associated with the acquisition of Holdings in
October 2008 for the excess of the purchase price over the fair value of
identifiable assets acquired, net of liabilities assumed. As discussed in Note
1, the Goodwill was determined to be impaired at December 31, 2008 and was
written off in full.
 
 The
following table presents the gross carrying amount, accumulated amortization and
net carrying amount of the Company’s goodwill and other identifiable intangible
assets at December 31, 2008:
 
 Gross
                      
                      
                      
                      
                      
                      NetCarrying
                      
                      
                      Accumulated
                      
                      
                      CarryingAmount
                      
                      
                      Amortization
                      
                      
                      AmountOther
      Identifiable intangible assetsCustomer
      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
Company’s amortization expense for other intangible assets was $121,333 for the
year ended December 31, 2008, which includes Essex Crane for the two month
post acquisition period.
 
 
 F-26
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 Estimated
amortization expense for the Company’s other intangible assets as of
December 31, 2008 is as follows:
 2009
                        
                        $
                        728,0002010
                        
                        
                        728,0002011
                        
                        
                        728,0002012
                        
                        
                        728,0002013
                        
                        
                        606,667$
                        3,518,667
 
 7.
                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 million.  The
maximum borrowing amount of the revolving credit facility may be increased by up
to $5 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, 2008) 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 (0.46% at December 31, 2008 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. The
applicable prime rate margin, euro-dollar LIBOR rate, and unused line commitment
fee vary based on the amount of monthly average excess availability as defined
in the credit agreement.  At December 31, 2008 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 Interest Rate Swap
for additional detail.
 
 The
interest rate on the revolving credit facility was based primarily on LIBOR
based loans which were yielding a weighted effective average interest rate of
2.89% at December 31, 2008.
 
 The
outstanding balance on the revolving credit facility was $137,377,921 at
December 31, 2008. 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 $175,497,000 at December 31, 2008, which was limited
by the eligible borrowing base.  The Company’s available borrowing
under the revolving credit facility is $38,119,079 at December 31,
2008.
 
 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 (“revolving credit
facility”) headed by the lead lender of its previous revolving credit facility,
which permitted it to borrow up to $170 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 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 payoff the previously
existing revolving credit facility and its former Junior Term B lender, pay a
$50 million dividend distribution, and cover related expenses.
 
 F-27
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 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,
eurodollar LIBOR rate, and unused line commitment fee vary based on the amount
of monthly average excess availability as defined in the credit
agreement.  At December 31, 2008 the applicable prime rate margin,
eurodollar LIBOR margin, and unused line commitment fee were 0.25%, 2.00% and
0.25%, respectively.
 
 The
previously existing revolving credit facility (“previous credit facility”)
permitted the Predecessor to borrow up to $110 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 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.
 
 The
interest rate on the revolving credit facilities at October 31, 2008 was based
primarily on a Prime based loan which was yielding 5.25%.  The
interest rate on the revolving credit facilities at December 31, 2007 and 2006
were based primarily on LIBOR based loans which were yielding a weighted
effective average interest rate of 7.2% and 8.6%, respectively.
 
 The
outstanding balance on Predecessor’s revolving
credit facility was $129,895,169 and $129,862,723 at October 31, 2008 and
December 31, 2007, respectively. The maximum amounts that could be borrowed
under the revolving credit facilities, net of letters of credit, interest rate
swaps and other reserves was $180,442,000 and $167,207,759 at October 31, 2008
and December 31, 2007, respectively.
 
 Predecessor
Junior Term B Debt
 
 The
Predecessor’s Junior Term B debt (“Term B”) was a $15 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, 2008 and for the year ended December 31, 2008, the Company was in
compliance with its covenants and other provisions of the senior debt revolving
line of credit facility as the covenants do not become active unless the
available borrowing base falls below a certain threshold.  The
Company’s borrowing base exceeded the threshold at December 31, 2008. 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.
 
 
 F-28
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 8.
                Interest
      Rate Swap Agreement
 
 The
Company’s objective in using derivatives is to add stability to interest expense
and to manage its exposure to interest rate movements.  To accomplish this
objective, the Company uses an interest rate swap as part of its cash flow
hedging strategy to hedge the variable cash flows associated with existing
variable-rate debt.  The Company has designated its interest rate swap
as a cash flow hedge.
 
 In
November 2008, the Successor 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 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.  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 either Wachovia’s prime rate or euro-dollar LIBOR rate, plus
a margin depending on certain criteria in the agreement.
 
 At
December 31, 2008, the interest rate swap had a fair value of ($3,424,613) and
was included in long-term liabilities. No hedge ineffectiveness on the cash flow
hedge was recognized during 2008.
 
 For the
year ended December 31, 2008, the change in net unrealized loss on derivatives
designated as cash flow hedges reported in the consolidated statements of
changes in shareholders’ equity and comprehensive income was a $3,424,613
($2,120,829 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. The Company
estimates that an additional $1,600,000 will be reclassified as an increase in
interest expense 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.
 
 Predecessor
      Interest Rate Swap Agreement
 
 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 million
through March 2009, at which time the notional principal amount was reduced to
$100 million for the remaining period though the original March 2010 maturity
date.  Under the agreement, the Predecessor paid a 5% fixed interest
rate.
 
 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 million, $100
million and $80 million for the first, second and third year,
respectively.
 
 
 F-29
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 8.
                Interest
      Rate Swap Agreements (continued)
 
 This swap
agreement was terminated by the Predecessor on September 22, 2008, which
resulted in the payment of a final settlement amount of $3,280,000.
 
 In July
2005, the Predecessor entered into an interest rate swap agreement with a $50
million notional principal amount and a maturity of September
2007.  This Swap was terminated in July 2006 for a net gain of $43,754
after covering the cost of a replacement interest rate cap at
5.5%.  This interest rate cap was terminated in November 2006 at an
additional net gain of $5,027. The $48,781 realized gain from these two
derivatives has been included in interest rate swap in other income (expenses)
in the Predecessor’s consolidated statements of operations for the year ended
December 31, 2006.
 
 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.
 
 The fair
value of the Predecessor’s interest rate swap agreement at December 31, 2007 was
($2,755,741), which has been recorded as interest rate swap in long-term
liabilities.
 
 The
Predecessor did not contemporaneously document the hedge designation on the date
of inception in order to quality for hedge accounting treatment in accordance
with SFAS No. 133. Accordingly, the derivative financial instruments are
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 Predecessor’s consolidated
statements of operations for the ten months ended October 31, 2008 and years
ended December 31, 2007 and 2006 as follows:
 
 PredecessorAsset
      (Liability) Balance2008
                                            
                                            
                                            2007
                                            
                                            
                                            2006Fair
      value at beginning of period/year
                                            
                                            $
                                            (2,755,741
                                            )
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            514,246Change
      in fair value recognized asinterest
      (expense) income
                                            
                                            
                                            (524,259
                                            )
                                            
                                            
                                            (2,755,741
                                            )
                                            
                                            
                                            48,781Payment
      (proceeds) from swaptermination
      recorded as interestexpense
                                            
                                            
                                            3,280,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (563,027
                                            )Fair
      value at end of period/year
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            (2,755,741
                                            )
                                            
                                            $
                                            -
  The
impact of the interest rate swap resulted in an increase in interest expense for
the ten month period ended October 31, 2008 and a decrease of $32,000 and
$655,000 for the years ended December 31, 2008 and 2007,
respectively.
  F-30
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 9.                 Fair
Value
 
 As
described in Note 1, the Successor and Predecessor partially adopted SFAS No.157
on January 1, 2008. SFAS No.157, 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. SFAS No.157 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, SFAS No.157
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.
 
 In
accordance with the provisions of FSP No. 157-2, we have applied the provisions
of SFAS No. 157 only to our financial assets and liabilities recorded at fair
value.
 
 Liabilities
measured by the Company at fair value on a recurring basis as of December 31,
2008 are as follows:
 Quoted Prices
                                          
                                          OtherFair Value
                                          
                                          Active for
                                          
                                          Observable
                                          
                                          SignificantDecember 31
                                          
                                          Identical Assets
                                          
                                          Inputs
                                          
                                          Unobservable2008
                                          
                                          (Level 1)
                                          
                                          (Level 2)
                                          
                                          Inputs (Level 3)Interest
      rate swap (a)
                                          
                                          $
                                          3,424,613
                                          
                                          $
                                          —
                                          
                                          $
                                          3,424,613
                                          
                                          $
                                          —
  
 (a)
      Since the Company’s interest rate derivative instrument is not traded on a
      market exchange, 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).
 
 F-31
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 10.  Income
      Taxes
 
 Income
tax (benefit) expense consists of the following:
 
 Successor
                    
                    
                    PredecessorTen
      MonthsEndedYears
      Ended December 31,
                    
                    
                    October
      31,
                    
                    
                    Years
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Current
      income taxes:Federal
                    
                    $
                    210,512
                    
                    
                    $
                    -
                    
                    
                    $
                    723,942
                    
                    
                    $
                    411,174
                    
                    
                    $
                    225,554State
      and local
                    
                    
                    144,727
                    
                    
                    
                    416,000
                    
                    
                    
                    235,596
                    
                    
                    
                    -
                    
                    
                    
                    -Deferred
      income taxes:Federal
                    
                    
                    (7,805,827
                    )
                    
                    
                    -
                    
                    
                    
                    6,867,955
                    
                    
                    
                    3,569,423
                    
                    
                    
                    -State
      and local
                    
                    
                    (615,363
                    )
                    
                    
                    (28,000
                    )
                    
                    
                    235,586
                    
                    
                    
                    (39,327
                    )
                    
                    
                    278,033Total
      income tax(benefit)
      expense
                    
                    $
                    (8,065,951
                    )
                    
                    $
                    388,000
                    
                    
                    $
                    8,063,079
                    
                    
                    $
                    3,941,270
                    
                    
                    $
                    503,587
 The
Successor’s current income tax benefit for 2008 relates to Federal alternative
minimum tax and state and local taxes while the deferred income tax expense
relates primarily to the Company’s recognition of goodwill
impairment.  The Company’s tax expense for the year ended December 31,
2007 relates to state and local taxes payable.  The Company had no
income tax expense for the period from inception (August 21, 2006) through
December 31, 2006.
 
 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 years ended December 31, 2007 and 2006 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 provides a reconciliation between the federal statutory tax rate
and the Company’s actual effective tax rate:
 
 Successor
                    
                    
                    PredecessorTen
      MonthsEndedYears
      Ended December 31,
                    
                    
                    October
      31,
                    
                    
                    Years
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007
                    
                    
                    2006Federal
      statutory rate
                    
                    
                    -35.0
                    %
                    
                    
                    34.0
                    %
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %
                    
                    
                    34.0
                    %State
      and local taxes
                    
                    
                    -2.6
                    %
                    
                    
                    18.5
                    %
                    
                    
                    1.9
                    %
                    
                    
                    -0.3
                    %
                    
                    
                    2.9
                    %Change
      in valuation allowance
                    
                    
                    -0.5
                    %
                    
                    
                    4.4
                    %
                    
                    
                    0.0
                    %
                    
                    
                    -8.7
                    %
                    
                    
                    -31.7
                    %Dividend
      income not taxable
                    
                    
                    -2.3
                    %
                    
                    
                    -38.3
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %Non-deductible
      transaction costs
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
                    
                    
                    2.1
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %Uncertain
      tax positions
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
                    
                    
                    2.1
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %Meals,
      entertainment and other
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.3
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.1
                    %Effective
      income tax rate
                    
                    
                    -40.4
                    %
                    
                    
                    18.6
                    %
                    
                    
                    41.4
                    %
                    
                    
                    26.0
                    %
                    
                    
                    5.3
                    %
 
 
 F-32
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 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 years
ended December 31, 2007 and 2006 was lower than the federal statutory tax rate
primarily due to the tax benefits associated with the valuation
allowance.  The Successor increased its federal statutory tax rate
from 34% for the year ended December 31, 2006 to 35% for the year ended December
31, 2007 due to the fact that taxable income was more than $10 million in both
2006 and 2007 and management had estimated that its future tax rate will be 35%
in the periods in which the deferred tax assets and liabilities are expected to
be realized.
 
 The tax
effects of temporary differences that give rise to deferred tax assets and
liabilities are as follows:
 Successor
                                              
                                              
                                              PredecessorDecember
      31,
                                              
                                              
                                              October
      31,
                                              
                                              
                                              December
      31,2008
                                              
                                              
                                              2007
                                              
                                              
                                              2008
                                              
                                              
                                              2007Deferred
      tax assets:Accounts
      receivable
                                              
                                              $
                                              1,179,233
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              944,245
                                              
                                              
                                              $
                                              220,487Accrued
      expenses
                                              
                                              
                                              679,838
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,413,047
                                              
                                              
                                              
                                              2,195,084Goodwill
                                              
                                              
                                              7,464,773
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              11,525,940
                                              
                                              
                                              
                                              13,060,088Net
      operating loss carry-forwards
                                              
                                              
                                              16,054,592
                                              
                                              
                                              
                                              22,700
                                              
                                              
                                              
                                              14,780,045
                                              
                                              
                                              
                                              20,461,566Tax
      credits and other
                                              
                                              
                                              2,571,747
                                              
                                              
                                              
                                              112,400
                                              
                                              
                                              
                                              1,357,605
                                              
                                              
                                              
                                              1,014,35627,950,183
                                              
                                              
                                              
                                              135,100
                                              
                                              
                                              
                                              30,020,882
                                              
                                              
                                              
                                              36,951,581Valuation
      allowance
                                              
                                              
                                              (13,708
                                              )
                                              
                                              
                                              (107,100
                                              )
                                              
                                              
                                              (15,121
                                              )
                                              
                                              
                                              (10,216
                                              )Total
      deferred tax assets, net
                                              
                                              
                                              27,936,475
                                              
                                              
                                              
                                              28,000
                                              
                                              
                                              
                                              30,005,761
                                              
                                              
                                              
                                              36,941,365Deferred
      tax liabilities:Rental
      equipment and propertyand
      equipment
                                              
                                              
                                              (89,344,177
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (41,478,175
                                              )
                                              
                                              
                                              (41,310,238
                                              )Total
      deferred tax liabilities
                                              
                                              
                                              (89,344,177
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (41,478,175
                                              )
                                              
                                              
                                              (41,310,238
                                              )Net
      deferred tax (liabilities) assets
                                              
                                              $
                                              (61,407,702
                                              )
                                              
                                              $
                                              28,000
                                              
                                              
                                              $
                                              (11,472,414
                                              )
                                              
                                              $
                                              (4,368,873
                                              )December
      31,
                                              
                                              
                                              October
      31,
                                              
                                              
                                              December
      31,2008
                                              
                                              
                                              2007
                                              
                                              
                                              2008
                                              
                                              
                                              2007Amounts included in
      the consolidated
      balance sheets:Current
      deferred tax assets
                                              
                                              $
                                              1,859,071
                                              
                                              
                                              $
                                              28,000
                                              
                                              
                                              $
                                              2,357,290
                                              
                                              
                                              $
                                              2,415,571Long-term
      deferred tax liabilities
                                              
                                              
                                              (63,266,773
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (13,829,704
                                              )
                                              
                                              
                                              (6,784,444
                                              )Net
      deferred tax (liabilities) assets
                                              
                                              $
                                              (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
 
 
 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 Company
had now generated taxable income in excess of $10 million in each of the past
two years.  Management has concluded that it is now 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, 2008, the Successor had unused federal net operating loss
carry-forwards totaling approximately $43.6 million that begin expiring in
2020.  At December 31, 2008, the Company also had unused state net
operating loss carry-forwards totaling approximately $26.2 million that expire
between 2009 and 2020.  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 unrecorded excess tax goodwill of approximately $6.4 million
associated with the acquisition of Holdings.  The excess tax goodwill
is amortized over the remaining seven 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 the provisions of FIN 48 on January 1, 2007 and did not
record any unrecognized income tax benefits as a result of the implementation of
FIN 48.  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 $1,100,000 of unrecognized tax benefits, net
of federal income tax benefit, at December 31, 2008, of which approximately
$700,000 would impact the Company’s effective tax rate if
recognized.
  A
reconciliation of the beginning and ending amount of gross unrecognized tax
benefits is as follows:
 
 Successor
                      
                      
                      PredecessorTen
      MonthsYear
      Ended
                      
                      
                      EndedDecember
      31,
                      
                      
                      October
      31,2008
                      
                      
                      2008Balance
      at January 1, 2008
                      
                      $
                      -
                      
                      
                      $
                      -Increases
      for tax positions taken in the current year
                      
                      
                      1,100,000
                      
                      
                      
                      400,000Balance
      at end of year/period
                      
                      $
                      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, 2008 and 2007 and period from inception (August 21,
2006) to December 31, 2006.  The Predecessor had no accrual for
interest or penalties for the ten months ended October 31, 2008 or the years
ended December 31, 2007 and 2006.
 
 The
Successor and Predecessor file separate income tax returns in the United States
federal jurisdiction and in numerous state jurisdictions. The Predecessor is no
longer subject to U.S. federal or state income tax examinations for years
prior to 2005.
 
 F-34
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 11.
                  Stock
      Based Compensation
 
 The
Successor has available up to 1,575,000 shares to issue under its 2008 Long-term
Incentive Plan to key employees and directors of the Corporation. Options to
purchase shares of common stock are granted at its market price on grant date
and expire ten years from issuance.
 
 In
December 2008, the Successor granted to certain key members of management
options to purchase 565,000 shares of common stock. 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 no stock options were vested as of
December 31, 2008.
 
 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
Corporation’s method of estimating expected volatility is based on volatility of
its peers since that Successor has only had operations for a short time. The
expected dividend yield is estimated based on the Company’s expected dividend
rate over the term of the options. The expected term of the options is based on
the 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 of the stock
options granted in 2008 are 61.0%, 0.0%, 6 years and 1.43%,
respectively.
 
 The
Successor recorded $15,722 of compensation in selling, general and
administrative expenses for the year ended December 31, 2008, which includes
Essex Crane Rental for the two month post acquisition period, with the offset
recorded in additional paid in capital. There was approximately
$1.4 million of total unrecognized compensation cost as of
December 31, 2008 related to non-vested stock option awards. The remaining
cost is expected to be recognized ratably over the years ended December 31,
2009, 2010 and 2011.
 
 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 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 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 will be 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 vest 20% annually on the anniversary of the grant date provided that the
individual remains in continuous employment as of such dates. Management Profit
Shares have 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 Hyde Park.
 
 F-35
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 The
compensation expense recognized by the Predecessor under SFAS No. 123(R) 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.  There was no compensation expense recognized
for the year ended December 31, 2006 as the awards issued prior to 2007 were
deemed to have no value of the grant date.
 
 12.
                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%.  These
contributions vest immediately upon contribution.  Company 401(k)
contributions were $38,152 for the year ended December 31, 2008, which includes
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.
 
 The
Company and Predecessor provide 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.
 
 13.
                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.
 
 14.
                  Earnings
      Per Share
 
 The
      following tables set forth the computation of basic and diluted earnings
      per share:
 Period
      fromInception(August
      21, 2006)Year
      Ended December 31,
                    
                    
                    to
      December 31,2008
                    
                    
                    2007
                    
                    
                    2006Net
      (loss) income
                    
                    $
                    (11,917,121
                    )
                    
                    $
                    1,699,120
                    
                    
                    $
                    (402
                    )Basic
      and diluted weighted average
                      common
      shares outstanding
                    
                    
                    13,517,010
                    
                    
                    
                    13,224,144
                    
                    
                    
                    2,812,500Basic
      and diluted (loss) earnings per share
                    
                    $
                    (0.88
                    )
                    
                    $
                    0.13
                    
                    
                    $
                    (0.00
                    )
 
 Basic
earnings (loss) per share ("EPS") is computed by dividing the net (loss) income
by the weighted average number of common shares outstanding during the period.
Included in weighted average number of shares outstanding is 632,911 shares of
common stock for the effective conversion retained interest in Holdings into
common stock of the Company. Diluted EPS adjusts basic EPS for the effects of
Warrants, and other potentially dilutive financial instruments, only in the
periods in which such effect is 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.
 
 F-36
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 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.
 
 15.
                Summarized
      Quarterly Financial Data
(Unaudited)
 
 The
Company was in the development stage in pursuit of a business combination for
the year ended December 31, 2007 and 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, 2008 and 2007:
 
 First
                        
                        Second
                        
                        Third
                        
                        FourthQuarter
                        
                        Quarter
                        
                        Quarter
                        
                        Quarter2008Total
      revenues
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        14,486,686Operating
      loss
                        
                        
                        (149,157)
                        
                        
                        
                        (109,985)
                        
                        
                        
                        (160,834)
                        
                        
                        
                        (19,844,335)Income
      (loss) before provision for
                          income
      taxes
                        
                        
                        356,771
                        
                        
                        
                        267,195
                        
                        
                        
                        281,827
                        
                        
                        
                        (20,888,865)Net
      income (loss)
                        
                        
                        251,071
                        
                        
                        
                        203,355
                        
                        
                        
                        223,467
                        
                        
                        
                        (12,595,014)Basic
      net income per common
                          share(1)
                        
                        $
                        0.02
                        
                        
                        $
                        0.01
                        
                        
                        $
                        0.01
                        
                        
                        $
                        (0.86)Diluted
      net income (loss) per
                          common share(1)
                        
                        $
                        0.02
                        
                        
                        $
                        0.01
                        
                        
                        $
                        0.01
                        
                        
                        $
                        (0.86)First
                        
                        Second
                        
                        Third
                        
                        FourthQuarter
                        
                        Quarter
                        
                        Quarter
                        
                        Quarter2007Total
      revenues
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Operating
      loss
                        
                        
                        (29,839)
                        
                        
                        
                        (125,754)
                        
                        
                        
                        (76,157)
                        
                        
                        
                        (224,911)Income
      before provision for
                          income
      taxes
                        
                        
                        145,598
                        
                        
                        
                        758,905
                        
                        
                        
                        804,184
                        
                        
                        
                        378,433Net
      income
                        
                        
                        145,598
                        
                        
                        
                        605,780
                        
                        
                        
                        627,309
                        
                        
                        
                        320,433Basic
      net income per common
                          share(1)
                        
                        $
                        0.03
                        
                        
                        $
                        0.04
                        
                        
                        $
                        0.04
                        
                        
                        $
                        0.02Diluted
      net income per common
                          share(1)
                        
                        $
                        0.03
                        
                        
                        $
                        0.04
                        
                        
                        $
                        0.04
                        
                        
                        $
                        0.02
 
 (1)
                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.
 
 
 
 
 F-37
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 16.
                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 $59,459 for the year ended December 31,
2008, which includes Essex Crane Rental for the two month post acquisition
period.  The Company had no rent expense for the year ended December
31, 2007 or period from August 21, 2006 (inception) to December 31,
2006.
 
 The
Predecessor rental expense under non-cancelable operating leases was $325,133,
$278,200 and $260,326 for the ten month period ended October 31, 2008 and years
ended December 31, 2007 and 2006, respectively.
 
 Future
minimum lease payments for the Company’s non-cancellable operating leases at
December 31, 2008 are as follows:
 
 2009
                      
                      $
                      241,6652010
                      
                      
                      162,4792011
                      
                      
                      104,2962012
                      
                      
                      4,730$
                      513,170
 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 commencing on March 5, 2007 with the terms of such
arrangement being reconsidered from time to time. The Company’s statements of
operations for the year ended December 31, 2008 and 2007 and the period from
August 21, 2006 (inception) to December 31, 2006 include $90,000, $73,790 of
expense related to this agreement, respectively.
 
 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, $400,000 and
$475,000 for management fees for the ten months ended October 31, 2008 and years
ended December 31, 2007 and 2006, 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.
  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.
Additionally, the Company paid the fees and issued the securities to the
underwriters in the Offering as described in Note 1.
  
 F-38
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  The
Successor and Predecessor maintain 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
born 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
estimates the gross personal property taxes liability and related contractual
customer receivable of the Company to be approximately $4,100,000 and $3,000,000
respectively, at December 31, 2008.
 
 Management
estimated the gross personal property taxes liability and related contractual
customer receivable of the Predecessor to be approximately $3,000,000 and
$2,300,000, respectively, at both October 31, 2008 and December 31,
2007.  Management estimated the gross liability and contractual
customer receivable of the Predecessor to be approximately $2,700,000 and
$2,000,000, respectively, at December 31, 2006.
 
 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.
 
 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.
  
 
 F-39
 ESSEX
RENTAL CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 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
      30, 2009
                  
                  
                  
                  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
      30, 2009Laurence
      S. Levy/s/
      Edward Levy
                
                Director
                
                March
      30, 2009Edward
      Levy/s/
      Daniel H. Blumenthal
                
                Director
                
                March
      30, 2009Daniel H.
      Blumenthal/S/ Ronald
      Schad
                
                Chief
      Executive Officer (Principal Executive
                
                March
      30, 2009Ronald Schad
                
                Officer)
      and Director/s/
      Martin Kroll
                
                Chief
      Financial Officer (Principal Financial Officer
                
                March
      30, 2009Martin
      Kroll
                
                and
      Principal Accounting Officer)