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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549




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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE


SECURITIES AND EXCHANGE ACT OF 1934


|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|[X]        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934    
|           |  | For the fiscal year ended December 31,
    2002                                                 
|OR        
|[  ]       |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from                 to                                           

Commission File Number: 001-14299

NATIONSRENT, INC.

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


(Exact Name of Registrant as Specified in its
Charter)


|                                                                                                                     |  |                                                  
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|DELAWARE(State or Other Jurisdiction of
    Incorporation or Organization)                                           |  | 31-1570069(I.R.S. Employer Identification Number)
|                                                                                                                    
|450 East Las Olas Boulevard,
    Suite 1400
    Fort Lauderdale, Florida(Address of Principal Executive
    Offices) |  | 33301(Zip Code)                                  

Registrants telephone number, including
area code: (954) 760-6550

Securities Registered Pursuant To
Section 12(b) of the Act:

None

Securities Registered Pursuant to
Section 12(g) of the Act:

Common Stock, par value $.01 per share


(Title of class)


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

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.
x

Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act).
Yes o
No x

As of February 28, 2003, the registrant had
57,364,437 shares of common stock, $.01 par value per share,
outstanding and, at such date, the aggregate market value of the
shares of common stock held by non-affiliates of the registrant
was nominal. Under the registrants
proposed plan of reorganization (as described in more detail herein),
equity holders shall receive no value or distribution on account of
the equity securities of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None



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INDEX

TO FORM 10-K


|         |  |                                                                                           |  |        |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ------ | -- | 
|         |  |                                                                                           |  | Page  
|         |  |                                                                                           |  | Number
|         |  |                                                                                           |  |       
|PART I  
|Item 1.  |  | Business                                                                                  |  |        | 1  | 
|Item 2.  |  | Properties                                                                                |  |        | 7  | 
|Item 3.  |  | Legal Proceedings                                                                         |  |        | 8  | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |        | 8  | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity and
    Related Stockholder Matters                 |  |        | 8  | 
|Item 6.  |  | Selected Financial Data                                                                   |  |        | 9  | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |        | 11 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |        | 27 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                               |  |        | 28 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |        | 59 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |        | 59 | 
|Item 11. |  | Executive Compensation                                                                    |  |        | 62 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |        | 66 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |        | 67 | 
|Item 14. |  | Controls and Procedures                                                                   |  |        | 69 | 
|Item 15. |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                      |  |        | 69 | 

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Certain statements and information in this
Annual Report on Form 10-K may include
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended, including in particular the statements about our plans,
strategies and prospects under Item 1. 
Business and Item 7. 
Managements Discussion and Analysis of Financial
Condition and Results of Operations. These statements are
based on our current plans and expectations and involve risks
and uncertainties that could cause actual future activities and
results to be materially different from those set forth in
these forward-looking statements. Important factors that could
cause actual results to differ materially from our
forward-looking statements are set forth below in
Item 7.  Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Factors that may Affect Future
Results and elsewhere in this Annual Report on
Form 10-K. We make no commitment to disclose any revisions
to forward-looking statements, or any fact, events or
circumstances after the date hereof that may bear upon
forward-looking statements.

PART I

Item 1.  Business

Introduction

NationsRent, Inc., a Delaware corporation,
together with its subsidiaries (the Company,
NationsRent, the Registrant, or in
connection with the Chapter 11 Cases (as defined below) the
Debtors), is a provider of rental equipment in the
United States with over 245 locations in 26 states. We offer a
comprehensive line of equipment for rent primarily to a broad
range of construction, industrial and homeowner customers including general
contractors, subcontractors, highway contractors, manufacturing
plants, distribution centers and other commercial businesses. We also sell used and new
equipment, spare parts and supplies, and provide maintenance and
repair services.

Proceedings Under Chapter 11 of the Bankruptcy
Code

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

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

In January 2002, the United States trustee for
the District of Delaware appointed an Official Committee of
Unsecured Creditors in accordance with the provisions of the
Bankruptcy Code. In March 2002, the Bankruptcy Court also
entered an order (the DIP Financing Order)
authorizing the Debtors to enter into a
debtor-in-possession financing facility, dated December 18,
2001, as amended (the DIP
Financing Facility), with certain of
the Debtors prepetition senior secured lenders, and to
grant first priority priming liens, mortgages, and security
interests on substantially all of the assets of the Debtors to
secure the





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DIP Financing Facility. See
Item 7.  Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources
below for a further discussion regarding the DIP Financing
Facility.


The Bankruptcy Code provides that the Debtors
have the exclusive right for certain specified periods during
which only they may file and solicit acceptances of a plan of
reorganization. If the Debtors fail
to file a plan of reorganization during this exclusive period or
any extensions thereof or, after such plan has been filed, if
the Debtors fail to obtain acceptance of such plan from the
requisite impaired classes of creditors and equity holders
during the exclusive solicitation period, any party in interest,
including a creditor, an equity holder, a committee of creditors
or equity holders, or an indenture trustee, may file their own
plan of reorganization for the Debtors. The initial exclusive period
of the Debtors to file a plan of reorganization was set to expire on
April 15, 2002 and the initial exclusive period of the Debtors
to solicit acceptance of a plan of reorganization was set to expire
on June 15, 2002. The Debtors have filed successive motions to
extend such exclusive periods, which are now set to expire on
April 16,
2003 and June 17, 2003, respectively.

In June 2002, the Debtors filed their proposed Joint
Plan of Reorganization and related disclosure statement with the
Bankruptcy Court. In December 2002, after negotiating with several
parties in interest, the Debtors filed their First Amended Joint Plan
of Reorganization (the Proposed Plan) and related
disclosure statement (the Disclosure Statement). The Proposed Plan was jointly proposed by the
Debtors, the official committee of unsecured creditors and the
holders of a majority of the bank debt under the Debtors
prepetition senior secured credit facility. Under the terms of the
Proposed Plan (i) the holders of allowed claims under the
Debtors prepetition senior secured credit facility shall
receive 95% of the new common stock, new preferred stock and new
subordinated notes of the reorganized company and (ii) a creditor
trust for the benefit of the holders of allowed general unsecured
claims shall receive 5% of the new securities and $300,000 in cash.
The Proposed Plan does not provide for any value or distribution to
existing equity holders of the Company. If the holders of allowed
general unsecured claims do not approve the Proposed Plan, no
property will be distributed to the creditor trust on behalf of the
holders of the allowed general unsecured claims and the holders of
allowed claims under the Debtors prepetition senior secured
credit facility shall receive 100% of the new securities. The
description of the Proposed Plan is subject to the terms of the
Proposed Plan which is filed herewith as an exhibit and incorporated
herein by reference. In addition, the Proposed Plan and
Disclosure Statement are available on the Companys internet web site at
www.nationsrent.com.

The confirmation of a plan of reorganization is
one of our primary objectives. In February 2003, the Bankruptcy Court
approved the Disclosure Statement  which together with the Proposed
Plan has been sent to all creditors for approval. The deadline to
vote to accept or reject the Proposed Plan was March 21, 2003. The
hearing to consider confirmation of the Proposed Plan is presently
scheduled for April 3, 2003 at 1:30 P.M. eastern time in the Bankruptcy Court. In order to confirm a plan of
reorganization, the Bankruptcy Court, among other things, is
required to find that (i) with respect to each impaired
class of creditors and equity holders, each holder in such class
has accepted the plan or will, pursuant to the plan, receive at
least as much as such holder would receive in a liquidation,
(ii) each impaired class of creditors and equity holders
has accepted the plan by the requisite vote (except as described
in the following sentence), and (iii) confirmation of the
plan is not likely to be followed by a liquidation or a need for
further financial reorganization of the Debtors or any
successors to the Debtors unless the plan proposes such
liquidation or reorganization. If any impaired class of
creditors or equity holders does not accept the plan and,
assuming that all of the other requirements of the Bankruptcy
Code are met, the proponents of the plan may invoke the
cram down provisions of the Bankruptcy Code. Under
these provisions, the Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity holders if certain requirements of
the Bankruptcy Code are met. These requirements may, among other
things, necessitate payment in full for senior classes of
creditors before payment to a junior class can be made. See Item 7. 
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Factors That May
Affect Future Results.

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

Strategic Initiatives

In late 2000 and early 2001, we implemented a
restructuring plan to address a significant imbalance between
our revenue and costs. This plan included disposing of excess
rental equipment, the closing of certain offices and locations
and certain other cost cutting measures. See
Item 7.  Managements Discussion and
Analysis of Financial Condition and Results of
Operations  2000 Restructuring Plan.
Notwithstanding

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these efforts, as a result of continuing weakness
in the construction industry and heightened competition in the
equipment rental industry, we continued to experience a decline
in our operating results causing significant constraints on our
liquidity. Under these circumstances, we determined that it was
in the best interests of our stakeholders to file the Chapter 11
Cases to allow us the opportunity to restructure our financial
obligations, focus on our operations and develop and implement a
new business plan.


In connection with
our Chapter 11, Cases, the Debtors conducted a comprehensive
strategic business review, including the development of a business
plan to address both short-term and longer-term issues required to
stabilize and revitalize the Debtors businesses (the
Business Plan). After analyzing the challenges faced by the Debtors, the Debtors, together
with the principals of the holders of a majority of the claims under the
Companys prepetition senior secured credit facility developed a strategic
plan aimed at leveraging the Debtors position as a market leader and improving
their profitability. The key initiatives of the strategic plan, to be
implemented or continued by the reorganized company (Reorganized
NationsRent), include the following:

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Business Growth: Two key components of the Business Plan are (i)
the establishment of a conservative capital structure and (ii) the
creation of a national platform to deliver a broader selection of
products and services to NationsRent customers in a manner that is
complimentary to relationships with key vendors and strategic alliance
partners. Recent store closings, liquidation of rental equipment and
rejection of rental equipment operating leases have significantly
reduced the Debtors' revenue and ability to generate cash flow.
Reorganized NationsRent is expected to use its conservatively leveraged
balance sheet as a competitive advantage as it attempts to reverse
recent negative trends in financial performance. Reorganized
NationsRent is expected to establish key vendor relationships to acquire
additional new, re-built and used rental equipment on terms that are
consistent with building market share during a period of industry
rationalization. New product and service offerings are expected to
further differentiate Reorganized NationsRent from both local
independent rental operations and national firms. Such offerings will
focus on non-capital intensive areas including, but not limited to:
third party repair and maintenance, service contracts and enhanced
merchandising.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) |  | Fleet Optimization. Reorganized NationsRent is expected to continue
to implement steps to improve rental revenue utilization. These steps
include (i) developing compensation programs that reward employees for
attaining achievable rental, sales and service goals that they are able
to directly influence, (ii) improved monitoring of fleet deployment to
assess opportunities to take advantage of higher deployment within
contiguous markets and (iii) improved accountability for safety and
fleet maintenance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) |  | Revenue Enhancement through NationsRent at Lowes Stores. As of
March 15, 2003, NationsRent operated 76 stores at Lowes locations.
The Business Plan also contemplates that an additional 24 locations
will open in 2003 followed by 45 and 60 locations in 2004 and 2005,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) |  | Enhance/Expand Customer Base. Reorganized NationsRent is expected
to focus on the improvement of operational execution in an effort to
attract new customers and retain existing customers. Differentiating
products and services will be introduced to existing customers when a
compelling value-added proposition exists and where execution risk can
be successfully managed using existing systems and infrastructure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Management Changes

In August 2002, after considering numerous candidates
and input from the Debtors pre and post petition secured
lenders and the official committee of unsecured creditors, the
Debtors selected D. Clark Ogle for the position of Chief Executive
Officer. Pursuant to the Proposed Plan, it is expected that
Thomas J. Putman will replace Mr. Ogle as Chief Executive
Officer of Reorganized NationsRent.

Background

NationsRent was founded in August 1997.
Since inception, we have acquired platform companies in target
markets, opened or acquired additional convenient locations
concentrated around those businesses and expanded the selection
and availability of our rental fleet. As part of building a
nationally branded network of rental centers, we conform the
physical appearance and product offerings of our stores to a
uniform format. Distinguishing characteristics of this format
include a full line of rental items from small tools to heavy
equipment, a wide variety of rental equipment, prominent use of
the NationsRent logo and colors, and attractive, well organized
and clean store facilities. In addition, our stores seek to
offer a high level of customer service, which is supported
through employee training and information systems.

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Our locations offer for rent a full range of
rental equipment, including the following:

|                                                                                               |  |                                                                                                                                                   |  |                                                                             
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------
|- backhoes
    - bulldozers
    - pressure washers
    - skid steer loaders
    - light towers |  | - aerial lifts and work platforms
    - compressors and generators
    - specialized hand tools
    - trailers and storage containers
    - pumps |  | - forklifts
    - excavators
    - wheel loaders
    - lawn and garden tools

From August 1997 through April 2000, we acquired
58 equipment rental businesses. Until late 2000, our
operating strategy had been focused on building a national
platform in target markets, establishing the NationsRent brand
and creating a foundation for future internal growth. In late
2000, as a result of adverse business conditions, we terminated
our acquisition program and began implementing an operational
restructuring plan to cut costs and increase cash flow,
including the disposal of excess rental fleet, the closing of
certain offices and locations and other cost cutting measures.
Our focus has now shifted to internal operations and improved
management of our existing asset base. In the near term,
internal growth will be limited to increasing the number of
NationsRent rental centers located in Lowes home
improvement stores, through our strategic alliances with
Lowes. See  Lowes Strategic
Alliance.

Industry Overview

According to industry sources, the United States
equipment rental industry grew from an estimated
$614.0 million in revenue in 1982 to nearly
$26.0 billion in 2002.
Construction and industrial companies primarily have
driven this growth by increasingly outsourcing their equipment
needs to reduce investment in non-core assets and convert cost
from fixed to variable. The growth rate in the rental industry
continued to
slow dramatically in 2002, largely as a
result of slowing construction activity in 2002 primarily
in the non-residential building segment.

Operations

As of March 15, 2003 we operate over 245
locations in 26 states. Our operations consist of:



| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| | - | renting a full range of equipment to construction
    and industrial customers;                                                             
|
| | - | selling used equipment inventory;                                                                                                           
|
| | - | selling new equipment; and                                                                                                                  
|
| | - | selling parts, supplies and merchandise and
    providing repair and maintenance services to complement our
    equipment rentals and sales.

Equipment Rentals.We rent on a daily, weekly and monthly basis a broad variety of
light, medium and heavy equipment serving contractors and other
commercial and industrial customers as well as homeowners. Our
rental inventory includes such equipment as aerial lifts and
work platforms, air compressors, backhoes, boom lifts,
bulldozers, ditch equipment, forklifts, generators, excavators, and a
variety of small tools. The mix of equipment offered from each of our
locations varies based on the needs of the local market. We make capital investments in new equipment,
engage in sales of used equipment and conduct
preventive maintenance.

Used Equipment Sales.We sell used equipment in the normal course
of business to customers that wish to own highly maintained used
equipment as a complement to their owned and rented equipment fleets.

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New Equipment Sales.We are a distributor of new equipment
on behalf of certain nationally known equipment manufacturers.

Merchandise, Parts, Supplies and Service.We sell merchandise, parts and
supplies to our customers in conjunction with our equipment
rental and sales business. We provide repair service to rental and
sales
customers.

Lowes Strategic Alliance

In October 2000, we entered into an exclusive
multi-year strategic alliance with Lowes to operate
NationsRent rental centers in select Lowes home
improvement stores. This multi-year alliance followed a
six-month, six-store pilot program which commenced in April
2000. Operating as a store within a store adjacent to the
entrance of a Lowes store, the NationsRent stores will
offer for rent our full line of construction tools and
equipment. As with all other NationsRent stores in a particular
market, customers will have access through a Lowes rental
center to all of the equipment, infrastructure and personnel
available in that market. The alliance is designed to offer
professional contractors one stop shopping with convenient
access to both building supplies and rental equipment from
complementary brands focused on customer service.

Lowes (NYSE: LOW) is one of the
countrys premier home improvement retailers and has annual
sales of more than $26.5 billion. Lowes serves more than
four million do-it-yourself retail and commercial business
customers through more than 850 stores in 44 states.

As of March 15, 2003, we operated 76 rental
centers in Lowes home improvement stores in 8 states. We
expect to open an additional 24 of these rental centers by the
end of 2003. We believe that our strategic alliance with
Lowes will offer us a number of competitive advantages,
including continued low cost penetration in our existing
markets, an efficient low cost way to enter new markets, access
to a new customer segment, the do-it-yourselfer, which is
estimated to represent approximately $135.0 billion in annual
sales, and increased brand awareness by virtue of Lowes
high customer traffic locations and co-promotions with
Lowes.

In April 2002, the Bankruptcy Court approved the
Companys assumption of its strategic alliance agreement
with Lowes, together with all of the leases of the
Companys rental centers at Lowes home improvement
stores. Accordingly, we are continuing to open NationsRent
rental centers in select Lowes home improvement stores.

Customers

We serve over 425,000 active accounts in the
construction, industrial, homeowner and other segments of the
equipment rental industry. No single customer accounted for more
than 10.0% of our 2002 revenue. Our customers vary in size from
large Fortune 500 companies to small construction contractors,
subcontractors, machine operators and homeowners.

We do not provide purchase financing to
customers. We rent equipment, sell parts and provide repair
services on account to customers who are screened through a
credit application process. Customers can arrange financing of
purchases of large equipment through a variety of sources
including manufacturers, banks, finance companies and other
financial institutions. We have entered into agreements with
financing sources to provide financing to our customers for the
purchase of new and used equipment.

Sales and Marketing

We maintain a strong marketing and sales
orientation throughout our organization in order to better
understand and serve our customers and increase our customer
base. We undertake sales and marketing initiatives designed to
increase revenue and market share and build brand awareness. We
prepare marketing analyses which address key business issues
such as market/industry history, opportunities, company
philosophy, sales trends, consumer behavior trends, distribution
channels, pricing issues, target markets, advertising and media
analysis, competitive situations and selling strategies. Based
on the results of our analyses, we develop marketing and sales
strategies.

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Our regional managers are responsible for
training, supervising and directing the selling activities of
the NationsRent sales force in their markets. In addition,
regional managers are also responsible for overseeing the mix of
equipment at their locations and keeping abreast of local
construction and industrial activity.

We employ over 300 equipment rental salespeople
who utilize targeted local marketing strategies to address
specific customer needs and respond to competitive pressures. To
remain informed of local market activity, salespeople track
construction projects and new equipment sales in their area
through Equipment Data Reports, F.W. Dodge Reports, CMD Reports
and PEC Reports (Planning, Engineering and Construction), follow
up on referrals and visit construction sites and potential
equipment users who are new to the area.

Trademarks

We own a number of registered service marks which
include the name NationsRent. Management views these
service marks as material to NationsRent.

Purchasing

We acquire equipment from vendors with
reputations for product quality and reliability. Our size and
the quantity of equipment we acquire enable us to purchase most
equipment directly from manufacturers pursuant to national
purchasing agreements at lower prices and on more favorable
terms than many smaller competitors. We maintain close
relationships with our vendors to ensure the timely delivery of
new equipment. We believe that we have sufficient alternative
sources of supply for the equipment we purchase in each of our
principal product categories. We acquire our rental equipment
inventory through a combination of purchase and lease
arrangements.

We select the type and quantity of rental
equipment to be purchased for each of our locations based on the
expected needs of the local market. We determine rental rates
for each type of equipment based on the cost and expected
utilization of the equipment, and adjust rental rates at each
location for demand, length of rental, volume of equipment
rented and other competitive considerations.

Competition

The equipment rental industry is capital
intensive, highly fragmented and is characterized by intense
price and service competition. We compete through a combination
of pricing, service, equipment quality, availability and value,
and convenience. We compete with independent third parties in
all of the markets in which we operate. As a result of industry
consolidation in recent years, many of our competitors also
operate on a regional or national basis. We also compete with
equipment manufacturers which sell and rent equipment to
customers, directly and through their dealer networks. We also
compete with national home improvement retailers, such as Home
Depot, with their small tool rental centers within select Home
Depot home improvement stores. Some of our competitors have
greater financial resources and name recognition than we do.

At times, industry-wide price pressures on
certain classes of equipment have adversely affected equipment
rental companies, and we have, on such occasions, priced our
equipment in response to these pressures. Moreover, at times
when the equipment rental industry has experienced equipment
oversupply, competitive pressure has intensified, with a
negative impact on the industrys rental rates.

Environmental, Safety and Other Governmental
Regulation

Our equipment, facilities and operations are
subject to certain federal, state and local laws and regulations
relating to environmental protection and occupational health and
safety, including those governing wastewater discharges, the
use, treatment, storage and disposal of solid and hazardous
wastes and materials, air quality and the remediation of
contamination associated with the release of hazardous
substances. For example, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended,
provides for, among other things, the remediation of sites from
which there is a release or threatened release of a hazardous
substance into the environment and may impose liability for the
costs of cleanup and for damages to natural

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##### 



resources upon past and current owners and
operators of such sites. In addition, the Federal Water
Pollution Control Act of 1972 regulates the discharge of
pollutants into streams, rivers and other waters and may require
that we obtain discharge permits. The Occupational Safety and
Health Act of 1970 authorizes the promulgation of occupational
safety and health standards which apply to our facilities and
operations. In addition to federal environmental and safety
regulations, the states and certain localities in which we
operate have their own laws and regulations governing solid
waste disposal, water pollution and, in most cases, releases and
cleanup of hazardous substances as well as liability for such
matters, which may be applicable to our facilities and
operations.


Certain of our existing and former locations use
and have used substances, and currently generate or have
generated or disposed of wastes, which are or may be considered
hazardous or otherwise are subject to applicable environmental
requirements. In particular, we store and dispense, or in the
past we or the prior owners or operators have stored or
dispensed, petroleum products from above-ground storage tanks
and, in certain cases, underground storage tanks. We also
operate locations which in the past used hazardous materials,
including solvents, to clean and maintain equipment, and
generate and dispose of solid and hazardous wastes, including
batteries, used motor oil, radiator fluid and solvents. In
connection with such activities, we have incurred certain
capital expenditures and other compliance costs which are
expensed on a current basis and which, to date, have not been
material to our financial condition or results of operations.

Additionally, in connection with our previous
acquisitions of equipment rental businesses, we have undertaken
environmental assessments of substantially all locations that we
will continue to operate following acquisition. We also
undertake environmental assessments at all facilities prior to
leasing them for new locations. We do not currently maintain
comprehensive insurance covering environmental liabilities at
our sites. However, the sellers of each of the equipment rental
businesses which we have acquired and the landlords of
facilities we have leased have indemnified us with respect to
pre-existing environmental liabilities associated with such
businesses or facilities. Based on currently available
information, we believe that it is unlikely that we will have to
incur material capital expenditures or other material compliance
or remediation costs for environmental and safety matters in the
foreseeable future. We cannot assure you, however, that federal,
state or local environmental and safety requirements will not
become more stringent or be interpreted and applied more
stringently in the future. We also cannot assure you that in
connection with leasing new facilities we will identify all
existing adverse environmental conditions or that
indemnification from landlords will be enforceable or sufficient
to cover such conditions. Such future changes or
interpretations, or the identification of adverse environmental
conditions following the time we begin operating a site, could
result in additional environmental compliance or remediation
costs which we do not currently anticipate, which could be
material to our financial condition or results of operations.

In addition to environmental and safety
regulations, we may also be subject to Department of
Transportation regulations regarding the operation of motor
vehicles and consumer protection laws affecting our operations.

Employees

As of March 13, 2003, we employed
3,191 persons, 138 of which were
covered by a collective bargaining agreement. We believe our
relations with our employees are good. For a description of
certain work force reduction initiatives, see Item
7.  Managements Discussion and Analysis
of Financial Condition and Results of Operations 
2000 Restructuring Plan.

Item 2.  Properties

Our corporate headquarters are located in Fort
Lauderdale, Florida, in leased premises. Substantially all of
our properties and equipment are subject to liens securing
payment of portions of our indebtedness. As of March 15,
2003, we operated over 245 rental locations located in 26
states: Alabama, Arizona, California, Colorado, Connecticut,
Florida, Georgia, Indiana, Kentucky, Louisiana, Maine,
Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Texas, Utah, and West Virginia. We lease
the real estate for all but two of our locations

7



---



##### 



and also lease certain of our equipment. We
believe that all of our facilities are sufficient for our
current needs. For a description of certain facility closure and
consolidation activities, see Item 7. 
Managements Discussion and Analysis of Financial
Condition and Results of Operations  2000
Restructuring Plan.


Item 3.  Legal
Proceedings

On December 17, 2001, NationsRent and all of
its subsidiaries filed the Chapter 11 Cases. The cases were consolidated for procedural
purposes and designated as Case No. 01-11628 (PJW). On
May 20, 2002, the Bankruptcy Court approved the
Debtors motion to establish a bar date for filing proofs
of claim. As a result, the Debtors selected August 5, 2002
as the bar date (the Bar Date). In connection with
the Chapter 11 Cases, proofs of claim have been
filed against the Debtors with the Bankruptcy Court or with the
Debtors claims and noticing agent, Logan & Company,
Inc. The Debtors currently are reconciling filed
claims that differ in nature, classification or amount from the
Debtors books and records through negotiations with the
applicable claimants and the filing and prosecution of
objections to such claims.

In December 2002, the Debtors filed the Proposed Plan. In February 2003,
the Bankruptcy Court approved the Disclosure Statement which, together with the
Proposed Plan, was sent to all of the Debtors creditors for approval. Under
the terms of the Proposed Plan, request for payment of administrative claims
must be filed no later than 60 days following the effective date of the
Proposed Plan, or in the cases of an administrative claim that arises in
connection with an executory contract or unexpired lease, within 60 days after
such contract or lease is assumed or rejected. Holders of administrative
claims that are based on liabilities incurred by the Debtors in the ordinary
course of business after the Petition Date are not required to file any request
for payment of such claims. On the effective date of the Proposed Plan, a
creditors trust for the benefit of general unsecured claims will be formed to
receive distributions in respect of general unsecured claims. Pursuant to the
Proposed Plan, the Debtors will assign to the creditors trust their right to
object to all general unsecured claims and to pursue all preference actions and
other claims or causes of action under sections 544 through 550 of the
Bankruptcy Code that have not been resolved or released pursuant to the
Proposed Plan. For a more detailed description of the treatment of claims
under the Proposed Plan, reference is made to the Proposed Plan, which is
incorporated herein by reference and filed as an exhibit hereto. Copies of the
Proposed Plan and Disclosure Statement are available on the Companys website
at www.nationsrent.com.

The Debtors were party to various legal
proceedings arising in the ordinary course of their business
prior to the filing of the Chapter 11 Cases, none of which
were material to the Debtors financial condition or
results of operations. All such proceedings have been stayed as
of the Petition Date, unless the stay has been or will be lifted
by the Bankruptcy Court, and any liabilities related to such
claims are subject to compromise pursuant to a plan of
reorganization in the Chapter 11 Cases.

We have also become party to legal proceedings
arising in the ordinary course of business after the Petition
Date, none of which are material to our financial condition or
results of operations.

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

No matters were submitted to our stockholders
during the fourth quarter of 2002.

PART II



|         |                                                                          
|-------- | -------------------------------------------------------------------------
|Item  5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Our common stock, $.01 par value per share, was
traded on the New York Stock Exchange (the NYSE)
under the symbol NRI until the NYSE suspended
trading in our common stock on November 23, 2001. The
following table sets forth, for the periods indicated, the range
of the high and low sales prices per share for the common stock
on the NYSE.

|                                           |  |                |        |     |  |  |        | 
|------------------------------------------ |  | -------------- | ------ | --- |  |  | ------ | 
|                                           |  |               
|                                           |  | Price Range of
|                                           |  | Common Stock  
|                                           |  |               
|                                           |  | High           |        | Low
|                                           |  |                |        |    
|Fiscal Year Ended December 31,
    2001:   |  |                |        |     |  |  |        | 
|First Quarter                              |  |                | 2.1250 |     |  |  | 1.0100 | 
|Second Quarter                             |  |                | 1.0900 |     |  |  | 0.3500 | 
|Third Quarter                              |  |                | 0.5100 |     |  |  | 0.1600 | 
|Fourth Quarter (through November 23, 2001) |  |                | 0.2200 |     |  |  | 0.0700 | 

Our common stock was delisted from the NYSE in
December 2001. After the NYSE suspended trading in our common
stock, it began trading on the over-the-counter electronic
bulletin board, commonly known as the pink sheets (the
OTCBB), under the symbol NRNQE. During
the period from the time trading

8



---



##### 



commenced on the OTCBB until May 31, 2002, the reported bid price for the
common stock on the OTCBB ranged from a high of $0.13 to a low
of $0.02. The quotations reflect interdealer prices without
retail mark-up, mark-down or commission and may not represent
actual transactions. As
a result of our late filings of required reports under the
Securities Exchange Act of 1934, our stock was not eligible
for trading on the OTCBB beginning June 1, 2002. As of
March 15,
2003, there were
approximately 170 holders of record of our common stock.


A liquid public market for our common stock does
not exist, which may make it difficult for you to sell our
common stock. NationsRent cautions investors that an investment
in any of its securities is highly speculative. NationsRent
believes the existing equity securities of NationsRent,
including its preferred and common stock, has and will have no
value. The Proposed Plan does not provide NationsRents
existing equity holders with any distributions, including any
interest in the Reorganized NationsRent.

We have not paid any dividends in the past and
presently anticipate that earnings, if any, will be retained for
the development of our business and that we will not declare
dividends on the common stock in the foreseeable future. In
addition, our ability to declare or pay dividends is restricted
by the terms of our credit facilities as well as the terms of
the indenture governing our 10 3/8% senior subordinated
notes due 2008. See Item 7.  Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources.

Item 6.  Selected Financial
Data

The selected financial data set forth below
should be read in conjunction with our Consolidated Financial
Statements and notes thereto contained in Part II,
Item 8 of this Annual Report on Form 10-K. The
following selected consolidated financial information summarizes
the statement of operations data
of NationsRent for the years ended December 31, 1998, 1999,
2000, 2001 and 2002
and selected balance sheet data as of December 31, 1998,
1999, 2000, 2001 and 2002 which have been derived from the audited
consolidated financial statements of NationsRent included herein
except for 1998, 1999 and certain 2000 information not included
herein. The other data has been derived from the consolidated
financial statements referred to above for the applicable
periods. See also Item 7. 
Managements Discussion and Analysis of Financial
Condition and Results of Operations.

9



---



##### 



|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |          |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------- | ------ | ------- | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | -------- | -------- | ------- | - | -------- | -------- | ------- | 
|                                                                                                                                                |                                                                                   | The Company(1)                               
|                                                                                                                                                |                                                                                   |                                              
|                                                                                                                                                |                                                                                   | Twelve Months Ended December 31,             
|                                                                                                                                                |                                                                                   |                                              
|                                                                                                                                                |                                                                                   | 1998                                          |        | 1999    |         | 2000 |         | 2001    |         | 2002
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |        
|                                                                                                                                                |                                                                                   | (dollars in thousands, except per share data)
|Statement of Operations Data:                                                                                                                   |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Revenue:                                                                                                                                        |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Equipment rentals                                                                 |                                               | $      | 150,668 |         |      | $       | 415,629 |         |      | $       | 546,434 |         |   | $        | 499,040  |         |   | $        | 419,057  |        
|                                                                                                                                                | Sales of equipment, merchandise, service, parts and supplies                      |                                               |        | 85,730  |         |      |         | 142,792 |         |      |         | 122,614 |         |   |          | 95,619   |         |   |          | 43,084   |        
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                |                                                                                   | Total revenue                                 |        |         | 236,398 |      |         |         | 558,421 |      |         |         | 669,048 |   |          |          | 594,659 |   |          |          | 462,141 | 
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Cost of revenue:                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Cost of equipment rentals                                                         |                                               |        | 49,866  |         |      |         | 127,049 |         |      |         | 207,466 |         |   |          | 241,959  |         |   |          | 240,324  |        
|                                                                                                                                                | Rental equipment depreciation and lease expense(2)                                |                                               |        | 30,681  |         |      |         | 87,358  |         |      |         | 136,100 |         |   |          | 140,895  |         |   |          | 149,736  |        
|                                                                                                                                                | Cost of sales of equipment, merchandise, service, parts and supplies              |                                               |        | 61,455  |         |      |         | 94,594  |         |      |         | 94,187  |         |   |          | 100,653  |         |   |          | 38,057   |        
|                                                                                                                                                | Impairment of rental equipment                                                    |                                               |        |        |         |      |         |        |         |      |         |        |         |   |          |         |         |   |          | 16,923   |        
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                |                                                                                   | Total cost of revenue                         |        |         | 142,002 |      |         |         | 309,001 |      |         |         | 437,753 |   |          |          | 483,507 |   |          |          | 445,040 | 
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Gross profit                                                                                                                                    |                                                                                   |                                               | 94,396 |         |         |      | 249,420 |         |         |      | 231,295 |         |         |   | 111,152  |          |         |   | 17,101   |         
|Selling, general and administrative expenses                                                                                                    |                                                                                   |                                               | 44,411 |         |         |      | 101,873 |         |         |      | 130,189 |         |         |   | 124,374  |          |         |   | 95,998   |         
|Restructuring charge(3)                                                                                                                         |                                                                                   |                                               |       |         |         |      |        |         |         |      | 72,005  |         |         |   | 9,653    |          |         |   |         |         
|Impairment of intangible assets related to
    acquired businesses(4)                                                                           |                                                                                   |                                               |       |         |         |      |        |         |         |      |        |         |         |   | 770,833  |          |         |   |         |         
|Expenses related to abandoned merger, net(5)                                                                                                    |                                                                                   |                                               |       |         |         |      | 3,932   |         |         |      |        |         |         |   |         |          |         |   |         |         
|Non-rental equipment depreciation and
    amortization(2)                                                                                       |                                                                                   |                                               | 7,266  |         |         |      | 22,136  |         |         |      | 27,810  |         |         |   | 36,792   |          |         |   | 15,606   |         
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Operating income (loss)                                                                                                                         |                                                                                   |                                               | 42,719 |         |         |      | 121,479 |         |         |      | 1,291   |         |         |   | (830,500 | )        |         |   | (94,503  | )       
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Other (income)/expense:                                                                                                                         |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Interest expense, net                                                             |                                               |        | 20,858  |         |      |         | 69,228  |         |      |         | 99,285  |         |   |          | 109,751  |         |   |          | 34,389   |        
|                                                                                                                                                | Other, net                                                                        |                                               |        | (401    | )       |      |         | (2,320  | )       |      |         | 548     |         |   |          | (731     | )       |   |          | (324     | )      
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                |                                                                                   |                                               | 20,457 |         |         |      | 66,908  |         |         |      | 99,833  |         |         |   | 109,020  |          |         |   | 34,065   |         
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Income (loss) before reorganization items,
    provision (benefit) for income taxes and cumulative effect of
    change in accounting principle |                                                                                   |                                               | 22,262 |         |         |      | 54,571  |         |         |      | (98,542 | )       |         |   | (939,520 | )        |         |   | (128,568 | )       
|                                                                                                                                                | Reorganization items, net(6)                                                      |                                               |        |        |         |      |         |        |         |      |         |        |         |   |          | 11,333   |         |   |          | 32,061   |        
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Income (loss) before provision (benefit) for
    income taxes and cumulative effect of change in accounting
    principle                       |                                                                                   |                                               | 22,262 |         |         |      | 54,571  |         |         |      | (98,542 | )       |         |   | (950,853 | )        |         |   | (160,629 | )       
|                                                                                                                                                | Provision (benefit) for income taxes                                              |                                               |        | 9,608   |         |      |         | 22,648  |         |      |         | (24,852 | )       |   |          | (9,815   | )       |   |          |         |        
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Income (loss) before cumulative change in
    accounting principle                |                                               |        | 12,654  |         |      |         | 31,923  |         |      |         | (73,690 | )       |   |          | (941,038 | )       |   |          | (160,629 | )      
|                                                                                                                                                | Cumulative effect of change in accounting
    principle net of Income tax benefit |                                               |        |        |         |      |         |        |         |      |         |        |         |   |          | 1,359    |         |   |          |         |        
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Net income (loss)                                                                                                                               |                                                                                   | $                                             | 12,654 |         |         | $    | 31,923  |         |         | $    | (73,690 | )       |         | $ | (942,397 | )        |         | $ | (160,629 | )       
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Earnings (loss) per share:                                                                                                                      |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Basic:                                                                            |                                               | $      | 0.37    |         |      | $       | 0.57    |         |      | $       | (1.27   | )       |   | $        | (16.43   | )       |   | $        | (2.80    | )      
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Diluted:                                                                          |                                               | $      | 0.37    |         |      | $       | 0.49    |         |      | $       | (1.27   | )       |   | $        | (16.43   | )       |   | $        | (2.80    | )      
|                                                                                                                                                |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|Other Data:                                                                                                                                     |                                                                                   |                                               |        |         |         |      |         |         |         |      |         |         |         |   |          |          |         |   |          |         
|                                                                                                                                                | Gross margin                                                                      |                                               |        | 39.9    | %       |      |         | 44.7    | %       |      |         | 34.6    | %       |   |          | 18.7     | %       |   |          | 3.7      | %      
|                                                                                                                                                | Operating margin                                                                  |                                               |        | 18.1    |         |      |         | 21.8    |         |      |         | 0.2     |         |   |          | (139.7   | )       |   |          | (20.4    | )      
|                                                                                                                                                | Amortization of goodwill(2)                                                       |                                               | $      | 5,038   |         |      | $       | 15,123  |         |      | $       | 20,227  |         |   | $        | 19,793   |         |   | $        |         |        
|                                                                                                                                                | Depreciation and other amortization                                               |                                               |        | 26,691  |         |      |         | 53,726  |         |      |         | 81,727  |         |   |          | 83,498   |         |   |          | 94,054   |        

|                             |                                                           |                    |   |           |  |      |   |           |  |      |   |           |  |  |   |           |   |  |   |           |  
|---------------------------- | --------------------------------------------------------- | ------------------ | - | --------- |  | ---- | - | --------- |  | ---- | - | --------- |  |  | - | --------- | - |  | - | --------- | -
|                             |                                                           | The Company       
|                             |                                                           |                   
|                             |                                                           | As of December 31,
|                             |                                                           |                   
|                             |                                                           | 1998               |   | 1999      |  | 2000 |   | 2001      |  | 2002
|                             |                                                           |                    |   |           |  |      |   |           |  |      |  
|Selected Balance Sheet Data: |                                                           |                    |   |           |  |      |   |           |  |      |   |           |  |  |   |           |   |  |   |          
|                             | Rental equipment, net                                     |                    | $ | 382,573   |  |      | $ | 574,846   |  |      | $ | 526,958   |  |  | $ | 427,407   |   |  | $ | 348,852   |  
|                             | Intangible assets related to acquired businesses,
    net |                    |   | 523,785   |  |      |   | 701,139   |  |      |   | 784,939   |  |  |   |          |   |  |   |          |  
|                             | Total assets                                              |                    |   | 1,075,812 |  |      |   | 1,559,394 |  |      |   | 1,719,996 |  |  |   | 687,516   |   |  |   | 561,669   |  
|                             | Total debt                                                |                    |   | 678,035   |  |      |   | 989,428   |  |      |   | 1,117,026 |  |  |   | 1,098,552 |   |  |   | 1,100,957 |  
|                             | Stockholders equity (deficit)                            |                    |   | 282,230   |  |      |   | 413,387   |  |      |   | 440,971   |  |  |   | (501,631  | ) |  |   | (662,260  | )






|    |                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All of our acquisitions to date have been
    accounted for as purchases and, accordingly, the operations of
    the acquired businesses are included in the statement of
    operations data and other data from the effective date of
    acquisition.                                                                     
|(2) | The amortization period for rental equipment
    depreciation ranges from 36 to 96 months. The amortization
    period for goodwill was 40 years through December 31,
    2001.                                                                                                                                              
|(3) | See Item 7. 
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  2000
    Restructuring Plan.                                                                                                                                                                                 
|(4) | See Item 8.  Financial
    Statements and Supplementary Data 
    Note 3  Accounting Policies 
    Intangible Assets Related to Acquired Businesses.                                                                                                                                                                   
|(5) | Represents the unreimbursed portion of expenses
    incurred related to the proposed merger with Rental Service
    Corporation (RSC) that was abandoned in May 1999.
    The Company received $6.0 million from RSC as reimbursement for
    expenses incurred by the Company in connection with the
    abandoned merger.
|(6) | See Item 8.  Financial
    Statements and Supplementary Data 
    Note 6  Reorganization Items.                                                                                                                                                                                                                         

10



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion and analysis of our
consolidated results of operations and financial condition
should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this
Annual Report on Form 10-K. Unless otherwise indicated, all
information contained in this Item 7 is as of
December 31, 2002.

General

NationsRent is a leading provider of rental
equipment in the United States. We offer a comprehensive line of
equipment for rent primarily to a broad range of construction,
industrial and homeowner customers including general contractors,
subcontractors, highway contractors, manufacturing plants,
distribution centers and other commercial businesses. We also sell used and new equipment,
merchandise, spare
parts and supplies. As of March 15, 2003, we operated over 245 equipment rental locations in 26 states. We have become a
leading provider of rental equipment as a result of a
combination of having acquired platform companies in target
markets, opened or acquired additional locations concentrated
around those businesses and expanded the selection and
availability of our rental fleet.

We derive our revenue from equipment rentals,
sales of new and used equipment, merchandise, parts, supplies,
maintenance and repair services. Rental revenue is dependent on
several factors including demand for rental equipment, the
amount and quality of equipment available for rent, rental
rates, weather conditions and general economic conditions.
Revenue generated from the sale of used equipment is affected by
price, general economic conditions and the condition and age of
the equipment. Revenue from the sale of new equipment is
affected by price and general economic conditions. Revenue from
the sale of merchandise, parts and supplies as well as
maintenance and repair services is primarily affected by
equipment rental and sales volume.

The principal components of our cost of revenue
include equipment depreciation and lease expense, costs of new
and used equipment sold, personnel costs, occupancy costs,
repair and maintenance costs and vehicle operations. Rental
equipment depreciation is calculated using the straight-line
method over the estimated useful life of such equipment.
Effective July 1, 2000, we revised the estimated service
lives and residual values for certain of our rental assets to
better allocate the expense over the time that such assets are
in our rental fleet. This change decreased the estimated service
lives and increased the residual values for certain rental
assets. The change in estimate resulted in a decrease of rental
equipment depreciation expense of approximately $9.8 million and
a decrease in net loss of approximately $6.0 million or $0.10
per share for the year ended December 31, 2000. In order to
more clearly reflect the cost of our rental fleet, we have
combined operating lease expense related to our rental fleet
with rental equipment depreciation and reported these amounts on
a separate line in our statements of operations.

Selling, general and administrative expenses
include management salaries, advertising and marketing, travel,
administrative and clerical salaries, data processing and bad
debt expense.

Non-rental equipment depreciation and
amortization includes the depreciation of fixed assets that are
not offered for rent, amortization of leasehold improvements and
amortization of intangible assets related to the acquired
businesses.

Proceedings Under Chapter 11 of the Bankruptcy
Code

On December 17, 2001, NationsRent and all of
its subsidiaries filed voluntary petitions in the Bankruptcy
Court for reorganization under chapter 11 of the Bankruptcy
Code. For further discussion of the Chapter 11 Cases, see
Item 1.  Business  Proceedings
Under Chapter 11 of the Bankruptcy Code above and
notes to consolidated financial statements included elsewhere in
this Annual Report.

The Debtors are currently operating their
business as debtors-in-possession pursuant to applicable
provisions of the Bankruptcy Code. Since the Petition Date, the
Debtors have continued to conduct business in the ordinary
course. In December 2002, the
Debtors filed the Proposed Plan and related Disclosure Statement with
the Bankruptcy Court. In February 2003, the Bankruptcy Court approved
the Disclosure Statement, which together with the Proposed Plan has
been sent to all creditors for approval. The hearing to consider
confirmation of the Proposed Plan is presently scheduled for
April 3, 2003 in the Bankruptcy Court.

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

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

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

Under the Bankruptcy Code, postpetition
liabilities and prepetition liabilities subject to compromise
must be satisfied before equity holders can receive any
distribution. The Proposed Plan
does not provide for any value or distribution to equity holders of
the Company.

Under bankruptcy law, actions by creditors to
collect prepetition indebtedness owed by the Debtors at the
filing date, as well as most litigation pending against us, are
stayed and other prepetition contractual obligations may not be
enforced against the Debtors. In addition, the Debtors have the
right, subject to Bankruptcy Court approval and other
conditions, to assume or reject any prepetition executory
contracts and unexpired leases. Parties affected by these
rejections may file prepetition damage claims with the
Bankruptcy Court. We have prepared and submitted the schedules
setting forth the Debtors assets and liabilities as of the
date of the petition as reflected in our accounting records. The
Bankruptcy Court set August 5, 2002 as the bar date for filing
proofs of claims against the Debtors. The Debtors are currently
reconciling the filed claims and
amounts of claims filed by creditors could be significantly
different from their recorded amounts. Due to material
uncertainties, it is not possible to predict the length of time
we will operate under chapter 11 protection, the outcome of
the proceedings in general, whether we will continue to operate
under our current organizational structure, or the effect of the
proceedings on our business or the recovery by creditors and our
equity holders.

Basis of Presentation

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

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business operations as the result of an approved
plan or plans of reorganization; or (iv) adjustments to the
carrying value of assets or liability amounts that may be
necessary as a result of actions by the Bankruptcy Court.
Adjustments necessitated by a plan of reorganization could
materially change the amounts reported in the consolidated
financial statements included elsewhere herein.


Liquidity and Capital Resources

Prepetition
Capital Resources

Historically, we funded our cash requirements
with borrowings under our senior credit facility, proceeds from
the issuance of debt and equity securities and cash from
operations. As of the petition date, our senior credit facility
consisted of a $395.4 million term loan and a revolving credit
facility with an outstanding balance of $355.9 million. The
senior credit facility is secured by substantially all of our
assets.

As a result of our reliance on debt-based
financing facilities, we became highly leveraged. Our ability to
meet our financial obligations under these financing
arrangements was dependent on, among other things, our results
of operations and our ability to maintain compliance with our
debt covenants. Beginning in 2000, we experienced increased
financial stress and liquidity issues, as well as significant
losses from operations. At December 31, 2001, our
accumulated deficit reached approximately $970.5 million.

Despite our restructuring efforts described
below, in December 2001, we failed to make a principal payment
due on the term loan portion of our senior credit facility, an
interest payment due on our 10.375% Senior Subordinated Notes
due 2008 (the Subordinated Notes), principal and
interest payments on certain subordinated notes issued in
connection with acquisitions (the Acquisition Notes)
and certain other scheduled payments.

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

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

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

Pursuant to the Bankruptcy Code, our prepetition
obligations, including obligations under debt instruments,
generally may not be enforced against the Debtors, and any
actions to collect prepetition indebtedness are automatically
stayed, unless the stay is lifted by order of the Bankruptcy
Court. In addition, as debtors-in-possession, the Debtors have
the right, subject to Bankruptcy Court approval and certain
other limitations, to assume or reject executory contracts and
unexpired leases. In this context, assumption means
that the Debtors agree to perform their obligations and cure all
existing defaults under the contract or lease, and
rejection means that the Debtors are relieved from
their obligations to perform further under the contract or
lease, but are subject to a prepetition claim for damages for
the breach thereof. Any damages resulting from rejection of
executory contracts and unexpired leases will be treated as
general unsecured claims in the Chapter 11 Cases unless
such claims had been secured on a prepetition basis prior to the
Petition Date. To

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date, the Debtors have rejected certain executory
contracts and unexpired leases of nonresidential real property
and the Debtors continue to review their remaining executory
contracts and unexpired leases to determine which, if any, they
will reject in the future.


Adequacy
of Capital Resources

The Debtors are now operating their businesses as
debtors-in-possession under chapter 11 of the Bankruptcy
Code. In addition to the cash requirements necessary to fund
ongoing operations, the Company has incurred, and anticipates that it
will continue to incur
significant professional fees and other restructuring costs in
connection with the Chapter 11 Cases and the restructuring
of its business operations. As a result of the uncertainty
surrounding NationsRents current circumstances, it is
difficult to predict the Companys actual liquidity needs
or sources at this time. However, based on current and anticipated levels
of operations, and efforts to reduce accounts receivable, the
Company anticipates that its cash flow from operations, together
with amounts available under the DIP Financing Facility, will be
adequate to meet its anticipated cash requirements through the
end of June 2003. In the event that cash flows and available
borrowings under the DIP Financing Facility are not sufficient
to meet future cash requirements, the Company may be required to
reduce planned capital expenditures or seek additional
financing. The Company can provide no assurances that reductions
in planned capital expenditures would be sufficient to cover
shortfalls in available cash or that additional financing would
be available or, if available, offered on acceptable terms. As a
result of the Chapter 11 Cases and the circumstances
leading to the filing thereof, NationsRents access to
additional financing is, and for the foreseeable future will
likely continue to be, very limited. The Companys
long-term liquidity requirements and the adequacy of the
Companys capital resources are difficult to predict at
this time, and ultimately cannot be determined until a plan of
reorganization has been confirmed by the
Bankruptcy Court in connection with the Chapter 11 Cases.

DIP
Financing Facility

In March 2002, the Bankruptcy Court
entered the DIP Financing Order authorizing the Debtors to enter
into the DIP Financing Facility and to grant first
priority primary liens, mortgages, security interests, liens
(including priming liens), and superiority claims on
substantially all of the assets of the Debtors to secure the DIP
Financing Facility. The original DIP Financing Facility provided the
Debtors with a revolving credit facility of up to $55.0 million
and was scheduled to expire in December 2002. In December 2002, the
Debtors amended and restated the DIP Financing Facility to increase availability
up to $75.0 million (including up to $30.0 million for
letters of credit) and to extend its term until June 30, 2003.
Under the terms of the amended and restated DIP Financing Facility,
availability is subject to a borrowing base based upon eligible
rental equipment and trade accounts receivable. Amounts
borrowed under the DIP Financing Facility bear interest per
annum equal to the agents capital index rate plus 2.00%. In
addition to a $500,000 commitment fee and a $750,000 syndication fee, there is an
unused commitment fee of 0.50%, a letter of credit fee of 3.25%,
and a letter of credit fronting fee of up to 0.25%. The DIP Financing
Facility is secured by super-priority claims and liens on the
real and personal assets of the Company that also secure the
prepetition senior credit facility. The DIP Financing Facility
contains financial covenants requiring a minimum operating cash flow, as well as
other covenants that limit,

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among other things, indebtedness, liens, sales of
assets, capital expenditures, investments, and prohibit dividend
payments.


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

As of March 25, 2003, the Company had
$24.9 million of cash borrowings and had $20 million in letters of credit outstanding under the DIP
Financing Facility.

Liquidity
Requirements

Our net cash provided by operations was $17.5 million
for the year ended December 31, 2002 compared to
net cash used in operations of $60.7 million for the year ended
December 31, 2001. The
increase in cash provided by operations was due primarily to
lower amounts of prior year accounts payable paid in 2002 when
compared to 2001. Net cash used in investing activities
was $34.6 million for the year ended December 31, 2002,
primarily reflecting $32.6 million for purchases of rental
equipment, $6.4 million for purchases of and improvements to
property and equipment and $4.3 million of proceeds from the sale of
non-rental equipment. Cash provided by
financing activities was $0.2 million for the year ended
December 31, 2002 and was primarily a result of net
borrowings under our DIP Financing Facility and repayments of
pre-petition debt.

Our net cash used in operations was $60.7 million
for the year ended December 31, 2001 compared to
net cash provided by operations of $56.1 million for the same
period in 2000. The decrease in cash provided by operations was
primarily due to a use of cash related to payments of accounts
payable related to prior year purchases of rental fleet and to
lower operating cash flows generated from store operations. Net
cash provided by investing activities was $44.9 million for the
twelve months ended December 31, 2001, primarily reflecting
$17.4 million for purchases of rental equipment, $11.4 million
for purchases of and improvements to property and equipment and
$70.8 million of proceeds from the sale of both rental and
non-rental equipment. Cash used in financing activities was
$28.3 million for the twelve months ended December 31, 2001
and was primarily a result of repayments of our senior credit
facility.

Historically, our primary uses of cash have been
the funding of acquisitions and capital expenditures. Through
the Petition Date, we have funded our cash requirements
primarily with borrowings under our senior credit facility,
proceeds from the issuance of debt and equity securities, equity
contributions from our founding stockholders and cash provided
by operations.

During 2002 and 2001, we added zero and $5.5 million,
respectively, of new equipment to our
rental equipment fleet using operating leases. These operating
leases have terms expiring over the next six years.

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

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We estimate that equipment expenditures over the
next 12 months for our existing locations and for new store
openings will be in the range of $12.0 million to $16.0 million
and proceeds from sales from used equipment will be in the range
of $3.0 million to $6.0 million, without giving
consideration to the Proposed Plan.

During the fiscal year ended December 31,
2002, we opened 30 NationsRent stores within Lowes
stores. By the end of 2002, we had opened a total of 70 such
stores within Lowes stores, and expect to open 30
additional stores in 2003. We estimate that the average capital
costs associated with opening a Lowes location to be in
the range of $0.3 million to $0.5 million.

We believe cash generated from operations and
borrowings under our DIP Financing Facility will be sufficient
to fund our cash requirements for existing operations, equipment
capital expenditures and new store openings through June
2003. In connection with the Proposed Plan, we are currently
negotiating an exit financing facility to refinance the DIP Financing
Facility and provide for liquidity upon emergence from the
Chapter 11 Cases. Our ability to fund existing operations,
equipment capital expenditures and new store openings in 2003 and
beyond will depend on our ability to obtain an exit financing
facility and the outcome of the approval process of our Proposed Plan.

2000 Restructuring Plan

During the fourth quarter of 2000, we implemented
a plan to restructure certain of our operations to address a
significant imbalance between our revenue and costs. During
2001, we implemented additional actions to restructure certain
of our operations pursuant to our 2000 restructuring plan. The
restructuring plan was comprised of the following major
components:



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

Pursuant to our restructuring plan, during the
fourth quarter of 2000, we recorded a pre-tax restructuring
charge of approximately $72.0 million and during 2001, we
recorded an additional pre-tax restructuring charge of
approximately $9.7 million. There was no activity in 2002
related to these charges. The components of these
charges, along with the activity for 2000 (of which
$21.8 million was non-cash) and 2001 related to these
charges, are presented in the following table (in thousands):

|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |   |       | 
|------------------------------------ |  | ------------- | ------ | ---------- |  | ------------- | ------- | ---------- |  | ---------- | ------ | ------------ |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ------- | - |  | - | ----- |  | - | ----- | 
|                                     |  |               |        |            |  |               |         |           
|                                     |  | 2000 Activity |        |            |  | 2001 Activity |         |           
|                                     |  |               |        |            |  |               |         | Reserve   
|                                     |  |               |        | Reserve    |  |               |         |            |  | Balance at
|                                     |  | Amounts       |        |            |  | Balance at    |         | Amounts    |  | Deductions |        | December 31,
|                                     |  | Charged       |        |            |  | December 31,  |         | Charged to |  |            |        |             
|                                     |  | to Income     |        | Deductions |  | 2000          |         | Income     |  | Cash       |        | Non-Cash     |  | 2001 |       | 2002
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |     
|Rental fleet disposition             |  | $             | 42,693 |            |  | $             | (6,202  | )          |  | $          | 36,491 |              |  | $    | 9,685 |      |  | $ |       |   |  | $ | (46,176 | ) |  | $ |      |  | $ |     
|Information systems abandonment      |  |               | 11,530 |            |  |               | (10,630 | )          |  |            | 900    |              |  |      |      |      |  |   | (900   | ) |  |   |        |   |  |   |      |  |   |     
|Employee termination severance costs |  |               | 10,156 |            |  |               | (3,520  | )          |  |            | 6,636  |              |  |      | 762   |      |  |   | (5,583 | ) |  |   |        |   |  |   | 1,815 |  |   | 1,815
|Facility closures                    |  |               | 7,626  |            |  |               | (5,863  | )          |  |            | 1,763  |              |  |      | (794  | )    |  |   | (576   | ) |  |   | (69     | ) |  |   | 324   |  |   | 324  
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |   |      
|                                     |  | $             | 72,005 |            |  | $             | (26,215 | )          |  | $          | 45,790 |              |  | $    | 9,653 |      |  | $ | (7,059 | ) |  | $ | (46,245 | ) |  | $ | 2,139 |  | $ | 2,139
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |   |      

The charge for rental fleet disposition
represented estimated losses on owned and leased assets
identified for sale under the restructuring plan. As of
December 31, 2001, all of the rental equipment that was
identified for sale under the restructuring plan had been sold.

The restructuring plan included the termination
and payment of related severance benefits under our existing
severance plan and agreements for approximately 450 employees,
all of whom had been terminated as of December 31, 2001.

During 2001, we modified our restructuring plan
related to facility closures, primarily as a result of changes
to our planned openings of NationsRent rental centers within
select Lowes home improvement stores (see
  New Stores). As a result of the changes
to the restructuring plan, three of the rental facilities
originally identified for closure will remain open and one
additional rental facility was identified for closure.

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The impact of such changes was not material to
the original restructuring charge recorded for store closures.
All 16 stores that have been identified for closure under the
restructuring plan, as modified, have been closed as of
December 31, 2001. Lease payments for the facility closures
extend into 2009 pursuant to the terms of the facility lease
agreements. However, during the first quarter of 2002, we
received approval from the Bankruptcy Court to reject the
facility lease agreements. As such, the remaining reserve for
such future lease payments was credited to income, which
resulted in a $0.8 million reduction of the previously
recorded charge. The remaining reserve balance at
December 31, 2002 for office closures relates to certain
office equipment leases that we have not yet received Bankruptcy
Court approval to reject.


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

New Stores

In October 2000, we entered into an exclusive
multi-year strategic alliance with Lowes, the worlds
second largest home improvement retailer, to operate NationsRent
rental centers within select Lowes home improvement
stores. Operating as a store within a store adjacent to the
entrance of a Lowes store, the NationsRent stores will
rent our full line of construction tools and equipment to
Lowes customers. We will lease these rental centers from
Lowes for terms initially expiring in 2008 with two
five-year renewal options. The Lowes strategic alliance
has and will require us to accelerate investments in systems,
training, brand support and other store start-up costs. As of
March 15, 2003, we operated 76 NationsRent rental centers at
Lowes locations. In April 2002, the Debtors obtained
approval from the Bankruptcy Court to continue the scheduled
opening of NationsRent rental centers within select Lowes
home improvement stores. Our new store growth during the next
several years will concentrate on our strategic alliance with
Lowes to open and operate NationsRent rental centers in
select Lowes locations. However, given our recent
financial performance, there can be no assurance that our
relationship with Lowes will not be impaired.

Historical Results of Operations

Year Ended December 31, 2002 as Compared to Year Ended December 31, 2001

Revenue.Total revenue
decreased $132.5 million, or 22.3% for the year
ended December 31, 2002 when compared to the prior year. Rental revenue
decreased $80.0 million, or 16.0% for the year ended December 31, 2002 when
compared to the prior year. Rental revenue was negatively impacted in
2002 by: (i) the
continuing weakness in construction activity, (ii) downward pressure on rental
rates caused by an oversupply of rental equipment due to the accelerated sales
of equipment across the industry in 2000 and 2001, (iii) the sale of
approximately 12.0% of our rental fleet in 2001 and (iv) significant disruptions caused
by the filing of the Chapter 11 Cases on December 17, 2001.

Sales of equipment, merchandise,
service, parts and supplies decreased $52.5 million, or 54.9% for the year ended
December 31, 2002 when compared to
the prior year. This was primarily due to the decrease in the sale of used
equipment by $50.0 million, or 75.0% for the year ended December 31, 2002 when
compared to the prior year. The decrease in used equipment sales was due to
the substantial completion of the fleet disposal component of the 2000
restructuring plan in the first quarter 2001 and the restrictions of the DIP Financing
Facility.

Gross Profit.Gross profit
decreased $94.1 million, or 84.6% for the
year ended December 31, 2002 when compared to the prior year. Gross profit as
a percentage of total revenue was 3.7% for the year ended December 31, 2002,
compared to 18.7% for the prior year.

Gross profit for the year ended December 31, 2002 was negatively impacted
when compared to the prior year by: (i) the decrease in rental revenue
discussed above, (ii) an increase in repairs and maintenance expense over the
prior year as a result of an increase in the average age of our fleet, (iii) an
increase in rental equipment depreciation expense and (iv) a
$16.9 million impairment charge recorded on rental equipment
that was identified to be sold during the fourth quarter of 2002.

Operating Expenses.Selling,
general and administrative expenses
decreased $28.4 million for the year ended December 31, 2002, compared to
the prior year. Selling, general and administrative expenses were positively
impacted by a $12.6 million decrease in bad debt expense, a $5.4 million
decrease in marketing and advertising, a $2.3 million decrease in travel and
entertainment and a $1.8 million decrease in facility and communication expense
in the year ended December 31, 2002, as compared to the prior year. Selling,
general and administrative expenses as a percentage of total revenue
were 20.8%
for the year ended December 31, 2002, compared to 20.9% for the prior year.

Operating
expenses for the year ended December 31, 2001
were negatively impacted by a $9.7 million charge related to the 2000 restructuring plan and a $770.8
million charge for impairment of intangible assets. See Item 8.  Financial Statements
and Supplementary Data 
Note 3  Accounting Policies  Intangible Assets Related to Acquired
Businesses.

Non-rental
equipment depreciation and amortization decreased $21.2 million
for the year ended December 31, 2002 when compared to the prior year. This
decrease is primarily related to the write-off of our entire balance of
intangible assets related to acquired businesses as of December 31, 2001 and
the resulting decrease in amortization related to these intangible assets.

Operating Loss.Operating loss was
$94.5 million for the year ended December 31, 2002, as a result of the factors discussed above.

Other Income and Expense.Interest expense decreased $76.1 million for
the year ended December 31, 2002 when compared to the prior year. The decrease
was due primarily to the fact that in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code,
interest expense is reported only to the extent that it will be paid during the
Chapter 11 Cases or that it is probable that it will be an allowed claim.
Interest expense reported during the year ended December 31, 2002 is primarily
attributable to prepetition borrowings under our senior credit facility while
interest expense reported during the prior year is attributable to borrowings
under our senior credit facility, notes issued to finance the purchase of
equipment, subordinated convertible notes issued to sellers of businesses we
acquired and our senior subordinated notes. Contractual interest expense and
amortization of deferred financing costs not accrued or recorded on certain
pre-petition debt totaled $58.8 million for the year ended December 31, 2002.

Reorganization
Items, net.We incurred $32.1 million and $11.3 million of net
expenses resulting from the reorganization of our business as a result of our
chapter 11 filing for the years ended December 31, 2002 and 2001, respectively.
See Item 8.  Financial Statements and Supplementary
Data  Note 6 
Reorganization Items, Net.

Income Taxes.We did not record a tax benefit for the year ended
December 31, 2002 due to the uncertainty surrounding the income tax
consequences of the Chapter 11 Cases. We recognized a tax benefit only to the
extent that we had deferred income tax liabilities recorded on our balance
sheet for the year ended December 31, 2001.

Cumulative Effect of Change in Accounting Principle.Effective January
1, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivative Instruments and Hedging Activities, as
amended. The adoption of SFAS No. 133 resulted in an after tax charge of $1.4
million which was reported as a cumulative effect of change in accounting
principle for the year ended December 31, 2001. See Item 8.  Financial
Statements and Supplementary Data  Note 11 
Derivative Financial Instruments.

Year
Ended December 31, 2001 as Compared to Year Ended December 31,
2000

Revenue.Total
revenue decreased $74.4 million, or 11.1%, for the year ended
December 31, 2001 when compared to the prior year. Rental
revenue decreased $47.4 million, or 8.7%, for the year ended
December 31, 2001 when compared to the prior year. As discussed
above, during the fourth quarter of 2000, we implemented a plan
to significantly restructure our operations. The 2000
restructuring plan resulted in the disposal of approximately
12.0% of our rental fleet and the repositioning of approximately
27.0% of our remaining rental fleet amongst the markets we
serve. In addition, we terminated approximately 13.0% of our
employees and closed approximately 8.0% of our locations. The
restructuring of our operations caused a significant amount of
internal disruptions as we disposed of and repositioned our
fleet, with certain markets being severely impacted by the shift
in rental fleet mix from heavy earth moving equipment to general
rental equipment. These factors, coupled with the continuing
weakness in the construction industry, heightened competition in
the equipment rental industry and adverse weather in certain of
our markets have contributed to the decrease in our revenue from
the prior year. In addition, during 2000 and 2001 we divested
certain non-core businesses.

Sales of equipment, merchandise, service, parts
and supplies during the twelve months ended December 31, 2001
include revenue of $41.3 million from the sale of rental fleet
pursuant to our restructuring plan discussed above. Such revenue
was recorded at no gross profit.

Gross Profit.Gross
profit decreased $120.1 million for the year ended December 31,
2001 when compared to the prior year. Gross profit as a
percentage of total revenue was 18.7% for the year ended
December 31, 2001, compared to 34.6% for the prior year.

Gross profit for the year ended December 31, 2001
was negatively impacted when compared to the prior year by:
(i) the decrease in revenue discussed above, (ii) an
increase in costs associated with new stores opened in 2000 and
2001, (iii) a $16.2 million decrease in gross profit on sales of
used equipment due to the sales of used equipment pursuant to
our 2000 restructuring plan and losses on sales of
non-restructuring used equipment as we continued to liquidate
excess rental fleet in the fourth quarter of 2001, (iv) a $15.5
million increase in repairs and maintenance expense over the
prior year, primarily incurred in the second half of 2001

17



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##### 



as a result of an increase in the average age of
our fleet due to our capital constraints discussed above, (v) a
$13.6 million provision for rental fleet and inventory shrinkage
and obsolescence recorded in the fourth quarter of 2001 as a
result of physical inventory counts and cost revaluations, and
(vi) an increase in equipment lease expense as a result of
leases entered into during the prior year, offset by a decrease
in depreciation expense as a result of the sale of excess rental
fleet in 2001 and the change in the estimated service lives and
salvage values made in July 2000. Gross profit for the year
ended December 31, 2001 was positively impacted by cost
reductions made pursuant to our 2000 restructuring plan
discussed above.


Operating Expenses.Selling, general and administrative
expenses decreased $5.8 million for the year ended December 31,
2001 when compared to the prior year. Selling, general and
administrative expenses were positively impacted by cost
reductions made pursuant to our 2000 restructuring plan
discussed above, offset by approximately $1.4 million of charges
related to the renegotiation of certain contracts and
professional fees and a $12.3 million increase in the allowance
for doubtful accounts primarily due to the impact of the 2001
economic recession on our customer base and competitive
conditions within our industry. Selling, general and
administrative expenses as a percentage of total revenue was
20.9% for the year ended December 31, 2001, compared to 19.5%
for the prior year.

Also included in operating expenses for the
twelve months ended December 31, 2001 and 2000 are charges
of $9.7 million and $72.0 million, respectively, related to the
2000 restructuring plan and a $770.8 million charge for
impairment of intangible assets recorded in the fourth quarter
of 2001. See Item 8.  Financial Statements and
Supplementary Data  Note 3  Accounting
Policies  Intangible Assets Related to Acquired
Businesses.

Operating Income.Operating income decreased $119.0
million, excluding the charges for restructuring and the
impairment of intangible assets, for the year ended December 31,
2001, when compared to the prior year. The decrease in operating
income was primarily a result of the factors discussed above.

Other Income and Expense.Interest expense increased
$11.1 million for the year ended December 31, 2001,
when compared to the prior year. The increase was due primarily
to a $3.6 million charge for the write-off of deferred financing
costs in connection with the amendment to our senior credit
facility entered into in March 2001 and an increase in the
interest rates charged on the variable portion of our bank debt
pursuant to such amendment. Interest expense is primarily
attributable to borrowings under our senior credit facility,
notes issued to finance the purchase of equipment, subordinated
convertible notes issued to sellers of businesses we acquired
and our senior subordinated notes.

Reorganization Items, Net.For the year ended December 31, 2001,
we incurred $11.3 million of expenses resulting from the
reorganization of our business as a result of our chapter 11
filing. Such expenses consisted of: (i) $5.2 million of
non-cash costs related to the write-off of fixed assets,
primarily leasehold improvements, of 14 stores identified for
closure, (ii) $4.1 million of professional fees, and
(iii) $2.0 million of severance expense related to an
executive transition agreement with our former Chief Executive
Officer. See Item 8.  Financial Statements and
Supplementary Data  Note 17  Related Party
Transactions.

Income Taxes.Our
effective income tax rate was 1.1% and 25.2% for the years ended
December 31, 2001 and 2000, respectively. For the year ended
December 31, 2001, we recognized a tax benefit only to the
extent that we can utilize the benefit to offset deferred income
tax liabilities recorded on our balance sheet at December 31,
2000. See Item 8.  Financial Statements
and Supplementary Data  Note 12  Income
Taxes for a reconciliation of the statutory federal income
tax rate to the effective income tax rate.

Cumulative Effect of Change in Accounting
Principle.Effective January 1,
2001, we adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended . The
adoption of SFAS No. 133 resulted in an after tax charge of
$1.4 million as a cumulative effect of change in accounting
principle for the year ended December 31, 2001. See Item
8.  Financial Statements and Supplementary
Data  Note 11  Derivative Financial
Instruments.

Net Loss.Excluding the charges for
restructuring, the impairment of intangible assets,
reorganization and cumulative effect of change in accounting
principle, net loss totaled $144.9 million, for the year ended
December 31, 2001.

18



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| |                             
| | ----------------------------
| | Critical Accounting Policies

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. See
Item 8.  Financial Statements and
Supplementary Data  Note 3 
Accounting Policies for a summary of our significant
accounting policies. These assumptions and estimates are often
subjective and may change based on changing circumstances or
changes in our analysis. Material changes in these assumptions
and estimates may materially alter our results of operations. We
have identified below those of our accounting policies that we
believe may produce materially different results were we to
change underlying assumptions and estimates.



| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts.
This allowance reflects our estimate of the amount of our
receivables that we will be unable to collect and is based on
current trends and historical collection experience. Our
estimate could require adjustment based on changing
circumstances, including changes in the economy or in the
particular circumstances of individual customers. Accordingly,
we may be required to increase or decrease our allowance.



| |                                                         
| | --------------------------------------------------------
| | Service Lives and Residual Value of Rental
    Equipment

We depreciate rental equipment using the
straight-line method over its estimated service life, using an
estimated residual value of zero to 79.0%. The service life of
an asset is determined based on our estimate of the period we expect
to keep the asset in our fleet, and the residual value is
determined based on our estimate of the value we expect to
realize from the asset after such period. As a result of our current
liquidity and capital resource constraints, our ability to dispose of
and replace our rental fleet within the service lives set forth in
our deprecation policy has been restricted. As a result, we have
extended the service lives and reduced the related residual values of
assets that have remained in our fleet beyond their originally
estimated service life. We may be required to
further adjust these estimates based on changes in our industry or other
changing circumstances. If these estimates change in the future,
we may be required to recognize increased or decreased
depreciation expense for these assets.



| |                                                              
| | -------------------------------------------------------------
| | Useful Lives and Residual Value of Property
    and Equipment

We depreciate property and equipment using the
straight-line method over its estimated service life, using an
estimated residual value of zero to 10.0%. The useful life of an
asset is determined based on our estimate of the period the
asset will generate revenue, and the residual value is
determined based on our estimate of the minimum value we could
realize from the asset after such period. We may be required to
adjust these estimates based on changes in our industry or other
changing circumstances. If these estimates change in the future,
we may be required to recognize increased or decreased
depreciation expense for these assets.



| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

We review the valuation of our long-lived assets if
the facts and circumstances suggest that the carrying value may be
impaired. If this review indicates that the carrying value of
long-lived assets will not be recoverable, then the carrying value is
reduced to its estimated fair value. Recoverability is determined
using an undiscounted cash flow analysis over the remaining
amortization period. This analysis requires the use of estimates and
assumptions. We may be required to adjust these estimates based on
changes in economic conditions or other circumstances. If these
estimates change in the future, we may be required to recognize
write-downs on our long-lived assets.

19



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Despite our 2000 restructuring efforts, we have
suffered significant adverse trends in operating results and
cash flows and are currently in default under our senior credit
facility and other obligations. As a result of the significant
historical and projected cash flow losses and the uncertainty
surrounding our ability to restructure our capital structure in
a satisfactory manner under the Chapter 11 Cases, we determined
that the carrying value of our net assets exceeded the projected
future undiscounted cash flows and, accordingly, we recognized
an operating charge for the permanent impairment of the entire
unamortized balance of intangible assets related to acquired
businesses of approximately $770.8 million in the quarter
ended December 31, 2001. See  Impact of
Recently Issued Accounting Standards for a discussion of
the new accounting standards for goodwill and other intangible
assets.



| |              
| | -------------
| | Restructuring

During the fourth quarter of 2000 and during
2001, we recorded reserves in connection with the 2000
restructuring plan. These charges include estimates pertaining
to rental fleet disposition, information systems abandonment,
employee termination severance costs, facility closures and
related settlements of contractual obligations. Although we do
not anticipate significant changes, the actual costs may differ
from these estimates and we may be required to adjust the
accruals.



| |                                                       
| | ------------------------------------------------------
| | Valuation Allowance Related to Deferred Tax
    Assets

As part of the process of preparing our
consolidated financial statements we are required to estimate
our income taxes in each of the jurisdictions in which we
operate. This process involves us estimating our actual current
tax exposure together with assessing temporary differences
resulting from differing treatment of items, for tax and
accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood
that our deferred tax assets will be recovered in the future and
to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a
valuation allowance or increase this allowance in a period, we
must include an expense within the tax provision in the
statement of operations.

Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. We have recorded a
valuation allowance of $318.8 and $263.0 million as of
December 31, 2002 and 2001, respectively, due to uncertainties related to our
ability to utilize some of our deferred tax assets, primarily
consisting of net operating losses carried forward and tax basis
in intangible assets. The valuation allowance is based on our
estimates of taxable income and the period over which our
deferred tax assets will be recoverable.

Seasonality and Fluctuations in Operating
Results

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

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



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

20



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| |   |                                   
| | - | ----------------------------------
| |  | competitive pricing pressures; and
|
| |  | changes in interest rates.        

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

Inflation

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

Impact of Recently Issued Accounting
Standards

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

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

In August 2001, the FASB issued SFAS No.
144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This pronouncement addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets. This pronouncement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting
and reporting provisions of APB No. 30,
Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business
(as previously defined in that opinion). SFAS No. 144 is
effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods
within those fiscal years, with early application encouraged.
The adoption of SFAS No. 144 as of January 1, 2002 did not have a material impact
on our consolidated financial statements.

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

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

In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and
Disclosure. This statement amends SFAS No. 123,
Accounting for Stock-Based Compensation. The provisions
of this statement are effective for interim and annual financial
statements for fiscal years ending after December 15, 2002. This
statement provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based
employee compensation. Also, this statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of
the method used on reported results. We continue to apply APB
No. 25
recognition and measurement principles, but have complied with the
new disclosure requirements of this statement. See Note 3 for these
disclosures.

21



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Factors That May Affect Future
Results

Certain statements and information in this Annual
Report on Form 10-K may include forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including in
particular the statements about our plans, strategies and
prospects under the headings Business and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. These statements are
based on our current plans and expectations and involve risks
and uncertainties that could cause actual future activities and
results to be materially different from those set forth in these
forward-looking statements. Important factors that could cause
actual results to differ materially from our forward-looking
statements are set forth below and elsewhere in this Annual
Report on Form 10-K. We make no commitment to disclose any
revisions to forward-looking statements, or any fact, events or
circumstances after the date hereof that may bear upon
forward-looking statements.

There
are significant uncertainties relating to our bankruptcy
proceedings

Our future results are dependent upon the
successful confirmation and implementation of a plan or plans of
reorganization. Although we have submitted the Proposed Plan
to the Bankruptcy Court for approval, we cannot make any
assurances that we will be able to obtain any such approval in a
timely manner. In addition, due to the nature of the
reorganization process, actions may be taken by creditors or
other parties in interest that may have the effect of preventing
or unduly delaying confirmation of a plan or plans of
reorganization in connection with the Chapter 11 Cases. Our
ability to obtain financing to fund our operations and our
relations with our customers and suppliers may be harmed by
protracted bankruptcy proceedings. Further, we cannot predict
the ultimate amount of our liabilities that will be subject to a
plan of reorganization.

Other negative consequences that could arise as a
result of the bankruptcy proceedings include:



| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | making us more vulnerable to a continued downturn
    in our industry or a downturn in the economy in general;                                                                
|
| |  | limiting our flexibility in planning for, or
    reacting to, changes in our business and our industry;                                                                       
|
| |  | the incurrence of significant costs associated
    with our reorganization;                                                                                                   
|
| |  | impacts on our relationship with suppliers and
    customers, including loss of confidence in our ability to
    fulfill contractual obligations due to financial uncertainty;
|
| |  | placing us at a competitive disadvantage compared
    to our competitors;                                                                                                     
|
| |  | limiting our ability to borrow additional funds;
    and                                                                                                                      
|
| |  | negatively impacting our ability to attract,
    retain and compensate key employees.                                                                                         

Once a plan of reorganization is finalized,
approved and implemented, our operating results may be adversely
affected by the possible reluctance of prospective lenders,
customers and suppliers to do business with a company that
recently emerged from bankruptcy proceedings.



| |                                                                     
| | --------------------------------------------------------------------
| | We face uncertainty with respect to treatment
    of our liabilities

As of the filing of the Chapter 11 Cases, in
general all pending litigation against us has been stayed and no
party may take any action to realize on our prepetition claims
except pursuant to further order of the Bankruptcy Court. In
addition, we may reject prepetition executory contracts and
unexpired lease obligations, and parties affected by these
rejections may file claims with the Bankruptcy Court. While we
anticipate substantially all liabilities as of the petition date
will be dealt with in accordance with our Proposed Plan there can be no
assurance that all the liabilities will be handled in this
manner. In addition, additional liabilities subject to the
bankruptcy proceedings may arise in the future as a result of
the rejection of executory contracts and/or unexpired leases,
and from the determination of the Bankruptcy Court (or agreement
by

22



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##### 



parties in interest) of allowed claims for
contingencies and other disputed amounts. Conversely, the
assumption of executory contracts and unexpired leases may
convert liabilities shown as subject to compromise to
postpetition liabilities. Due to the uncertain nature of many of
the potential claims, we are unable to project the magnitude of
such claims with any degree of certainty.




| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Our status as a debtor-in-possession under
    chapter 11 of the Bankruptcy Code raises going
    concern questions

The commencement of the Chapter 11 Cases in
the Bankruptcy Court, and other factors such as our recurring
losses, raise substantial doubt as to our ability to continue as
a going-concern. The financial statements contained herein have
been prepared assuming that we will continue as a going-concern
with the realization of assets and the settlement of liabilities
and commitments in the normal course of business. However, as a
result of the Chapter 11 Cases and circumstances relating
to this event, including our leveraged financial structure and
losses from operations, such realization of assets and
liquidation of liabilities and the ability to continue to
operate as a going-concern is subject to significant
uncertainty. While in chapter 11, we may sell or otherwise
dispose of assets (subject to Bankruptcy Court approval), and
liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan or plans
of reorganization could materially change the amounts reported
in the financial statements. Additionally, a deadline has been
established for the assertion of prepetition claims against the
Company (commonly referred to as a bar date), including
contingent, unliquidated or disputed claims, which claims could
result in greater liabilities than reported in the financial
statements. Our ability to continue as a going-concern is
contingent upon, among other things, confirmation of a plan or
plans of reorganization, future profitable operations and the
ability to generate sufficient cash flow from operations and
financing arrangements to meet ongoing obligations.

We
have substantial debt and are highly leveraged

We have a substantial amount of debt outstanding
which could adversely affect our financial health. As of
December 31, 2002, we had approximately $1.1 billion
of debt outstanding. The Debtors filing for
chapter 11 represented an Event of Default under each of
our financing facilities. Under bankruptcy law, the Debtors are
not permitted to make scheduled principal and interest payments
with respect to prepetition debt unless specifically ordered by
the Bankruptcy Court. This leveraged position could have adverse
consequences, including:



| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limiting our ability to obtain additional
    financing, if needed, for working capital, capital expenditures,
    debt service requirements or other purposes;                                                       
|
| |  | increasing our vulnerability to adverse economic
    and industry conditions;                                                                                                                                         
|
| |  | requiring us to dedicate a substantial portion of
    our cash flow from operations to payments on our debt, thereby
    reducing funds available for operations, future business
    opportunities or other purposes;
|
| |  | limiting our flexibility in planning for, or
    reacting to, changes in our business and our industry; and                                                                                                           
|
| |  | placing us at a competitive disadvantage compared
    to our competitors that have less leverage.                                                                                                                     

We have and, following our bankruptcy
proceedings, expect to have liens on all of our assets, which
will limit our ability to raise additional incremental senior
secured financing in the future.

We
have experienced losses which may continue in future
periods

We have experienced substantial net losses in each of
the past three years. We can
not assure you that we will be able to generate net income in
the future. Continued losses, and the resulting impact on
operating cash flow, could adversely affect our financial
condition and our ability to obtain financing in the future.

23



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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We face uncertainty regarding the adequacy of
    our capital resources and have limited access to additional
    financing

In addition to the cash requirements necessary to
fund ongoing operations, we anticipate that we will incur
significant professional fees and other restructuring costs in
connection with the Chapter 11 Cases and the restructuring
of our business operations. However, as a result of the
uncertainty surrounding our current circumstances, it is
difficult to predict our actual liquidity needs at this time.
Although, based on current and anticipated levels of operations,
we believe that cash flows from operations, together with
amounts available under the DIP Financing Facility, will be
adequate to meet its anticipated cash requirements through the
end of June 2003. In the event that cash flows
and available borrowings under the DIP Financing Facility are
not sufficient to meet future cash requirements, we may be
required to reduce planned capital expenditures or seek
additional financing. We can provide no assurance that
reductions in planned capital expenditures would be sufficient
to cover shortfalls or that additional financing would be
available or, if available, offered on acceptable terms. As a
result of the Chapter 11 Cases and the circumstances
leading to the filing thereof, our access to additional
financing is, and for the foreseeable future will likely
continue to be, very limited. If cash from operations,
borrowings under the DIP Financing Facility and reductions in
capital expenditures are not sufficient to meet our cash
requirements, and additional financing is not available, such a
shortfall could have a material adverse effect on our operations
and our ability to attract and retain key employees, open new
NationsRent facilities at Lowes stores and otherwise meet
the objectives of its business plan. Our long-term liquidity
requirements and the adequacy of our capital resources are
difficult to predict at this time, and ultimately cannot be
determined until a plan of reorganization has been developed and
is confirmed by the Bankruptcy Court in the Chapter 11
Cases.

We
are subject to restrictions on the conduct of our
business

We are operating our business as
debtors-in-possession pursuant to the Bankruptcy Code. Under
applicable bankruptcy law, during the pendency of the
Chapter 11 Cases, we will be required to obtain the
approval of the Bankruptcy Court prior to engaging in any
transaction outside the ordinary course of business. In
connection with any such approval, creditors and other parties
in interest may raise objections to such approval and may appear
and be heard at any hearing with respect to any such approval.
Accordingly, although we may engage in activities outside the
ordinary course of business with the approval of the Bankruptcy
Court, there can be no assurance that the Bankruptcy Court will
approve any such transactions. The Bankruptcy Court also has the
authority to oversee and exert control over our ordinary course
operations.

In addition, the DIP Financing Facility contains
financial covenants requiring a minimum operating cash flow, as well as other
covenants that limit, among other things, indebtedness, liens,
sales of assets, capital expenditures, and investments and
prohibit, among other things, dividend payments.

As a result of the restrictions described above,
our ability to respond to changing business and economic
conditions may be significantly restricted and we may be
prevented from engaging in transactions that might otherwise be
considered beneficial to us.



| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | We believe our equity holders will not receive
    any value or distribution for their interests under a plan or
    plans of reorganization

The value of our capital stock is highly
speculative and any investment in such capital stock would pose
a high degree of risk. Our common stock was delisted from the
NYSE in December 2001 and later began trading on the OTCBB, commonly
known as the pink sheets. As a result of our late
filings of required
reports under the Securities Exchange Act of 1934, our stock
was removed from trading on the OTCBB beginning
June 1, 2002. As a result, a liquid public market for
our common stock does not exist, which may make it difficult for
you to sell our common stock. In addition, there may be very
limited demand for our
common stock.

24



---



##### 



Under the
Proposed Plan our equity holders will not
receive any value or distribution for their interests.




| |                                                                        
| | -----------------------------------------------------------------------
| | Our rental fleet is subject to residual value
    risk upon disposition

The market value for any given piece of our
rental fleet could be less than its depreciated value at the
time it is sold. The market value of rental equipment is
dependent upon several factors, including: (i) the market
price for new equipment of a like kind, (ii) wear and tear
on the equipment relative to its age, (iii) the time of
year that it is sold (generally prices are higher during the
construction season for the market), (iv) worldwide and
domestic demand for used equipment, and (v) general
economic conditions.



| |                                                                     
| | --------------------------------------------------------------------
| | Our reorganization will require substantial
    effort by management

Our senior management have been required to expend a
substantial amount of time and effort structuring a plan or
plans of reorganization, which could have a disruptive impact on
managements ability to focus on the operation of our
business.

Our
business is dependent on changes in construction and industrial
activities

Our equipment is primarily used in construction
and industrial activities. The growth rate in the rental
industry continued to slow dramatically in 2002,
largely as a result of slowing construction activity in 2002
primarily in the non-residential building segment. Combined with the general weak United States economy,
this contraction led to decreased demand or prices for our
equipment, which has had a material adverse effect on our
business, financial condition or results of operations. It is
likely that if industry contraction does not improve, or further
declines, our operations and our ability to fulfill our
reorganization plan would be materially adversely affected.

We
may not be able to execute our business strategy

A component of our business strategy is
to expand through the opening of NationsRent facilities at
Lowes locations through our strategic alliance with
Lowes.

We cannot assure you that we will successfully
expand or that any expansion will result in profitability. The
failure to effectively identify, evaluate and integrate newly
opened locations could adversely affect our growth prospects. We
also cannot assure success in entering new geographic markets,
which may have different competitive conditions, seasonality and
demographic characteristics than our current markets.

As we expand through the opening of new
locations, we expect to increase the number of our employees,
the scope of our operating and financial systems and the
geographic area of our operations. This growth will increase the
complexity of operations and the level of responsibility for
both existing and new management personnel. We may not be able
to attract and retain qualified management and employees and our
current operating and financial systems and controls may not be
adequate to support our expected growth.

We
may not be able to recover the start-up costs of our strategic
alliance with Lowes

Our strategic alliance with Lowes has and
will require us to accelerate investments in systems, training,
branch support and other store start-up costs. We cannot assure
you that the strategic alliance with Lowes will be
successful or that we will recover these start-up costs. If our
rental stores located in Lowes stores do not generate
sufficient revenue and net income or if Lowes does not
permit us to open our rental centers in quantities or locations
that are desirable to us, we may not recover our start-up costs
and we may not grow as quickly as expected, which could have a
material adverse effect on our business, financial condition or
results of operations. In addition, the availability of
additional capital for growth may restrict our ability to
fulfill our

25



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##### 



commitment under the Lowes strategic
alliance agreement, which could have a material adverse effect
on our business, financial condition or results of operations.


The
equipment rental industry is highly competitive

Our competitors include large national companies,
equipment manufacturers, regional corporations, smaller
independent businesses and equipment vendors and dealers who
both sell and rent equipment to customers. Some of our
competitors have greater financial resources, are more
geographically diverse and have greater name recognition than we
have. We may encounter increased competition from existing
competitors or new market entrants, such as equipment
manufacturers, that may be significantly larger and have greater
financial and marketing resources than we have.

We believe that price is one of the primary
competitive factors in the equipment rental industry. From time
to time, we or our competitors, some of which have greater
financial resources, may attempt to compete aggressively by
lowering rental rates. To the extent that we lower rental rates
to attempt to increase or retain market share, our operating
margins may be adversely impacted. Conversely, if we do not
match competitors rate reductions, we may lose market
share, resulting in decreased revenue and cash flow.

Our
revenue and operating results are likely to continue to
fluctuate

Our revenue and operating results have varied
from quarter to quarter and we expect that they will continue to
fluctuate in the future due to:



| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | general economic conditions in our markets;                                
|
| |  | adverse weather conditions;                                                
|
| |  | the timing and cost of opening new locations;                              
|
| |  | the effectiveness of integrating acquired
    businesses and new locations;
|
| |  | the timing of fleet expansion capital
    expenditures;                    
|
| |  | the realization of targeted equipment utilization
    rates;               
|
| |  | seasonal rental and purchasing patterns of our
    customers; and          
|
| |  | price changes in response to competitive factors.                          

We will incur various costs in establishing newly
opened locations, and the profitability of a new location is
generally expected to be lower in the initial period of its
operation.



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | We must comply with various safety and
    environmental regulations that may increase expenses and
    liabilities

We are subject to federal, state and local laws
and regulations governing occupational health and safety and
environmental protection. Under these laws, an owner or operator
of real estate may be liable for the costs of removal or
remediation of hazardous substances located on such property.
These laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the presence
of such hazardous substances. Some of our existing and former
locations use and have used such substances and currently
generate or have generated or disposed of wastes, which are or
may be considered hazardous or otherwise are subject to
applicable environmental requirements. We use hazardous
materials such as solvents to clean and maintain our rental
fleets. We also generate and dispose of waste such as used motor
oil, radiator fluid and solvents, and we may be liable under
various federal, state and local laws for environmental
contamination at facilities where our waste is or has been
disposed. In addition, we dispense petroleum products from
underground and above-ground storage tanks located at certain
rental locations that we own or operate. We incur ongoing
expenses associated with the removal of older underground
storage tanks and other activities in order to comply with
environmental laws and we also perform remediation at certain of
our locations. We cannot assure you that environmental and
safety requirements will not become more stringent or be
interpreted and applied more stringently in the future, or that
we will not indemnify other parties for

26



---



##### 



adverse environmental conditions that are
currently known to us. Such future changes or interpretations,
or the indemnification for such adverse environmental
conditions, could result in additional environmental compliance
or remediation costs not currently anticipated by us, which
could have a material adverse effect on our business, financial
condition or results of operations.


Some
of our liabilities may not be covered by insurance

Our business exposes us to possible claims for
personal injury or death resulting from the use of equipment we
rent or sell and from injuries caused in motor vehicle accidents
in which delivery or service personnel are involved. We carry
comprehensive insurance subject to a deductible. We cannot
assure that existing or future claims will not exceed the level
of our insurance, or that our insurance will continue to be
available on economically reasonable terms, if at all.

Our
operations are dependent on information systems

Our ability to monitor and control our operations
depends to a large extent on the proper functioning of our
information systems. Any disruption in these systems or the
failure of these systems to operate as expected could, depending
on the magnitude or duration of the problem, materially
adversely affect our business, financial condition or results of
operations.

Item 7A.  Quantitative and
Qualitative Disclosures About Market Risk

Our exposure to market risk is limited primarily
to the fluctuating interest rates associated with our variable
rate indebtedness. Our variable interest rates are subject to
interest rate changes in the United States and the Eurodollar
market. At December 31, 2002, we had $795.7 million of
variable rate indebtedness, representing approximately 72.2% of
our total debt outstanding, at an average interest rate of 6.67%. In
April 2002, all swaps to which the Company was a party terminated or expired. The Company used
these swaps to limit its exposure to and benefits from interest rate
fluctuations on variable rate debt to within a certain range of rates.

27



---



##### 





|         |                                                
|-------- | -----------------------------------------------
|Item  8. | Financial Statements and Supplementary
    Data

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                               |  |      |    | 
|---------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                               |  | Page
|                                                                                               |  |     
|Report of Independent Certified Public Accountants                                             |  |      | 29 | 
|Report of Independent Certified Public Accountants                                             |  |      | 30 | 
|Consolidated Balance Sheets at December 31,
    2002 and 2001                                  |  |      | 31 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2002, 2001 and 2000 |  |      | 32 | 
|Consolidated Statement of Stockholders
    Equity (Deficit)                                   |  |      | 33 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2002, 2001 and 2000 |  |      | 34 | 
|Notes to Consolidated Financial Statements                                                     |  |      | 35 | 
|Schedule II  Valuation and Qualifying
    Accounts and Reserves                               |  |      | 58 | 

28



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders
NationsRent, Inc.

We have audited the accompanying consolidated balance
sheet of NationsRent, Inc. (the Company) as of December 31, 2002, and the
related consolidated statements
of operations, cash flows and stockholders equity (deficit) for the year
then ended. Our audit also included the financial statement schedule
listed in the index at Item 15(a). These financial statements
and schedule are the
responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements and schedule
based on our audit. The consolidated financial statements of
NationsRent, Inc. as of December 31, 2001 and for each of the two years in
the period ended December 31, 2001 were audited by other
auditors who have ceased operations and whose report dated
May 21, 2002, expressed an
unqualified opinion on those statements and included an explanatory paragraph that
described substantial doubt about the Companys ability to
continue as a going concern.

We conducted our audit in accordance with auditing
standards generally accepted in the 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 consolidated
financial position of NationsRent, Inc. at
December 31, 2002, and the consolidated results of its
operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related 2002
financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.

The accompanying financial statements have been
prepared assuming that NationsRent, Inc. will continue as a going
concern. As more fully described in Note 2, the Company has
incurred recurring operating losses and has a working capital
deficiency. In addition, on December 17, 2001, the Company and
its subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code. These
conditions raise substantial doubt about the
Companys ability to continue as a going concern.
Managements plans in regard to these matters are also described
in Note 2. The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of
this uncertainty.

As discussed above, the financial statements of
NationsRent, Inc. as of December 31, 2001, and for the two years
then ended were audited by other auditors who have ceased operations.
As described in Note 3, these financial
statements have been revised to include the transitional disclosures
required by Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, which was adopted by the
Company as of January 1, 2002. Our audit procedures with respect
to the disclosures in Note 3 with respect to 2001 and 2000
included (a) agreeing the previously reported net loss to the
previously issued financial statements and the adjustments to
reported net loss representing amortization expense recognized in
those periods related to goodwill to the Companys underlying
records obtained from management, and (b) testing the
mathematical accuracy of the reconciliation of adjusted net loss to
reported net loss, and the related loss-per-share amounts. In our
opinion, the disclosures for 2001 and 2000 in Note 3 are
appropriate. However, we were not engaged to audit, review, or apply
any procedures to the 2001 or 2000 financial statements of the Company
other than with respect to such disclosures and, accordingly, we do
not express an opinion or any other form of assurance on the 2001 or
2000 financial statements taken as a whole.



| |  |                      
| |  | ---------------------
| |  | /s/ ERNST & YOUNG LLP

Fort Lauderdale, Florida,

March 26, 2003


29



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To NationsRent, Inc.:

We have audited the accompanying consolidated
balance sheets of NationsRent, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations,
stockholders equity (deficit) and cash flows for each of
the three years in the period ended December 31, 2001.
These financial statements and the schedule referred to below
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of NationsRent, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been
prepared assuming the Company will continue as a going concern.
The Company has experienced significant losses over the last two
years and has a stockholders deficit of approximately
$501.6 million as of December 31, 2001. In addition, as
discussed in Note 2 to the accompanying financial
statements, on December 17, 2001, the Company and its
subsidiaries filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code. These
matters, among others, raise substantial doubt about the
Companys ability to continue as a going concern.
Managements plans in regard to these matters, including
its intent to file a plan of reorganization that will be
acceptable to the Bankruptcy Court and the Companys
creditors, are also described in Note 2. In the event a
plan of reorganization is accepted, continuation of the business
thereafter is dependent on the Companys ability to achieve
successful future operations. The accompanying financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern.

As explained in Note 10 to the consolidated
financial statements, effective January 1, 2001, the
Company changed its method of accounting for derivative
financial instruments.

Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole.
The schedule listed in the index to consolidated financial
statements is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part
of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to
be set forth therein in relation to the basic financial
statements taken as a whole.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,

May 21, 2002.


Note: The report of Arthur Andersen
LLP presented above is a copy of a previously issued Arthur Andersen
LLP report. This report has not been reissued by Arthur Andersen LLP
nor has Arthur Andersen LLP provided a consent to the inclusion of
its report in this Form 10-K.

30



---



##### 



NATIONSRENT, INC.

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


CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |        |          |           |  
|-------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------ | ---------- | --------- | --------- | ------ | -------- | --------- | -
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                  
|                                                                                                                                       |                                                                                                                                                | December 31,                                                                                                                                     
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                  
|                                                                                                                                       |                                                                                                                                                | 2002                                                                                                                                              |                                             | 2001  
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |       
|ASSETS                                                                                                                                
|Cash and cash equivalents                                                                                                              |                                                                                                                                                | $                                                                                                                                                 | 6,940                                       |        |            | $         | 23,787    |       
|Accounts receivable, net of allowance for
    doubtful accounts of $16,826 and $26,109 at December 31,
    2002 and 2001, respectively |                                                                                                                                                |                                                                                                                                                   | 69,376                                      |        |            |           | 93,584    |       
|Inventories                                                                                                                            |                                                                                                                                                |                                                                                                                                                   | 20,196                                      |        |            |           | 20,801    |       
|Prepaid expenses and other assets                                                                                                      |                                                                                                                                                |                                                                                                                                                   | 20,577                                      |        |            |           | 15,524    |       
|Deferred financing costs, net                                                                                                          |                                                                                                                                                |                                                                                                                                                   | 15,582                                      |        |            |           | 15,696    |       
|Rental equipment, net                                                                                                                  |                                                                                                                                                |                                                                                                                                                   | 348,852                                     |        |            |           | 427,407   |       
|Property and equipment, net                                                                                                            |                                                                                                                                                |                                                                                                                                                   | 80,146                                      |        |            |           | 90,717    |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   | Total Assets                                |        | $          | 561,669   |           |        | $        | 687,516   |  
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)                                                                                    
|Liabilities Not Subject to Compromise:                                                                                                 |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       | Accounts payable                                                                                                                               |                                                                                                                                                   | $                                           | 20,853 |            |           | $         | 4,983  |         
|
|                                                                                                                                       | Accrued compensation and related taxes                                                                                                         |                                                                                                                                                   |                                             | 5,257  |            |           |           | 4,770  |         
|                                                                                                                                       | Accrued expenses and other liabilities                                                                                                         |                                                                                                                                                   |                                             | 36,233 |            |           |           | 16,150 |         
|                                                                                                                                       | Debt                                                                                                                                           |                                                                                                                                                   |                                             | 14,228 |            |           |           |       |         
|                                                                                                                                       | Income taxes payable                                                                                                                           |                                                                                                                                                   |                                             | 66     |            |           |           | 100    |         
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   | Total liabilities not subject to compromise |        |            | 76,637    |           |        |          | 26,003    |  
|Liabilities Subject to Compromise (Note 5)                                                                                             |                                                                                                                                                |                                                                                                                                                   | 1,147,292                                   |        |            |           | 1,163,144 |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   | Total liabilities                           |        |            | 1,223,929 |           |        |          | 1,189,147 |  
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|Commitments and Contingencies (Notes 2, 3
    and 9)                                                                                   |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|Stockholders Deficit:                                                                                                                 |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       | Preferred stock  $0.01 par value,
    5,000,000 shares authorized:                                                                            |                                                                                                                                                   |                                             |        |            |           |           |        |         
|                                                                                                                                       |                                                                                                                                                | Series A convertible, $100,000 liquidation
    preference, 100,000 shares issued and outstanding at
    December 31, 2002 and 2001, respectively. |                                             |        | 1          |           |           |        | 1        |          
|                                                                                                                                       |                                                                                                                                                | Series B convertible, $100,000 liquidation
    preference, 100,000 shares issued and outstanding at
    December 31, 2002 and 2001, respectively. |                                             |        | 1          |           |           |        | 1        |          
|                                                                                                                                       | Common stock  $0.01 par value,
    250,000,000 shares authorized, 57,364,437 shares
    issued and outstanding at December 31, 2002 and 2001. |                                                                                                                                                   |                                             | 584    |            |           |           | 584    |         
|                                                                                                                                       |                                                                                                                                                | Additional paid-in capital                                                                                                                        |                                             |        | 471,172    |           |           |        | 471,172  |          
|                                                                                                                                       |                                                                                                                                                | Accumulated deficit                                                                                                                               |                                             |        | (1,131,138 | )         |           |        | (970,509 | )        
|                                                                                                                                       |                                                                                                                                                | Treasury stock, at cost, 1,065,200 shares
at December 31, 2002 and 2001.                                                                          |                                             |        | (2,880     | )         |           |        | (2,880   | )        
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   | Total stockholders deficit                 |        |            | (662,260  | )         |        |          | (501,631  | )
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   | Total Liabilities and Stockholders Deficit |        | $          | 561,669   |           |        | $        | 687,516   |  
|                                                                                                                                       |                                                                                                                                                |                                                                                                                                                   |                                             |        |            |           |           |       

The accompanying notes to consolidated financial
statements

are an integral part of these statements.


31



---



##### 



NATIONSRENT, INC.

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


CONSOLIDATED STATEMENTS OF
OPERATIONS

(in thousands, except per share
data)


|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |         |         | 
|-------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------- | -------- | ------- | ------- | ---- | -------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                                           |                                                                          |                        
|                                                                                                                           |                                                                          | Year Ended December 31,
|                                                                                                                           |                                                                          |                        
|                                                                                                                           |                                                                          | 2002                    |          | 2001    |         | 2000
|                                                                                                                           |                                                                          |                         |          |         |         |     
|Revenue:                                                                                                                   |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Equipment rentals                                                        |                         | $        | 419,057 |         |      | $        | 499,040 |         |   | $       | 546,434 |        
|                                                                                                                           | Sales of equipment, merchandise, service, parts
    and supplies         |                         |          | 43,084  |         |      |          | 95,619  |         |   |         | 122,614 |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           |                                                                          | Total revenue           |          |         | 462,141 |      |          |         | 594,659 |   |         |         | 669,048 | 
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Cost of revenue:                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Cost of equipment rentals                                                |                         |          | 240,324 |         |      |          | 241,959 |         |   |         | 207,466 |        
|                                                                                                                           | Rental equipment depreciation and lease expense                          |                         |          | 149,736 |         |      |          | 140,895 |         |   |         | 136,100 |        
|                                                                                                                           | Cost of sales of equipment, merchandise, service,
    parts and supplies |                         |          | 38,057  |         |      |          | 100,653 |         |   |         | 94,187  |        
|                                                                                                                           | Impairment of rental equipment                                           |                         |          | 16,923  |         |      |          |        |         |   |         |        |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           |                                                                          | Total cost of revenue   |          |         | 445,040 |      |          |         | 483,507 |   |         |         | 437,753 | 
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Gross profit                                                                                                               |                                                                          |                         | 17,101   |         |         |      | 111,152  |         |         |   | 231,295 |        
|Operating expenses:                                                                                                        |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Selling, general and administrative expenses                             |                         |          | 95,998  |         |      |          | 124,374 |         |   |         | 130,189 |        
|                                                                                                                           | Restructuring charge                                                     |                         |          |        |         |      |          | 9,653   |         |   |         | 72,005  |        
|                                                                                                                           | Impairment of intangible assets                                          |                         |          |        |         |      |          | 770,833 |         |   |         |        |        
|                                                                                                                           | Non-rental equipment depreciation and amortization                       |                         |          | 15,606  |         |      |          | 36,792  |         |   |         | 27,810  |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Operating income (loss)                                                                                                    |                                                                          |                         | (94,503  | )       |         |      | (830,500 | )       |         |   | 1,291   |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Other (income)/expense:                                                                                                    |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Interest expense                                                         |                         |          | 34,389  |         |      |          | 110,467 |         |   |         | 99,393  |        
|                                                                                                                           | Interest income                                                          |                         |          |        |         |      |          | (716    | )       |   |         | (108    | )      
|                                                                                                                           | Other, net                                                               |                         |          | (324    | )       |      |          | (731    | )       |   |         | 548     |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           |                                                                          |                         | 34,065   |         |         |      | 109,020  |         |         |   | 99,833  |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Loss before reorganization items,
    benefit for income taxes and cumulative effect of
    change in accounting principle |                                                                          |                         | (128,568 | )       |         |      | (939,520 | )       |         |   | (98,542 | )      
|Reorganization items, net                                                                                                  |                                                                          |                         | 32,061   |         |         |      | 11,333   |         |         |   |        |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Loss before benefit for
    income taxes and cumulative effect of change in accounting
    principle                       |                                                                          |                         | (160,629 | )       |         |      | (950,853 | )       |         |   | (98,542 | )      
|Benefit for income taxes                                                                                                   |                                                                          |                         |         |         |         |      | (9,815   | )       |         |   | (24,852 | )      
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Loss before cumulative effect of change
    in accounting principle                                                        |                                                                          |                         | (160,629 | )       |         |      | (941,038 | )       |         |   | (73,690 | )      
|Cumulative effect of change in accounting
    principle net of income tax benefit                                          |                                                                          |                         |         |         |         |      | 1,359    |         |         |   |        |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Net loss                                                                                                                   |                                                                          | $                       | (160,629 | )       |         | $    | (942,397 | )       |         | $ | (73,690 | )      
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Net loss per share:                                                                                                        |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Basic                                                                    |                         | $        | (2.80   | )       |      | $        | (16.43  | )       |   | $       | (1.27   | )      
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Diluted                                                                  |                         | $        | (2.80   | )       |      | $        | (16.43  | )       |   | $       | (1.27   | )      
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|Weighted average common shares outstanding:                                                                                |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Basic                                                                    |                         |          | 57,364  |         |      |          | 57,364  |         |   |         | 58,165  |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        
|                                                                                                                           | Diluted                                                                  |                         |          | 57,364  |         |      |          | 57,364  |         |   |         | 58,165  |        
|                                                                                                                           |                                                                          |                         |          |         |         |      |          |         |         |   |         |        

The accompanying notes to consolidated financial
statements

are an integral part of these statements.


32



---



##### 



NATIONSRENT, INC.

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


CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY (DEFICIT)

(in thousands, except share data)


|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |       |         |   |  |   |            |   |  |  |            |   |  |   |        |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | --------------- | ------- | ------------ |  | ---------- | - | -------- |  | ------------ | ---------- | --------- |  | --------- | --- | ------ |  | ----- | ------- | - |  | - | ---------- | - |  |  | ---------- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |       
|                                                                                 |  |                 |         |              |  |            |   |          |  | Common Stock |            |          
|                                                                                 |  | Preferred Stock |         | Common Stock |  |            |   |          |  | in Treasury  |            |          
|                                                                                 |  |                 |         |              |  | Additional |   | Retained |  |              |            |          
|                                                                                 |  | Number of       |         |              |  | Number of  |   |          |  | Paid-in      |            | Earnings  |  | Number of |     |        |  |      
|                                                                                 |  | Shares          |         | Amount       |  | Shares     |   | Amount   |  | Capital      |            | (Deficit) |  | Shares    |     | Amount |  | Total
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |      
|Balance, December 31, 1999.                                                      |  |                 | 100,000 |              |  | $          | 1 |          |  |              | 56,844,414 |           |  | $         | 568 |        |  | $     | 367,240 |   |  | $ | 45,578     |   |  |  |           |   |  | $ |       |   |  | $ | 413,387  |  
|Issuance of common stock in connection with
    acquisitions                     |  |                 |        |              |  |            |  |          |  |              | 1,728,742  |           |  |           | 17  |        |  |       | 9,983   |   |  |   |           |   |  |  |           |   |  |   |       |   |  |   | 10,000   |  
|Retirement of common stock                                                       |  |                 |        |              |  |            |  |          |  |              | (285,067   | )         |  |           | (3  | )      |  |       | (1,367  | ) |  |   |           |   |  |  |           |   |  |   |       |   |  |   | (1,370   | )
|Purchase of treasury stock                                                       |  |                 |        |              |  |            |  |          |  |              |           |           |  |           |    |        |  |       |        |   |  |   |           |   |  |  | (919,000   | ) |  |   | (2,675 | ) |  |   | (2,675   | )
|Options exercised                                                                |  |                 |        |              |  |            |  |          |  |              | 136,392    |           |  |           | 2   |        |  |       | 36      |   |  |   |           |   |  |  |           |   |  |   |       |   |  |   | 38       |  
|Proceeds from sale of Series B preferred
    stock, less issuance cost of $4,719 |  |                 | 100,000 |              |  |            | 1 |          |  |              |           |           |  |           |    |        |  |       | 95,280  |   |  |   |           |   |  |  |           |   |  |   |       |   |  |   | 95,281   |  
|Net loss                                                                         |  |                 |        |              |  |            |  |          |  |              |           |           |  |           |    |        |  |       |        |   |  |   | (73,690    | ) |  |  |           |   |  |   |       |   |  |   | (73,690  | )
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |       |         |   |  |   |            |   |  |  |            |   |  |   |        |   |  |   |          |  
|Balance, December 31, 2000                                                       |  |                 | 200,000 |              |  |            | 2 |          |  |              | 58,424,481 |           |  |           | 584 |        |  |       | 471,172 |   |  |   | (28,112    | ) |  |  | (919,000   | ) |  |   | (2,675 | ) |  |   | 440,971  |  
|Purchase of treasury stock                                                       |  |                 |        |              |  |            |  |          |  |              |           |           |  |           |    |        |  |       |        |   |  |   |           |   |  |  | (146,200   | ) |  |   | (205   | ) |  |   | (205     | )
|Options exercised                                                                |  |                 |        |              |  |            |  |          |  |              | 5,156      |           |  |           |    |        |  |       |        |   |  |   |           |   |  |  |           |   |  |   |       |   |  |   |         |  
|Net loss                                                                         |  |                 |        |              |  |            |  |          |  |              |           |           |  |           |    |        |  |       |        |   |  |   | (942,397   | ) |  |  |           |   |  |   |       |   |  |   | (942,397 | )
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |       |         |   |  |   |            |   |  |  |            |   |  |   |        |   |  |   |          |  
|Balance, December 31, 2001                                                       |  |                 | 200,000 |              |  |            | 2 |          |  |              | 58,429,637 |           |  |           | 584 |        |  |       | 471,172 |   |  |   | (970,509   | ) |  |  | (1,065,200 | ) |  |   | (2,880 | ) |  |   | (501,631 | )
|Net loss                                                                         |  |                 |        |              |  |            |  |          |  |              |           |           |  |           |    |        |  |       |        |   |  |   | (160,629   | ) |  |  |           |   |  |   |       |   |  |   | (160,629 | )
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |       |         |   |  |   |            |   |  |  |            |   |  |   |        |   |  |   |          |  
|Balance, December 31, 2002                                                       |  |                 | 200,000 |              |  | $          | 2 |          |  |              | 58,429,637 |           |  | $         | 584 |        |  | $     | 471,172 |   |  | $ | (1,131,138 | ) |  |  | (1,065,200 | ) |  | $ | (2,880 | ) |  | $ | (662,260 | )
|                                                                                 |  |                 |         |              |  |            |   |          |  |              |            |           |  |           |     |        |  |       |         |   |  |   |            |   |  |  |            |   |  |   |        |   |  |   |          |  

The accompanying notes to consolidated financial
statements

are an integral part of this statement.


33



---



##### 



NATIONSRENT, INC.

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


CONSOLIDATED STATEMENTS OF CASH
FLOWS

(in thousands)


|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |          |          |  
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------- | -------- | ------- | ---- | -------- | -------- | ------- | - | ------- | -------- | -------- | -
|                                                                                              |                                                                                                           |                                                                              
|                                                                                              |                                                                                                           | Year Ended                                                                   
|                                                                                              |                                                                                                           | December 31,                                                                 
|                                                                                              |                                                                                                           |                                                                              
|                                                                                              |                                                                                                           | 2002                                                                          |          | 2001     |         | 2000
|                                                                                              |                                                                                                           |                                                                               |          |          |         |     
|CASH FLOWS FROM OPERATING
    ACTIVITIES:                                                     |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|Net loss                                                                                      |                                                                                                           | $                                                                             | (160,629 | )        |         | $    | (942,397 | )        |         | $ | (73,690 | )       
|Adjustments to reconcile net loss to net
    cash provided by/(used in) operating activities: |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              | Depreciation and amortization                                                                             |                                                                               |          | 94,054   |         |      |          | 106,545  |         |   |         | 104,472  |         
|                                                                                              | Provision for allowance for doubtful accounts                                                             |                                                                               |          | 11,645   |         |      |          | 24,245   |         |   |         | 13,162   |         
|                                                                                              | Non-cash reorganization items                                                                             |                                                                               |          | 2,019    |         |      |          | 6,231    |         |   |         |         |         
|                                                                                              | Provision for impairment of intangible assets                                                             |                                                                               |          |         |         |      |          | 770,833  |         |   |         |         |         
|                                                                                              | Provision for impairment of rental equipment                                                              |                                                                               |          | 16,923   |         |      |          |         |         |   |         |         |         
|                                                                                              | Non-cash restructuring charge                                                                             |                                                                               |          |         |         |      |          | 8,891    |         |   |         | 66,103   |         
|                                                                                              | Loss (gain) on sale of non-rental equipment                                                               |                                                                               |          | 2        |         |      |          | (342     | )       |   |         |         |         
|                                                                                              | Loss (gain) on sale of rental equipment                                                                   |                                                                               |          | 2,185    |         |      |          | 6,426    |         |   |         | (20,779  | )       
|                                                                                              | Gain on sale of businesses                                                                                |                                                                               |          |         |         |      |          | (486     | )       |   |         |         |         
|                                                                                              | Deferred income tax benefit                                                                               |                                                                               |          |         |         |      |          | (10,906  | )       |   |         | (24,952  | )       
|                                                                                              | Changes in operating assets and liabilities:                                                              |                                                                               |          |          |         |      |          |          |         |   |         |          |         
|                                                                                              |                                                                                                           | Accounts receivable                                                           |          |          | 12,563  |      |          |          | 11,559  |   |         |          | (17,451  | )
|                                                                                              |                                                                                                           | Inventories                                                                   |          |          | 6,279   |      |          |          | 12,600  |   |         |          | 1,769    |  
|                                                                                              |                                                                                                           | Prepaid expenses and other assets                                             |          |          | 1,521   |      |          |          | 6,589   |   |         |          | 4,033    |  
|                                                                                              |                                                                                                           | Accounts payable                                                              |          |          | 15,868  |      |          |          | (62,288 | ) |         |          | 10,618   |  
|                                                                                              |                                                                                                           | Accrued expenses and other liabilities                                        |          |          | 22,847  |      |          |          | 1,792   |   |         |          | (6,576   | )
|                                                                                              |                                                                                                           | Liabilities subject to compromise                                             |          |          | (7,708  | )    |          |          |        |   |         |          |         |  
|                                                                                              |                                                                                                           | Income taxes payable                                                          |          |          | (34     | )    |          |          |        |   |         |          | (603     | )
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Net cash provided by/(used in) operating
    activities                       |          |          | 17,535  |      |          |          | (60,708 | ) |         |          | 56,106   |  
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES, NET OF
    ACQUISITIONS:                                |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              | Acquisitions of businesses, net of cash acquired                                                          |                                                                               |          |         |         |      |          |         |         |   |         | (21,012  | )       
|                                                                                              | Proceeds from sale of businesses                                                                          |                                                                               |          |         |         |      |          | 900      |         |   |         | 6,657    |         
|                                                                                              | Purchases of rental equipment                                                                             |                                                                               |          | (39,005  | )       |      |          | (17,363  | )       |   |         | (138,336 | )       
|                                                                                              | Payment of contingent acquisition consideration                                                           |                                                                               |          |         |         |      |          |         |         |   |         | (11,750  | )       
|                                                                                              | Purchases of property and equipment                                                                       |                                                                               |          | (6,380   | )       |      |          | (11,377  | )       |   |         | (56,862  | )       
|                                                                                              | Proceeds from sale of rental equipment                                                                    |                                                                               |          | 10,780   |         |      |          | 66,630   |         |   |         | 73,216   |         
|                                                                                              | Investment in affiliate                                                                                   |                                                                               |          |         |         |      |          | 2,000    |         |   |         | (2,214   | )       
|                                                                                              | Proceeds from sale of non-rental equipment                                                                |                                                                               |          | 10       |         |      |          | 4,159    |         |   |         |         |         
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Net cash (used in)/provided by in investing
    activities                    |          |          | (34,595 | )    |          |          | 44,949  |   |         |          | (150,301 | )
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|CASH FLOWS FROM FINANCING
    ACTIVITIES:                                                     |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              | Proceeds from debtor-in-possession financing facility                                                     |                                                                               |          | 172,300  |         |      |          |         |         |   |         |         |         
|                                                                                              | Proceeds from debt                                                                                        |                                                                               |          |         |         |      |          | 179,900  |         |   |         | 441,740  |         
|                                                                                              | Proceeds from issuance of preferred stock, net                                                            |                                                                               |          |         |         |      |          |         |         |   |         | 95,281   |         
|                                                                                              | Proceeds from stock options exercised                                                                     |                                                                               |          |         |         |      |          |         |         |   |         | 38       |         
|                                                                                              | Payment of deferred financing costs                                                                       |                                                                               |          |         |         |      |          | (5,337   | )       |   |         | (4,843   | )       
|                                                                                              | Repayments of debt                                                                                        |                                                                               |          | (216     | )       |      |          | (202,625 | )       |   |         | (372,823 | )       
|                                                                                              | Repayments of debt subject to compromise                                                                  |                                                                               |          | (11,823  | )       |      |          |         |         |   |         |         |         
|                                                                                              | Repayments of debtor-in-possession financing facility                                                     |                                                                               |          | (160,048 | )       |      |          |         |         |   |         |         |         
|                                                                                              | Purchase of treasury stock                                                                                |                                                                               |          |         |         |      |          | (205     | )       |   |         | (2,675   | )       
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Net cash provided by/(used in) financing
    activities                       |          |          | 213     |      |          |          | (28,267 | ) |         |          | 156,718  |  
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|Net (decrease)/increase in cash and cash
    equivalents                                      |                                                                                                           |                                                                               | (16,847  | )        |         |      | (44,026  | )        |         |   | 62,523  |         
|Cash and cash equivalents, beginning of year                                                  |                                                                                                           |                                                                               | 23,787   |          |         |      | 67,813   |          |         |   | 5,290   |         
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|Cash and cash equivalents, end of year                                                        |                                                                                                           | $                                                                             | 6,940    |          |         | $    | 23,787   |          |         | $ | 67,813  |         
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:                                         |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Cash paid for interest                                                        |          | $        | 38,701  |      |          | $        | 93,798  |   |         | $        | 95,923   |  
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Cash paid for income taxes                                                    |          | $        | 34      |      |          | $        | 790     |   |         | $        | 780      |  
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES:                     |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              | The Company acquired the net assets and assumed
    certain liabilities of certain businesses as follows: |                                                                               |          |          |         |      |          |          |         |   |         |          |         
|                                                                                              |                                                                                                           | Total assets acquired, net of cash acquired                                   |          | $        |        |      |          | $        |        |   |         | $        | 37,961   |  
|                                                                                              |                                                                                                           | Total liabilities assumed                                                     |          |          |        |      |          |          |        |   |         |          | (12,274  | )
|                                                                                              |                                                                                                           | Amounts paid through the issuance of debt and
    future contractual payments |          |          |        |      |          |          |        |   |         |          | (4,675   | )
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              |                                                                                                           | Net cash paid                                                                 |          | $        |        |      |          | $        |        |   |         | $        | 21,012   |  
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         
|                                                                                              | Fixed assets acquired under financial obligations                                                         |                                                                               | $        |         |         |      | $        | 4,363    |         |   | $       | 42,893   |         
|                                                                                              |                                                                                                           |                                                                               |          |          |         |      |          |          |         |   |         |         

The accompanying notes to consolidated financial
statements

are an integral part of these statements.


34



---



##### 



NATIONSRENT, INC.

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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

December 31, 2001


1.  DESCRIPTION OF THE
BUSINESS

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

2.  PROCEEDINGS UNDER CHAPTER 11 OF
THE BANKRUPTCY CODE

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

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

The Bankruptcy Code provides that the Debtors
have the exclusive right for certain specified periods during
which only they may file and solicit acceptances of a plan of
reorganization. If the Debtors fail to file a plan of reorganization
during this exclusive period or any extensions thereof or, after
such plan has been filed, if the Debtors fail to obtain
acceptance of such plan from the requisite impaired classes of
creditors and equity holders during the exclusive solicitation
period, any party in interest, including a creditor, an equity
holder, a committee of creditors or equity holders, or an
indenture trustee, may file their own plan of reorganization for
the Debtors. The initial exclusive period of the Debtors to file
a plan of reorganization was set to expire on April 15, 2002 and
the initial exclusive period of the Debtors to solicit acceptance of
a plan of reorganization was set to expire on June 15, 2002. The
Debtors have filed successive motions to extend such exclusive
periods, which are now set to expire on April 16, 2003 and
June 17, 2003,
respectively.

In June 2002, the Debtors filed their proposed Joint
Plan of Reorganization and related disclosure statement with the
Bankruptcy Court. In December 2002, after negotiating with several
parties in interest, the Debtors filed their First Amended Joint Plan
of Reorganization (the Proposed Plan) and related
disclosure statement (the Disclosure Statement). The Proposed Plan was jointly proposed by the
Debtors, the official committee of unsecured creditors and the
holders of a majority of the bank debt under the Debtors
prepetition senior secured credit facility. Under the terms of the
Proposed Plan (i) the holders of allowed claims under the
Debtors prepetition senior secured credit facility shall
receive 95% of the new common stock, new preferred stock and new
subordinated notes of the reorganized company and (ii) a
creditor trust for the benefit of the holders of allowed general
unsecured claims shall receive 5% of the new securities and $300,000
in cash. The Proposed Plan does not provide for any value or
distribution to existing equity holders of the Company. If the
holders of allowed general unsecured claims do not approve the
Proposed Plan, no property will be distributed to the creditor trust
on behalf of the holders of the allowed general unsecured claims and
the holders of allowed claims under the Debtors prepetition
senior secured credit facility shall receive 100% of the new
securities.

The confirmation of a plan of reorganization is
one of the Companys primary objectives. In February 2003, the
Bankruptcy Court approved the Disclosure Statement which together
with the Proposed Plan has been sent to all creditors for approval.
The deadline to vote to accept or reject the Proposed Plan was
March 21, 2003. The hearing to consider confirmation of the
Proposed Plan is presently scheduled for April 3, 2003 at
1:30 P.M. in the Bankruptcy Court. In order to confirm a
plan of reorganization, the Bankruptcy Court, among other
things, is required to find that (i) with respect to each
impaired class of creditors and equity holders, each holder in
such class has accepted the plan or will, pursuant to the plan,
receive at least as much as such holder would receive in a
liquidation, (ii) each impaired class of creditors and
equity holders has accepted the plan by the requisite vote
(except as described in the following sentence), and
(iii) confirmation of the plan is not likely to be followed
by a liquidation or a need for further financial reorganization
of the Debtors or any successors to the Debtors unless the plan
proposes such liquidation or

35



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

reorganization. If any impaired class of
creditors or equity holders does not accept the plan and,
assuming that all of the other requirements of the Bankruptcy
Code are met, the proponents of the plan may invoke the
cram down provisions of the Bankruptcy Code. Under
these provisions, the Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity holders if certain requirements of
the Bankruptcy Code are met. These requirements may, among other
things, necessitate payment in full for senior classes of
creditors before payment to a junior class can be made.

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

3.  ACCOUNTING POLICIES

Basis of Presentation

The Company operates in one industry segment
consisting of the rental and sales of equipment and related
merchandise and parts. The Companys operations are managed
as one segment, or strategic unit, because it offers similar
products and services in similar markets and the factors
underlying strategic decisions are comparable for all products
and services.

The nature of the Companys business is such
that short-term obligations are typically met by cash flow
generated from long-term assets. Consequently, consistent with
industry practice, the accompanying consolidated balance sheets
are presented on an unclassified basis.

The accompanying consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

The accompanying consolidated financial
statements have been prepared on a going concern basis, which
contemplates continuity of operations, realization of assets,
and payment of liabilities in the ordinary course of business,
and do not reflect adjustments that might result if the Debtors
are unable to continue as a going concern. The Debtors
history of significant losses, the stockholders deficit of
approximately $1,131,138,000 as of December 31, 2002 and
their Chapter 11 Cases raise substantial doubt about the
Debtors ability to continue as a going concern.
Continuing as a going concern is dependent
upon, among other things, the Debtors formulation of a
plan or plans of reorganization acceptable to the Bankruptcy
Court and creditors, the success of future business operations,
and the generation of sufficient cash from operations and
financing sources to meet the Companys obligations. The
consolidated financial statements do not reflect: (i) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (ii) aggregate
prepetition liability amounts that may be allowed for unrecorded
claims or contingencies, or their status or priority;
(iii) the effect of any

36



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

changes to the Debtors capital structure or
in the Debtors business operations as the result of an
approved plan or plans of reorganization; or
(iv) adjustments to the carrying value of assets or
liability amounts that may be necessary as a result of actions
by the Bankruptcy Court. Adjustments necessitated by a plan of
reorganization could materially change the amounts reported in
the accompanying consolidated financial statements.

These statements have been prepared in accordance
with the American Institute of Certified Public Accountants
(AICPA) Statement of Position
(SOP) 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code.
Pursuant to SOP 90-7, revenues and expenses, realized gains
and losses and provisions for losses resulting from the
reorganization of the business are to be reported in the
consolidated statements of operations separately as
reorganization items. Professional fees are expensed as
incurred. Interest expense is reported only to the extent that
it will be paid during the Chapter 11 Cases or that it is
probable that it will be an allowed claim. Reorganization items
are disclosed in the notes to consolidated financial statements.
See  Note 6  Reorganization
Items, Net.

Cash Equivalents

The Company considers all highly liquid
instruments with a maturity of three months or less when
purchased to be cash equivalents. The Company had zero and $22,945,000
of cash equivalents at December 31, 2002 and
2001, respectively.

Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates. Significant estimates include the service
lives and residual value of rental equipment, the accruals
related to the Companys restructuring plan, the allowance
for doubtful accounts, the valuation allowance related to the
Companys deferred tax assets, the accruals related to the
Companys insurance programs, the allocation of purchase
price of acquired businesses and the valuation of intangible
assets related to acquired businesses.

Inventories

Inventories, which consist of equipment, tools,
parts and related merchandise supply items, are stated at the
lower of cost or market. Cost is determined using the first-in,
first-out method. Provision is made to reduce excess or obsolete
inventories to their estimated net realizable value.

Deferred Financing Costs

Costs relating to borrowings are deferred and
amortized to interest expense using the effective interest
method over the terms of the related borrowings. As of
December 31, 2002 and 2001, deferred financing costs of
$15,582,000 and $15,696,000 were recorded, net of accumulated
amortization of $7,090,000 and $6,988,000, respectively. The
amortization of deferred financing and debt issuance costs was
$102,000, $3,254,000, and $2,296,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. During the
first quarter of 2001, the Company recorded an approximate
$3,600,000 charge to income related to the deferred financing
costs related to its senior credit facility. Such charge was the
result of an amendment to the senior credit facility that
reduced the capacity from $925,000,000 to $850,000,0000.

37



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Rental Equipment

Rental equipment purchased by the Company is
recorded at cost and depreciated over its estimated service life
using the straight-line method. The range of service lives
estimated by management for rental equipment is 18 to
96 months. Rental equipment is depreciated to a residual
value ranging from zero to 79.0% of cost. Accumulated
depreciation on rental equipment was $213,862,000 and $154,586,000 at
December 31, 2002 and 2001, respectively.
Depreciation expense of rental equipment was $78,447,000, $66,499,000
and $74,144,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. Ordinary
maintenance and repair costs are charged to operations as
incurred. Expenditures that extend the useful life or increase
the capacity, efficiency or safety of rental equipment are
capitalized.

Effective as of July 1, 2000, the Company
revised the estimated service lives and residual values for
certain of its rental assets to better allocate depreciation
expense over the time such assets are in its rental fleet. This
change decreased the estimated service lives and increased the
residual values for certain rental assets. The change in
estimate resulted in a decrease in rental equipment depreciation
expense of approximately $9,800,000 and a decrease in net loss
of approximately $6,000,000 or $0.10 per diluted share for the
twelve months ended December 31, 2000.

As a result of the Companys current liquidity
and capital resource  constraints the Companys ability to
dispose of and replace its rental fleet within the service lives set
forth in its depreciation policy has been restricted. Currently
approximately 15.0% of the Companys rental fleet has
exceeded its service life as determined by the Companys
depreciation policy. As a result, the Company has extended the
service lives and reduced the related residual values of such assets
to record depreciation expense in the periods beyond its originally estimated service
life.

Property and Equipment

Property and equipment purchased in the ordinary
course of business by the Company is recorded at cost. Property
and equipment obtained through the acquisition of a business is
recorded at the estimated fair market value at the time of
acquisition. Depreciation and amortization are recorded on a
straight-line basis using an estimated residual value of zero to
10.0% over the following estimated useful lives:

|                                         |  |                                      
|---------------------------------------- |  | -------------------------------------
|Buildings and improvements               |  | 10-39 years, not to exceed lease term
|Furniture, fixtures and office equipment |  | 3-7 years                            
|Vehicles, delivery and shop equipment    |  | 5-10 years                           

Depreciation expense of property and equipment
was $15,203,000, $16,816,000 and $7,405,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. Ordinary
maintenance and repair costs are charged to expense as incurred.

Long-Lived Assets

The carrying value and estimated lives of
long-lived assets are reviewed if the facts and circumstances
suggest that the carrying value may be impaired or the useful
lives may require revision. If this review indicates that the
carrying value of long-lived assets will not be recoverable, as
determined based on the undiscounted cash flows of the
long-lived assets over the remaining amortization period, the
Companys carrying value of the long-lived assets will be
reduced by the amount by which carrying value exceeds fair
value. Management has reviewed the carrying value of the
Companys long-lived assets to be held and used in the
Companys operations (other than goodwill) and has
determined there has been no impairment of the carrying value
for any periods presented. The Company also reviewed the carrying
value of $28,746,000 of assets within its rental fleet that were held
for sale in the third quarter of 2002. This resulted in an impairment
charge, related to these assets. See  Note 7
Impairment of Rental Equipment.

Capitalized Interest

Interest cost incurred on capital expenditures
for assets constructed by the Company is capitalized and
included in the cost of such assets. Total interest cost
incurred by the Company was $34,389,000, $110,467,000 and
$101,427,000 for the years ended December 31, 2002, 2001 and
2000, respectively. Total interest capitalized was zero, zero and
$2,034,000 for the years ended December 31,
2002, 2001 and 2000, respectively.

38



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Intangible Assets Related to Acquired
Businesses

Prior to January 1, 2002, the Company recorded
intangible assets at cost and amortized them using the straight-line method over their estimated
useful lives of five years for covenants not to compete and
40 years for goodwill. When an intangible assets carrying
value exceeded associated expected operating cash flows, the Company
considered it to be impaired and wrote it down to fair value which
was determined based on discounted future cash flows.

As a result of the
significant historical and projected cash flow losses and the
uncertainty surrounding the Companys ability to
restructure its capital structure in a satisfactory manner under
the Chapter 11 Cases, the Company determined that the
carrying value of its net assets exceeded the projected future
undiscounted cash flows and, accordingly, the Company recognized
an operating charge for the permanent impairment of the entire
unamortized balance of intangible assets related to acquired
businesses of approximately $770,833,000 in the quarter ended
December 31, 2001.

The accumulated amortization of intangible
assets related to acquired businesses was zero, zero and $40,927,000
at December 31, 2002, 2001 and 2000,
respectively. Amortization expense of intangible assets was zero,
$19,903,000 and $20,348,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. See  Impact of
Recently Issued Accounting Standards.

Fair Value of Financial Instruments

The carrying amounts reported in the accompanying
consolidated balance sheets for cash and cash equivalents,
accounts receivable and accounts payable approximate fair value
due to the short-term nature of these accounts. The fair value of
prepetition debt as of
December 31, 2002 and 2001 is not determinable, due to the
uncertainties surrounding the repayment terms of this debt as a
result of the Chapter 11 proceedings.

Revenue Recognition

Rental revenue is recognized on a straight-line
basis as earned during the rental contract period. Equipment
rentals in the consolidated statements of operations include
revenue earned on equipment rentals, rental equipment delivery
and pick-up fees and fuel sales. Revenue from the sales of
equipment, parts and supplies and retail merchandise is
recognized at the time of delivery to, or pick-up by, the
customer. When used rental equipment is sold, the related cost
and accumulated depreciation are removed from the respective
accounts. Proceeds from the sale and the related book value of
the equipment sold are reported as revenue from sales of
equipment, merchandise, service, parts and supplies and cost of
sales of equipment, merchandise, service, parts and supplies,
respectively, in the accompanying consolidated statements of
operations.

39



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Advertising

Advertising costs are charged to expense as
incurred. The Company incurred advertising costs of $5,070,000,
$10,462,000 and $9,824,000 for the years ended December 31,
2002, 2001 and 2000, respectively.

Income Taxes

The Company accounts for income taxes under the
liability method pursuant to Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for
Income Taxes. Under the liability method, deferred tax
assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. Recognition
of deferred tax assets is limited to amounts considered by
management to be more likely than not with respect to
realization of those assets in future periods. The Company and
its wholly-owned subsidiaries file a consolidated federal income
tax return.

Concentrations of Credit Risk

Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist
principally of cash investments and accounts receivable. The
Company maintains cash and cash equivalents with high quality
financial institutions. Concentrations of credit risk with
respect to accounts receivable are limited because a large
number of diverse customers make up the Companys customer
base. No single customer represents greater than 10.0% of total
accounts receivable. The Company mitigates customer credit risk
through credit approvals, credit limits, and monitoring
procedures.

Stock-Based Compensation

The Company accounts for stock compensation
arrangements in accordance with Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to
Employees, and related
interpretations and accordingly, recognizes no compensation
expense for the stock compensation arrangements with employees
or directors since the stock options are granted at exercise
prices at or greater than the fair market value of the shares at
the date of grant and follows the new disclosure requirements of SFAS
No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure. See  Impact of Recently
Issued Accounting Standards below for further discussion.

Pro forma information regarding net loss
and loss per share is required by SFAS No. 123,
Accounting for Stock Based Compensation, as if the
Company had accounted for its granted employee stock options
under the fair value method of SFAS No. 123. The Company granted
no options in 2002. The
Companys pro forma net loss, pro forma loss per share and pro forma weighted average fair value of
options granted in 2002, 2001 and 2000 (with related assumptions) would have been as
follows:

|                                                       |  |                                       |          |      |  |      |          |   |  |   |         |   | 
|------------------------------------------------------ |  | ------------------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | ------- | - | 
|                                                       |  | Year Ended                           
|                                                       |  | December 31,                         
|                                                       |  |                                      
|                                                       |  | 2002                                  |          | 2001 |  | 2000
|                                                       |  |                                       |          |      |  |     
|                                                       |  |                                      
|                                                       |  | (In thousands, except per share data)
|Reported net loss                                      |  | $                                     | (160,629 | )    |  | $    | (942,397 | ) |  | $ | (73,690 | )
|Pro forma stock-based compensation expense, net of
tax |  | $                                     | (2,486   | )    |  | $    | (5,346   | ) |  | $ | (8,751  | )
|                                                       |  |                                       |          |      |  |      |          |   |  |   |         |  
|Pro forma net loss                                     |  | $                                     | (163,115 | )    |  | $    | (947,743 | ) |  | $ | (82,441 | )
|                                                       |  |                                       |          |      |  |      |          |   |  |   |         |  
|Reported loss per share, basic and diluted             |  | $                                     | (2.80    | )    |  | $    | (16.43   | ) |  | $ | (1.27   | )
|Pro forma loss per share, basic and diluted            |  | $                                     | (2.84    | )    |  | $    | (16.52   | ) |  | $ | (1.42   | )
|Weighted average fair value of options granted         |  | $                                     |         |      |  | $    | 0.60     |   |  | $ | 3.10    |  
|Expected life (years)                                  |  |                                       |         |      |  |      | 7        |   |  |   | 7       |  
|Risk-free interest rate                                |  |                                       |         |      |  |      | 4.88     | % |  |   | 5.78    | %
|Expected volatility                                    |  |                                       |         |      |  |      | 155.28   | % |  |   | 87.30   | %
|Dividend yield                                         |  |                                       |         |      |  |      | 0.00     | % |  |   | 0.00    | %

Impact of Recently Issued Accounting
Standards

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

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

40



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

annual assessment for impairment in value by
applying a fair value based test. Any applicable impairment loss
is the amount, if any, by which the implied fair value of
goodwill is less than the carrying or book value. SFAS
No. 142 is effective for fiscal years beginning after
December 15, 2001. An impairment loss for goodwill arising
from the initial application of SFAS No. 142 is to be
reported as a cumulative effect of a change in accounting
principle. The Company adopted the provisions of SFAS
No. 142, as appropriate. The
adoption did not have any impact on the Companys consolidated
financial statements as the Companys entire intangible assets
related to acquired businesses
balance was written-off as of December 31, 2001 as a result
of the Companys significant historical and projected cash
flow losses and the uncertainty surrounding the Companys
ability to restructure its capital structure in a satisfactory
manner under the Chapter 11 Cases.

The following table
compares actual results of operations for the year ended
December 31, 2002 with proforma results of operations for the
years ended December 31, 2001 and 2000 assuming that the Company
did not amortize intangible assets
related to acquired businesses in the years ended 2001 and 2000 applying
the provisions of SFAS No. 142 to such years (in thousands,
except per share data):

|                                                                                          |                   |   |              |       |      |   |          |        |   |   |         |       |   | 
|----------------------------------------------------------------------------------------- | ----------------- | - | ------------ | ----- | ---- | - | -------- | ------ | - | - | ------- | ----- | - | 
|                                                                                          |                   |   | Year Ended  
|                                                                                          |                   |   | December 31,
|                                                                                          |                   |   |             
|                                                                                          |                   |   | 2002         |       | 2001 |   | 2000     |       
|                                                                                          |                   |   |              |       |      |   |          |       
|Reported
net loss                                                                         |                   | $ | (160,629     | )     |      | $ | (942,397 | )      |   | $ | (73,690 | )     |  
|Amortization
of intangible assets related to acquired businesses                          |                   |   |             |       |      |   | 19,903   |        |   |   | 20,348  |       |  
|                                                                                          |                   |   |              |       |      |   |          |        |   |   |         |       |  
|Net
loss excluding amortization of intangible assets related to acquired
businesses       |                   | $ | (160,629     | )     |      | $ | (922,494 | )      |   | $ | (53,342 | )     |  
|                                                                                          |                   |   |              |       |      |   |          |        |   |   |         |       |  
|Reported
loss per share                                                                   |                   |   |              |       |      |   |          |        |   |   |         |       |  
|                                                                                          | Basic
and Diluted |   | $            | (2.80 | )    |   | $        | (16.43 | ) |   | $       | (1.27 | ) | 
|                                                                                          |                   |   |              |       |      |   |          |        |   |   |         |       |  
|Loss
per share excluding amortization of intangible assets related to
acquired businesses |                   |   |              |       |      |   |          |        |   |   |         |       |  
|                                                                                          | Basic
and Diluted |   | $            | (2.80 | )    |   | $        | (16.08 | ) |   | $       | (0.92 | ) | 
|                                                                                          |                   |   |              |       |      |   |          |        |   |   |         |       |  

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This pronouncement addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets. This pronouncement supersedes SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and
the accounting and reporting provisions of APB No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of a segment of business (as previously defined in that
opinion). SFAS No. 144 is effective for financial
statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The adoption of SFAS
No. 144, as of January 1, 2002 did not have a material impact on the consolidated
financial statements of the Company.

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

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

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. This statement amends
SFAS No. 123, Accounting for Stock-Based Compensation. The provisions of this
statement are effective for interim and annual financial statements for fiscal
years ending after December 15, 2002. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Also, this statement amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company continues to apply APB No. 25 recognition and measurement
principles, but has complied with the new disclosure requirements of this
statement. See   Note 14  Stock Options for these disclosures.

41



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4.  DEBT

Debt, all of which is subject to compromise with
the exception of the debtor-in-possession financing facility
(the DIP Financing Facility) and the post-petition note, consists of the
following:

|                                                                                                                                                                             |                                         |                |           |         |           |   |           |         |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | -------------- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                                                                                                                                                             |                                         |               
|                                                                                                                                                                             |                                         | December 31,  
|                                                                                                                                                                             |                                         |               
|                                                                                                                                                                             |                                         | 2002           |           | 2001   
|                                                                                                                                                                             |                                         |                |           |        
|                                                                                                                                                                             |                                         |               
|                                                                                                                                                                             |                                         | (in thousands)
|Notes payable to financial institutions:                                                                                                                                     |                                         |                |           |         |           |   |           |        
|                                                                                                                                                                             | Term loan due July 2006                 |                | $         | 393,798 |           |   | $         | 395,364 |          
|                                                                                                                                                                             | Revolving credit facility due July 2004 |                |           | 355,481 |           |   |           | 355,903 |          
|DIP financing facility                                                                                                                                                       |                                         |                | 12,252    |         |           |   |          |        
|10.375% Senior Subordinated Notes due
    December 15, 2008 with interest due semi-annually each
    June 15 and December 15                                                 |                                         |                | 175,000   |         |           |   | 175,000   |        
|Post-petition notes payable, bearing interest at 7.0%, interest
payable quarterly and maturities through October 2005, secured by
equipment                                  |                                         |                | 1,976     |         |           |   |          |        
|Subordinated promissory notes, bearing interest
    at 6.0% to 8.5%, interest payable quarterly and maturities
    through November 2002                                     |                                         |                | 625       |         |           |   | 625       |        
|Subordinated convertible promissory notes,
    bearing interest at 6.0% to 8.5%, interest payable quarterly and
    maturities through December 2006                         |                                         |                | 98,798    |         |           |   | 99,782    |        
|Rental equipment financing obligations, secured
    by equipment, payable in monthly installments, through January
    2005                                                  |                                         |                | 18,965    |         |           |   | 21,770    |        
|Note payable, with interest at the commercial
    paper rate plus 2.05% to 2.25%, payable in monthly installments
    through September 2004, secured by equipment           |                                         |                | 6,773     |         |           |   | 7,083     |        
|Note payable, with interest at the London
    Interbank Offered Rate plus 2.75%, payable in monthly
    installments secured by equipment                                    |                                         |                | 7,824     |         |           |   | 7,909     |        
|Equipment notes, bearing interest at 6.2% to
    9.25% or at the Prime Rate less 0.25%, payable in various
    monthly installments through April 2003, secured by equipment |                                         |                | 29,454    |         |           |   | 34,105    |        
|Note payable to related party (see Note 17)                                                                                                                                  |                                         |                |          |         |           |   | 1,000     |        
|Other                                                                                                                                                                        |                                         |                | 11        |         |           |   | 11        |        
|                                                                                                                                                                             |                                         |                |           |         |           |   |           |        
|                                                                                                                                                                             |                                         | Total debt     |           | $       | 1,100,957 |   |           | $       | 1,098,552 | 
|                                                                                                                                                                             |                                         |                |           |         |           |   |           |        
|Debt not subject to compromise                                                                                                                                               |                                         | $              | 14,228    |         |           | $ |          |        
|                                                                                                                                                                             |                                         |                |           |         |           |   |           |        
|Debt subject to compromise                                                                                                                                                   |                                         | $              | 1,086,729 |         |           | $ | 1,098,552 |        
|                                                                                                                                                                             |                                         |                |           |         |           |   |           |        

42



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

DIP
Financing Facility

In December 2002, the Company amended and restated the DIP
Financing Facility to increase availability up to $75,000,000
(including up to $30,000,000 of letters of credit) and to extend its
term until June 30, 2003. Under the terms of the DIP Financing Facility, availability is subject to
a borrowing base based upon eligible rental equipment and trade accounts receivable. Amounts
borrowed under the DIP Financing Facility bear interest per
annum equal to the agents capital index rate plus 2.00%. In
addition to a $500,000 commitment fee and a $750,000 syndication fee, there is an
unused commitment fee of 0.50%, a letter of credit fee of 3.25%,
and a letter of credit fronting fee of up to 0.25%. The DIP Financing
Facility is secured by super-priority claims and liens on the
real and personal assets of the Company that also secure the
prepetition senior credit facility. The DIP Financing Facility
contains financial covenants requiring a minimum operating cash flow, as well as
other covenants that limit, among other things, indebtedness,
liens, sales of assets, capital expenditures, investments, and
prohibit dividend payments. In connection with the DIP Financing Facility,
the Companys prepetition senior credit facility was
amended to provide for subordination of the liens (to the liens
under the DIP Financing Facility) and use of cash collateral.

As of
December 31, 2002 the Company had $12,252,000 in cash borrowings
and had $19,999,000 in letters of credit outstanding under the DIP
Financing Facility. As of March 25, 2003 the Company had
$24,860,000 in cash
borrowings and had $19,999,000 in letters of credit outstanding under
the DIP Financing Facility.

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

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

43



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The aggregate contractually stated maturities of
debt, including the principal portion of rental equipment
financing obligations, is $183,012,000, $394,196,000,
$17,532,000, $331,217,000 and zero for the five years
ending December 31, 2003, 2004, 2005, 2006 and 2007
respectively, and $175,000,000 thereafter.

Rental equipment financing obligations consist of
leases which meet the criteria for treatment as capital leases
under accounting principles generally accepted in the United
States. The total amount of assets recorded under these leases
is $30,501,000 and $33,771,000 and the accumulated depreciation
related to these assets is $7,711,000 and $6,180,000 at
December 31, 2002 and 2001, respectively. Contractually
stated future minimum lease payments under capital leases at
December 31, 2002 total $11,769,000, $8,283,000,
$2,461,000 and $547,000 for the years ending December 31, 2003, 2004, 2005 and 2006, respectively. There are no
payments under capital leases subsequent to the year ending
December 31, 2006. The amount representing interest relating to
these lease payments is $4,095,000. Amortization relating to
these assets is included in rental equipment depreciation.

5.     LIABILITIES
SUBJECT TO COMPROMISE

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

As a result of the Chapter 11 Cases, no
principal or interest payments may be made on unsecured
prepetition debt without Bankruptcy Court approval or until a
plan or plans of reorganization providing for the repayment
terms has been confirmed by the Bankruptcy Court and becomes
effective. Therefore, interest on prepetition unsecured
obligations, as well as amortization of deferred financing costs
related to such debt, has not been accrued or recorded after the
Petition Date. Contractual interest expense not accrued or recorded
on certain prepetition debt totaled approximately $58,764,000 and
$2,395,000 for the
years ended December 31, 2002 and 2001, respectively.

Liabilities subject to compromise consists of the
following:

|                                                              |                                         |                |           |           |  |   |           |           | 
|------------------------------------------------------------- | --------------------------------------- | -------------- | --------- | --------- |  | - | --------- | --------- | 
|                                                              |                                         |               
|                                                              |                                         | As of         
|                                                              |                                         | December 31,  
|                                                              |                                         |               
|                                                              |                                         | 2002           |           | 2001     
|                                                              |                                         |                |           |          
|                                                              |                                         |               
|                                                              |                                         | (In thousands)
|Debt                                                          |                                         | $              | 1,086,729 |           |  | $ | 1,098,552 |          
|Accounts payable                                              |                                         |                | 16,276    |           |  |   | 16,641    |          
|Accrued expenses                                              |                                         |                | 39,341    |           |  |   | 43,434    |          
|Personal property, real estate and other
    non-income taxes |                                         |                | 4,946     |           |  |   | 4,517     |          
|                                                              |                                         |                |           |           |  |   |           |          
|                                                              | Total liabilities subject to compromise |                | $         | 1,147,292 |  |   | $         | 1,163,144 | 
|                                                              |                                         |                |           |           |  |   |           |          

44



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6.     REORGANIZATION
ITEMS, NET

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

|                  |                            |                |        |        |  |   |       |        | 
|----------------- | -------------------------- | -------------- | ------ | ------ |  | - | ----- | ------ | 
|                  |                            |               
|                  |                            | Year Ended    
|                  |                            | December 31,  
|                  |                            |               
|                  |                            | 2002           |        | 2001  
|                  |                            |                |        |       
|                  |                            |               
|                  |                            | (In thousands)
|Professional fees |                            | $              | 23,230 |        |  | $ | 4,102 |       
|Employee expenses |                            |                | 5,229  |        |  |   | 2,000 |       
|Facility closures |                            |                | 2,095  |        |  |   | 5,231 |       
|Interest income   |                            |                | (240   | )      |  |   |      |       
|Other             |                            |                | 1,747  |        |  |   |      |       
|                  |                            |                |        |        |  |   |       |       
|                  | Total reorganization items |                | $      | 32,061 |  |   | $     | 11,333 | 
|                  |                            |                |        |        |  |   |       |       

Professional
fees consist of costs for financial
advisors, legal counsel, consulting and other costs related to
professional services incurred. Employee expenses primarily consist
of a severance and retention program approved by the Bankruptcy Court
to ensure the retention of certain key employees. Facility closure
costs relate to the write-off of fixed assets, primarily leasehold
improvements, of the stores identified for closure in the
reorganization. Interest income consists of interest earned on
excess cash balances. Other primarily consists of director and
officer insurance purchased as a result of the Chapter 11 Cases.
All but $2,019,000 of the reorganization items were cash charges.

7. IMPAIRMENT OF RENTAL EQUIPMENT

During 2002 the Company performed
a review of its rental equipment fleet identifying equipment with low
utilization and deployment. Based on this review, the Company decided to sell certain assets within its rental fleet with a
carrying value of $28,746,000. In
conjunction with this sale, the Company has performed a
review for impairment in accordance with SFAS No. 144,
Accounting for the Impairment of Long-Lived Assets.
Accordingly, a portion of the equipment with a carrying value of
$28,036,000 was adjusted to its fair value less cost to sell. The
resulting $16,923,000 impairment
loss was recorded in the accompanying statement of
operations.

8.  STOCKHOLDERS
EQUITY

Preferred Stock

The Company has authorized 5,000,000 shares of
$0.01 par value preferred stock. In July and August 1999,
pursuant to a Preferred Stock Purchase Agreement, the Company
sold an aggregate of 100,000 shares of Series A Convertible
Preferred Stock (Preferred Stock) to NR Holdings
Limited and NR Investments Limited, affiliates of Investcorp,
S.A., for an aggregate price of $100,000,000. The net proceeds
of the sale of the Preferred Stock were used to pay down amounts
outstanding under the prepetition senior credit facility. The
100,000 shares of Preferred Stock are convertible into
14,285,714 shares of the Companys $0.01 par value common stock
(Common Stock), based on a liquidation
preference of $1,000 per share of Preferred Stock and a
conversion price of $7.00 per share of Common Stock. The holders
of the Preferred Stock were granted certain demand and
piggy-back registration rights with respect to the shares of the
Companys Common Stock issuable upon conversion of the
Preferred Stock, pursuant to a Registration Rights Agreement
among the Company, NR Holdings Limited, NR Investments Limited
and certain of the Companys stockholders. Upon certain
changes of control of the Company (approved by the
Companys Board of Directors), the Company will be required
to offer to purchase shares of Preferred Stock for a purchase
price per share equal to the liquidation preference plus 8%
compounded annually from the date of issuance. The terms of the
Preferred Stock are set forth in the Preferred Stock Certificate
of Designation along with the Preferred Stock Purchase Agreement
and the Registration Rights Agreement.

In August and September 2000, pursuant to a
Preferred Stock Purchase Agreement, the Company sold an
aggregate of 100,000 shares of Series B Convertible
Preferred Stock (the Series B Preferred Stock),
to NR2 Holdings Limited, DB Capital Investors, L.P., J.P.
Morgan Capital Corporation and Sixty Wall Street Fund, L.P. for
an aggregate price of $100,000,000. The net proceeds of the sale
of the Series B Preferred Stock were used to pay down
amounts outstanding under the prepetition senior credit
facility. The 100,000 shares of Series B Preferred Stock
are convertible into 22,222,222 shares of Common Stock, based on
a liquidation preference of $1,000 per share of Series B
Preferred Stock and a conversion price of $4.50 per share of
Common Stock. The holders of the Series B Preferred Stock
were granted certain demand and piggy-back registration rights
with respect to the shares of the Companys Common Stock
issuable upon conversion of the

45



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Series B Preferred Stock, pursuant to a
Registration Rights Agreement among the Company, such holders
and certain of the Companys stockholders. Upon certain
changes of control of the Company (approved by the
Companys Board of Directors), the Company will be required
to offer to purchase shares of Series B Preferred Stock for
a purchase price per share equal to the liquidation preference
plus 8% compounded annually from the date of issuance. The terms
of the Series B Preferred Stock are set forth in the
Series B Preferred Stock Certificate of Designation along
with the Preferred Stock Purchase Agreement and the Registration
Rights Agreement.

Pursuant to the Proposed Plan, no value or other
distribution will be made on account of the Companys equity
securities.

Common Stock

In May 2000, the Board of Directors of the
Company approved the repurchase from time to time of up to
$5,000,000 of the Companys Common Stock. As of
December 31, 2000, the Company repurchased 919,000 shares
of its Common Stock in the open market for a cost of
approximately $2,675,000. In January 2001, the Company purchased
146,200 additional shares of its Common Stock in the open
market for a cost of approximately $205,000. Through January
2001, an aggregate of 1,065,200 shares of Common Stock have
been acquired under this program for an aggregate purchase price
of approximately $2,880,000. These shares have been recorded as
treasury stock in the accompanying consolidated financial
statements. Since January 2001, no additional shares have been
purchased.

In June 2001, the New York Stock Exchange (the
NYSE) notified the Company that the Companys
stock price had been below the NYSEs continued listing
criteria for minimum share price of $1.00 over a 30 day
trading period. In addition, in November 2001, the NYSE notified
the Company that the Companys market capitalization had
been below the NYSEs continued listing criteria for
minimum market capitalization of $15,000,000 over a 30 day
trading period. In November 2001, the NYSE advised the Company
that the they would suspend the Companys Common Stock from
trading on the NYSE and seek to delist the stock from the NYSE. In December
2001, the NYSE delisted the Common Stock from the NYSE.

The
Companys stock began trading on the over-the-counter
electronic bulletin board, commonly known as the pink sheets
(the OTCBB) during November 2001. In May 2002, the Company was notified by the
OTCBB that as a result of the Companys late filings of
required reports under the Securities Exchange Act of 1934, the
Companys stock would not be eligible for trading on the
OTCBB beginning June 2002, unless all such required reports were
filed. In June 2002, the Companys Common Stock was removed from
the OTCBB.

Pursuant to the Proposed Plan, no value or other
distribution will be made on account of the Companys equity
securities.

9.  COMMITMENTS AND
CONTINGENCIES

Operating Leases

The Company leases rental equipment, real estate
and certain office equipment under operating leases. Certain
real estate leases require the Company to pay maintenance,
insurance, taxes and certain other expenses in addition to the
stated rentals. Contractually stated future minimum lease
payments under noncancelable operating leases (excluding
rejected leases) at December 31, 2002 total $172,013,000,
$80,705,000, $39,811,000, $16,227,000 and $13,877,000 for the
years ending December 31, 2003, 2004, 2005, 2006 and 2007,
respectively and $29,936,000, thereafter. Lease expense under
noncancelable operating leases was $113,285,000, $117,746,000 and
$96,766,000 for the years ended December 31, 2002, 2001 and
2000, respectively. As part of the Chapter 11 Cases, the Company
is reviewing the legal status of its equipment leases (and other
leases), including the issue of whether such leases should be
recharacterized as financing arrangements for legal purposes in
the Chapter 11 Cases. The Company is also renegotiating certain equipment leases as part of the Chapter 11 Cases. Subject to the approval of the Bankruptcy Court, the Company has entered or expects to enter into settlement agreements with respect to such equipment leases.

46



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Insurance

In addition to group medical coverage, effective
September 1, 2000, the Companys primary auto
liability, commercial general liability, and, in most states,
its workers compensation liability insurance coverages
were issued under an arrangement with an insurance carrier
pursuant to which the Company effectively self-insures such
primary coverage. Above the respective primary coverages, the Company has obtained commercial excess/umbrella and excess
workers compensation liability stop loss coverages on a
fully insured basis. The Company's exposure to losses for the primary coverages
are accrued based upon the fully developed liability for reported
claims incurred and fully developed estimate for claims incurred but not
reported. These liabilities are not discounted.

Legal Matters

On December 17, 2001, the Debtors filed the
Chapter 11 Cases in the Bankruptcy Court. The cases were
consolidated for procedural purposes and designated as Case
No. 01-11628 (PJW). In connection with the
Chapter 11 Cases, proofs of claim have been
filed against the Debtors with the Bankruptcy Court or with the
Debtors claims and noticing agent. The Debtors currently are
reconciling filed claims that differ in nature,
classification or amount from the Debtors books and
records through negotiations with the applicable claimants and
the filing and prosecution of objections to such claims. See
 Note 22  Subsequent
Events.

The Debtors were party to various legal
proceedings arising in the ordinary course of their business
prior to the filing of the Chapter 11 Cases, none of which
were material to the Debtors financial condition or
results of operations. All such proceedings have been stayed as
of the Petition Date, unless the stay has been or will be lifted
by the Bankruptcy Court, and any liabilities related to such
claims are subject to compromise pursuant to a plan of
reorganization in the Chapter 11 Cases.

The Debtors have also become party to legal
proceedings arising in the ordinary course of business after the
Petition Date, none of which are material to its financial
condition or results of operations.

Environmental Matters

The Company and its operations are subject to
various laws and related regulations governing environmental
matters. Under such laws, an owner or operator of real estate
may be liable for the costs of removal or remediation of certain
hazardous or toxic substances located on or in, or emanating
from, such property, as well as investigation of property
damage. As part of the Companys acquisition due diligence
and prior to leasing any new facilities, the Company performs
extensive environmental analyses on the sites to be operated by
the Company. Any required remediation has typically been the
responsibility of the prior owner or landlord. The Company does
not believe there are currently any environmental liabilities
which should be recorded or disclosed in the accompanying
consolidated financial statements. The Company believes the
possibility is remote that its compliance with various laws and
regulations relating to the protection of the environment will
have a material effect on its capital expenditures, future
earnings or financial position.

10.  2000 RESTRUCTURING
PLAN

During the fourth quarter of 2000, the
Companys management implemented a plan to restructure
certain of its operations to address a significant imbalance
between the Companys revenue and costs. During 2001, the
Company implemented additional actions to restructure certain of
its operations pursuant to the 2000 restructuring plan.

47



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The restructuring plan was comprised of the
following major components:



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

Pursuant to the restructuring plan, during the
fourth quarter of 2000, the Company recorded a pre-tax
restructuring charge of approximately $72,005,000 and during
2001, the Company recorded an additional net pre-tax
restructuring charge of approximately $9,653,000. There was no
activity in 2002 related to these charges. The components
of these charges, along with the activity for 2000 (of which
$21,807,000 was non-cash) and 2001 related to these charges, are
presented in the following table (in thousands).

|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |  |   |       | 
|------------------------------------ |  | ------------- | ------ | ---------- |  | ------------- | ------- | ---------- |  | ---------- | ------ | ------------ |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ------- | - |  | - | ----- |  |  | - | ----- | 
|                                     |  |               |        |            |  |               |         |           
|                                     |  | 2000 Activity |        |            |  | 2001 Activity |         |           
|                                     |  |               |        |            |  |               |         | Reserve   
|                                     |  |               |        | Reserve    |  |               |         |            |  | Balance at
|                                     |  | Amounts       |        |            |  | Balance at    |         | Amounts    |  | Deductions |        | December 31,
|                                     |  | Charged       |        |            |  | December 31,  |         | Charged to |  |            |        |             
|                                     |  | to Income     |        | Deductions |  | 2000          |         | Income     |  | Cash       |        | Non-Cash     |  | 2001 |       | 2002
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |     
|Rental fleet disposition             |  | $             | 42,693 |            |  | $             | (6,202  | )          |  | $          | 36,491 |              |  | $    | 9,685 |      |  | $ |       |   |  | $ | (46,176 | ) |  | $ |      |  |  | $ |      | 
|Information systems abandonment      |  |               | 11,530 |            |  |               | (10,630 | )          |  |            | 900    |              |  |      |      |      |  |   | (900   | ) |  |   |        |   |  |   |      |  |  |   |      | 
|Employee termination severance costs |  |               | 10,156 |            |  |               | (3,520  | )          |  |            | 6,636  |              |  |      | 762   |      |  |   | (5,583 | ) |  |   |        |   |  |   | 1,815 |  |  |   | 1,815 | 
|Facility closures                    |  |               | 7,626  |            |  |               | (5,863  | )          |  |            | 1,763  |              |  |      | (794  | )    |  |   | (576   | ) |  |   | (69     | ) |  |   | 324   |  |  |   | 324   | 
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |  |   |      
|                                     |  | $             | 72,005 |            |  | $             | (26,215 | )          |  | $          | 45,790 |              |  | $    | 9,653 |      |  | $ | (7,059 | ) |  | $ | (46,245 | ) |  | $ | 2,139 |  |  | $ | 2,139 | 
|                                     |  |               |        |            |  |               |         |            |  |            |        |              |  |      |       |      |  |   |        |   |  |   |         |   |  |   |       |  |  |   |      

The charge for rental fleet disposition
represents estimated losses on assets identified for sale under
the restructuring plan. As of December 31, 2001, all of the
rental equipment that was identified for sale under the
restructuring plan had been sold.

The restructuring plan includes the termination
and payment of related severance benefits under the
Companys existing severance plan and agreements for
approximately 450 employees, all of whom had been terminated as
of December 31, 2001.

During 2001, the Company modified its
restructuring plan related to facility closures, primarily as a
result of changes to its planned openings of NationsRent rental
centers within select Lowes home improvement stores. As a
result of the changes to the restructuring plan, three of the
rental facilities originally identified for closure will remain
open and one additional rental facility was identified for
closure. The impact of such changes was not material to the
original restructuring charge recorded for store closures. All
16 stores that have been identified for closure under the
restructuring plan, as modified, have been closed as of
December 31, 2001. Lease payments for the facility closures
extend into 2009 pursuant to the terms of the facility lease
agreements. However, during the first quarter of 2002, the
Company received approval from the Bankruptcy Court to reject
the facility lease agreements. As such, the remaining reserve
for such future lease payments was reversed to income, which
resulted in a $794,000 reduction of the previously recorded
charge. The remaining reserve balance at December 31, 2002
for facility closures relates to certain office equipment leases
that the Company has not yet received Bankruptcy Court approval
to reject.

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

11.     DERIVATIVE
FINANCIAL INSTRUMENTS

Effective January 1, 2001 the Company
adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. This
statement establishes accounting and reporting standards for

48



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

derivative instruments and hedging activities.
This standard requires that all derivative instruments be
recorded in the balance sheet as either an asset or liability
measured at its fair value. The provisions of SFAS No. 133
require that changes in a derivatives fair value be
recognized immediately in earnings unless specific hedge
accounting criteria are met.

The Company was party to interest rate swaps until
April 2002 when all swaps had terminated or expired. The Company used
swaps to limit its exposure to and benefits
from interest rate fluctuations on variable rate debt to within
a certain range of rates. Derivative
financial instruments are not used for trading or speculative
purposes. As of December 31, 2001, the amount covered by
swaps was $195,000,000, with effective interest rates between
6.58% and 6.80%. The swap agreements for $165,000,000 and
$30,000,000 of debt expired in February and October of 2002,
respectively. The Company recognized its derivatives in the
balance sheet at fair value, representing a liability of
approximately $2,697,000 as of December 31, 2001 which is
included in other accrued liabilities in the accompanying
consolidated balance sheet. This amount is included in liabilities
subject to compromise. The Company determined the
interest rate swaps to be ineffective cash flow hedges, as
defined by SFAS No. 133. In accordance with the transition
provisions of SFAS No. 133, the Company recorded a
$1,359,000 charge net of $968,000 of income tax benefits, or
$0.02 per share, which is recorded in the consolidated statement
of operations for the year ended December 31, 2001 as a
cumulative effect of change in accounting principle. The impact
of the change in value of the Companys swaps for the year
ended December 31, 2001 resulted in a net charge to
interest expense of $369,000.

12.  INCOME TAXES

The components of the provision (benefit) for
federal and state income taxes are summarized as follows:

|         |  |                |       |  |      |         |   |  |   |         |   | 
|-------- |  | -------------- | ----- |  | ---- | ------- | - |  | - | ------- | - | 
|         |  |               
|         |  | Year Ended    
|         |  | December 31,  
|         |  |               
|         |  | 2002           | 2001  |  | 2000
|         |  |                |       |  |     
|         |  |                |       |  |     
|         |  | (in thousands)
|Current  |  | $              | 100   |  | $    | 123     |   |  | $ | 100     |   | 
|Deferred |  |                | (100) |  |      | (10,906 | ) |  |   | (24,952 | ) | 
|         |  |                |       |  |      |         |   |  |   |         |   | 
|         |  | $              |      |  | $    | (10,783 | ) |  | $ | (24,852 | ) | 
|         |  |                |       |  |      |         |   |  |   |         |   | 
|Federal  |  | $              |      |  | $    | (8,967  | ) |  | $ | (20,264 | ) | 
|State    |  |                |      |  |      | (1,816  | ) |  |   | (4,588  | ) | 
|         |  |                |       |  |      |         |   |  |   |         |   | 
|         |  | $              |      |  | $    | (10,783 | ) |  | $ | (24,852 | ) | 
|         |  |                |       |  |      |         |   |  |   |         |   | 

A reconciliation of the statutory federal income
tax rate to the effective income tax rate is as follows:

|                                               |  |              |       |      |  |       |   |  |  |      |   | 
|---------------------------------------------- |  | ------------ | ----- | ---- |  | ----- | - |  |  | ---- | - | 
|                                               |  |             
|                                               |  | Year Ended  
|                                               |  | December 31,
|                                               |  |             
|                                               |  | 2002         |       | 2001 |  | 2000 
|                                               |  |              |       |      |  |      
|Federal statutory income tax rate              |  |              | 35.0  | %    |  | 35.0  | % |  |  | 35.0 | % | 
|Non-deductible goodwill                        |  |              |      |      |  | (9.6  | ) |  |  | (2.5 | ) | 
|Non-deductible reorganization costs            |  |              | (3.6  | )    |  |      |   |  |  |     |   | 
|State income taxes, net of federal tax benefit |  |              | 3.6   |      |  | 2.9   |   |  |  | 4.0  |   | 
|Change in valuation allowance                  |  |              | (34.8 | )    |  | (27.1 | ) |  |  | (9.1 | ) | 
|Other, net                                     |  |              | (0.2  | )    |  | (0.1  | ) |  |  | (2.2 | ) | 
|                                               |  |              |       |      |  |       |   |  |  |      |   | 
|                                               |  |              |      | %    |  | 1.1   | % |  |  | 25.2 | % | 
|                                               |  |              |       |      |  |       |   |  |  |      |   | 

The benefit for income taxes for
the year ended December 31, 2001 was $10,783,000
of which, $968,000 is included in the cumulative effect of
change in accounting principle, net of income tax benefit.

49



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Deferred income taxes reflect the tax effects of
temporary differences between the carrying value of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The significant components of
deferred income tax assets and liabilities are as follows:

|                                 |                                           |                |        |          |   |        |          |   | 
|-------------------------------- | ----------------------------------------- | -------------- | ------ | -------- | - | ------ | -------- | - | 
|                                 |                                           |               
|                                 |                                           | December 31,  
|                                 |                                           |               
|                                 |                                           | 2002           |        | 2001    
|                                 |                                           |                |        |         
|                                 |                                           |               
|                                 |                                           | (in thousands)
|Deferred income tax assets, net: |                                           |                |        |          |   |        |          |  
|                                 | Accrued liabilities and other reserves    |                | $      | 2,019    |   | $      | 10,021   |   | 
|                                 | Restructuring reserve                     |                |        | 834      |   |        | 834      |   | 
|                                 | Bad debt reserve                          |                |        | 6,562    |   |        | 10,182   |   | 
|                                 | Net operating loss carryforwards          |                |        | 245,460  |   |        | 169,499  |   | 
|                                 | Intangible assets                         |                |        | 148,673  |   |        | 162,327  |   | 
|                                 | Alternative minimum tax and other credits |                |        | 1,714    |   |        | 1,714    |   | 
|                                 | Other                                     |                |        | 358      |   |        | 494      |   | 
|                                 | Valuation allowance                       |                |        | (318,821 | ) |        | (262,982 | ) | 
|                                 |                                           |                |        |          |   |        |          |  
|                                 |                                           |                | 86,799 |          |   | 92,089 |          |  
|Deferred income tax liabilities: |                                           |                |        |          |   |        |          |  
|                                 | Depreciable assets                        |                |        | (86,799  | ) |        | (92,089  | ) | 
|                                 |                                           |                |        |          |   |        |          |  
|                                 | Net deferred income tax liabilities       |                | $      |         |   | $      |         |   | 
|                                 |                                           |                |        |          |   |        |          |  

At December 31, 2002, the Company had Net
Operating Loss (NOL) carryforwards for federal and
state income tax purposes of $629,385,000, that expire in the
years 2006 through 2022. At December 31, 2002, the Company
had alternative minimum tax credit and general business credit
carryforwards of $1,714,000. These credits are available to
offset future regular income tax that is in excess of the
alternative minimum tax in such year.

During 2001, a large number of shares of Common
Stock of the Company were exchanged on the open market. If it is
determined that these transactions result in an ownership
change as defined under Internal Revenue Code
(IRC) §382, the Companys ability to
utilize its NOL carryforwards and other tax attributes including
tax credit carryforwards may be limited in accordance with the
IRC §382.

The Company has recorded a valuation allowance
for deferred tax assets of $318,821,000 and $262,982,000 at
December 31, 2002 and 2001, respectively, as management
believes it is likely that those deferred tax assets will not be
realized.

50



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

13.  LOSS PER
SHARE

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

|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |        |   | 
|-------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------------- | -------- | ------ | - | ---- | -------- | ------ | - | - | ------- | ------ | - | 
|                                                                           |                                                                               |                              
|                                                                           |                                                                               | Year Ended                   
|                                                                           |                                                                               | December 31,                 
|                                                                           |                                                                               |                              
|                                                                           |                                                                               | 2002                          |          | 2001   |   | 2000
|                                                                           |                                                                               |                               |          |        |   |     
|Numerator:                                                                 |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|Net loss                                                                   |                                                                               | $                             | (160,629 | )      |   | $    | (942,397 | )      |   | $ | (73,690 | )     
|Interest expense on convertible subordinated
    debt, net of income taxes |                                                                               |                               |         |        |   |      |         |        |   |   |        |       
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|Numerator  diluted loss per
    share                                     |                                                                               | $                             | (160,629 | )      |   | $    | (942,397 | )      |   | $ | (73,690 | )     
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|Denominator:                                                               |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|                                                                           | Denominator for basic loss per
    share  weighted-average shares            |                               |          | 57,364 |   |      |          | 57,364 |   |   |         | 58,165 |  
|                                                                           | Effect of dilutive securities:                                                |                               |          |        |   |      |          |        |   |   |         |        |  
|                                                                           |                                                                               | Convertible subordinated debt |          |        |  |      |          |        |  |   |         |        |  | 
|                                                                           |                                                                               | Convertible preferred stock   |          |        |  |      |          |        |  |   |         |        |  | 
|                                                                           |                                                                               | Employee stock options        |          |        |  |      |          |        |  |   |         |        |  | 
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|                                                                           | Denominator for diluted loss per
    share  adjusted weighted-average shares |                               |          | 57,364 |   |      |          | 57,364 |   |   |         | 58,165 |  
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|Basic loss per share                                                       |                                                                               | $                             | (2.80    | )      |   | $    | (16.43   | )      |   | $ | (1.27   | )     
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       
|Diluted loss per share                                                     |                                                                               | $                             | (2.80    | )      |   | $    | (16.43   | )      |   | $ | (1.27   | )     
|                                                                           |                                                                               |                               |          |        |   |      |          |        |   |   |         |       

Options and warrants to purchase
5,243,940, 8,988,488
and 9,688,167 shares of Common Stock were outstanding
at December 31, 2002, 2001 and 2000, respectively, but were
not included in the computation of diluted earnings per share
because the exercise prices of such options and warrants were
greater than the average fair value of the common shares and,
therefore, the effect would be antidilutive.

Weighted average shares of preferred stock convertible
into 36,507,937, 36,507,937 and 22,375,574
shares of Common Stock were outstanding at
December 31, 2002, 2001 and 2000, respectively, but were not included in the computation
of diluted earnings per share since their effect would be
antidilutive.

Weighted average shares of subordinated debt
convertible into 10,841,961,
10,948,231 and 11,185,836
shares of Common Stock were outstanding at
December 31, 2002, 2001 and 2000, respectively, but were not included in the computation
of diluted earnings per share since their effect would be
antidilutive.

14.  STOCK OPTIONS

In August 1998, the Board of Directors and
stockholders of the Company approved the NationsRent 1998 Stock
Option Plan (the 1998 Plan), which authorized the
grant of options to directors (employee and non-employee) and
employees of the Company for up to 5,000,000 shares of Common
Stock. In July 1999, the Board of Directors and stockholders of
the Company authorized an increase of the shares available for
grant under the 1998 Plan to 7,000,000 shares. In May 2000, the
Board of Directors and stockholders of the Company authorized an
increase of the shares available for grant under the 1998 Plan
to 10,000,000 shares. In May 2001, the Board of Directors and
the stockholders of the Company authorized an increase of the
shares available for grant under the 1998 plan to 12,000,000. In
addition, the Company has granted to certain employees 1,087,571
options to purchase shares of Common Stock prior to the adoption
of the 1998 Plan (the Pre-Plan Options). The Company
accounts for stock-based compensation in accordance with the
provisions of APB No. 25 and related interpretations. The
exercise price per share for all options granted was based on
the estimated fair value of the Companys Common Stock at
the time of the grant. As such, no compensation cost has been
recognized for these stock options. The Company did not grant any
stock options in 2002. During 2001 and 2000,
a total of 3,030,000 and 5,027,500 stock options were
granted with exercise prices ranging from $0.16 to $2.00 and $1.69
to $5.63 per share, respectively.

51



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In connection with the acquisition of Logan
Equipment Corporation (Logan), the Company assumed
outstanding options to purchase shares of stock in Logan, which
were granted under the Logan 1998 Stock Option Plan, and
converted them into options to purchase 196,293 shares of Common
Stock with an exercise price of $0.86 per share. In December
1999, pursuant to the acquisition agreement with Logan, these
options were automatically converted into options to purchase
291,347 shares of Common Stock with an exercise price of $0.58
per share as a result of certain market performance criteria
relating to the Common Stock.

As of December 31, 2002, a total of
13,126,103 shares of Common Stock have been reserved for
issuance of options to purchase shares of Common Stock with
7,982,163 remaining available for grant. A summary of the
Companys outstanding stock option activity, and related
information, for the years ended December 31, 2000, 2001 and
2002 is as follows:

|                             |           |             |           |                  |   |   |      |      | 
|---------------------------- | --------- | ----------- | --------- | ---------------- | - | - | ---- | ---- | 
|                             |           |             |           | Weighted        
|                             |           | Options     |           | Average Exercise
|                             |           | Outstanding |           | Price           
|                             |           |             |           |                 
|Balance at December 31, 1999 |           |             | 5,981,343 |                  |   |   | 6.06 |     
|                             | Granted   |             |           | 5,027,500        |   |   |      | 3.16 | 
|                             | Canceled  |             |           | (1,284,284       | ) |   |      | 6.32 | 
|                             | Exercised |             |           | (136,392         | ) |   |      | 0.58 | 
|                             |           |             |           |                  |   |   |      |     
|Balance at December 31, 2000 |           |             | 9,588,167 |                  |   |   | 4.58 |     
|                             |           |             |           |                  |   |   |      |     
|                             | Granted   |             |           | 3,030,000        |   |   |      | 0.62 | 
|                             | Canceled  |             |           | (3,724,523       | ) |   |      | 4.40 | 
|                             | Exercised |             |           | (5,156           | ) |   |      | 0.58 | 
|                             |           |             |           |                  |   |   |      |     
|Balance at December 31, 2001 |           |             | 8,888,488 |                  |   | $ | 3.31 |     
|                             |           |             |           |                  |   |   |      |     
|                             | Granted   |             |           |                 |   |   |      |     | 
|                             | Canceled  |             |           | (3,744,548       | ) |   |      | 3.24 | 
|                             | Exercised |             |           |                 |   |   |      |     | 
|                             |           |             |           |                  |   |   |      |     
|Balance at December 31, 2002 |           |             | 5,143,940 |                  |   |   | 3.36 |     
|                             |           |             |           |                  |   |   |      |     

Generally, options granted have ten year terms
and vest in equal increments over a three or four year period
commencing on the first anniversary of the date of grant, except
for options granted to non-employee directors of the Company
which are fully exercisable at the time of grant. No options were
granted to non-employee directors of the Company in 2002. At
December 31, 2002, 700,000 options had been granted to
non-employee directors of the Company. Options granted under the
1998 Plan

52



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and Pre-Plan Options expire upon termination of
employment or service on the board. The following table
summarizes information concerning outstanding and exercisable
options as of December 31, 2002:

|           |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |   |      | 
|---------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | ----------- |  | -------- | ---- |  |  |  | --------- |  |  | - | ---- | 
|           |  |                     |           |                    
|           |  | Options Outstanding |           | Options Exercisable
|           |  |                     |           |                    
|           |  |                     |           | Weighted            |  |          |      |            
|           |  |                     |           | Average             |  | Weighted |      |             |  | Weighted
|Range of   |  |                     |           | Remaining           |  | Average  |      |             |  | Average 
|Exercise   |  | Number              |           | Contractual         |  | Exercise |      | Number      |  | Exercise
|Prices     |  | Outstanding         |           | Life (Years)        |  | Price    |      | Exercisable |  | Price   
|           |  |                     |           |                     |  |          |      |             |  |         
|$0.16-1.62 |  |                     | 1,618,791 |                     |  |          | 8.24 |             |  | $        | 0.50 |  |  |  | 501,291   |  |  | $ | 0.61 | 
|1.69-3.94  |  |                     | 1,121,500 |                     |  |          | 7.91 |             |  |          | 1.92 |  |  |  | 560,750   |  |  |   | 2.12 | 
|4.63-5.63  |  |                     | 1,133,000 |                     |  |          | 6.89 |             |  |          | 5.08 |  |  |  | 723,000   |  |  |   | 5.12 | 
|5.75-8.00  |  |                     | 1,270,649 |                     |  |          | 5.54 |             |  |          | 6.75 |  |  |  | 1,241,149 |  |  |   | 6.75 | 
|           |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |   |      | 
|           |  |                     | 5,143,940 |                     |  |          | 7.21 |             |  | $        | 3.36 |  |  |  | 3,026,190 |  |  | $ | 4.50 | 
|           |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |   |      | 

Pursuant to the Proposed Plan, no value or other
distribution will be made on account of the Companys equity
securities, including stock options.

15.     PROPERTY AND
EQUIPMENT

Property and equipment, net consists of the
following:

|                                                |                             |                |         |        |  |   |         |        | 
|----------------------------------------------- | --------------------------- | -------------- | ------- | ------ |  | - | ------- | ------ | 
|                                                |                             |               
|                                                |                             | December 31,  
|                                                |                             |               
|                                                |                             | 2002           |         | 2001  
|                                                |                             |                |         |       
|                                                |                             |               
|                                                |                             | (in thousands)
|Buildings and improvements                      |                             | $              | 64,359  |        |  | $ | 62,809  |       
|Furniture, fixtures and office equipment        |                             |                | 33,488  |        |  |   | 31,577  |       
|Vehicles, delivery and shop equipment           |                             |                | 22,346  |        |  |   | 21,776  |       
|Construction in progress                        |                             |                | 2,740   |        |  |   | 2,643   |       
|                                                |                             |                |         |        |  |   |         |       
|                                                |                             |                | 122,933 |        |  |   | 118,805 |       
|Less: accumulated depreciation and amortization |                             |                | (42,787 | )      |  |   | (28,088 | )     
|                                                |                             |                |         |        |  |   |         |       
|                                                | Property and equipment, net |                | $       | 80,146 |  |   | $       | 90,717 | 
|                                                |                             |                |         |        |  |   |         |       

16.  ACQUISITIONS

The Company did not make any acquisitions in
2002 or 2001. The Company acquired four equipment rental
businesses during the year ended December 31, 2000. The acquisitions have been accounted for
using the purchase method and, accordingly, the acquired assets
and assumed liabilities have been recorded at their estimated
fair values as of the date of acquisition. The operations of the
acquired businesses have been included in the Companys
consolidated statements of operations since the effective date
of each respective acquisition.

The aggregate consideration paid for the
businesses acquired during 2000 was $25,826,000 and consisted of
(i) $21,150,000 of cash, (ii) $3,475,000 of convertible
subordinated debt and (iii) $1,200,000 of future
contractual cash payments. The cash portion of the consideration
was funded through borrowings under the Companys credit
facility. The Company repaid or assumed outstanding indebtedness
of the acquired companies in the aggregate amount of $9,793,000.

53



---



##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During 2000, the Company paid consideration of
$11,750,000 of cash, $2,450,000 of subordinated convertible debt
and 1,728,742 shares of Common Stock to the former owners of
previously acquired businesses related to the achievement of
certain operating results. The Company records amounts paid for
contingent consideration as additional purchase price once they
are incurred since the consideration is required regardless of
the former owners continued association with the Company.

In connection with two previous acquisitions, the
Company agreed to make future payments up to an aggregate of
$12,898,000 in cash or Common Stock to the former owners based
on the achievement of certain future operating results of the
acquired companies or market performance of the Common Stock.
These contractual obligations were to be paid at various times
through December 2001. These payments were not made as of
December 31, 2002.

The following table sets forth the estimated fair
value of the assets acquired and liabilities assumed for the
aforementioned acquisitions completed in 2000:

|                       |  |                |        | 
|---------------------- |  | -------------- | ------ | 
|                       |  | Year Ended    
|                       |  | December 31,  
|                       |  | 2000          
|                       |  |               
|                       |  | (in thousands)
|Assets, including cash |  | $              | 10,375 | 
|Goodwill               |  |                | 27,725 | 
|Liabilities            |  |                | 12,274 | 

17.  RELATED PARTY
TRANSACTIONS

The Company entered into an Executive Transition
Agreement in December 2001 with its former CEO. Pursuant to the
agreement, the former CEO agreed to resign all of his director
and officer positions with the Company and its subsidiaries the
earlier of (i) 60 days following the date of the agreement
or (ii) the date the

54



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company appointed a new or interim chief executive
officer. The agreement provided a severance payment to the
former CEO of $2,000,000, of which $1,000,000 was paid in cash
and $1,000,000 was paid in the form a promissory note (backed by
a letter of credit) that was to be due and payable upon the
former CEOs resignation. In addition, the Company
deposited a retainer of $175,000 with the former CEOs
counsel to cover expenses related to the negotiation,
documentation and defense of the Executive Transition Agreement.
The former CEO resigned in February 2002. The $2,000,000 was included
in reorganization items in 2001.

The Company leases certain office space from Extended
Stay America, Inc. (Extended Stay). Lease payments for
such space totaled $636,000 for the year ended December 31, 2002. One
of the Companys directors serves as a director of Extended Stay.

The Company leases certain properties from TTG
Properties, a general partnership controlled by a former director of
the Company until March 2001. Rental expense for such
properties totaled $1,093,000 and $1,061,000 for the
years ended December 31, 2001 and 2000, respectively.

The Company leases certain office space from
AutoNation, Inc. (AutoNation). Lease payments for
such space totalled $752,000, $687,000 and $527,000 for the years
ended December 31, 2002, 2001 and 2000, respectively. Two
of the Companys directors serve as directors of AutoNation.

The Company leased certain office space from Boca
Resorts, Inc. (Boca Resorts). Lease payments for
such space totaled zero, zero and $89,000 for the years
ended December 31, 2002, 2001 and 2000, respectively. In
addition, the Company leased certain other facilities and
related services from the Arena Operating Company, which was
controlled by Boca Resorts until July 2001, with lease payments
totaling zero and $112,000 for the years ended
December 31, 2001 and 2000, respectively. Two of the
Companys directors serve as directors of Boca Resorts, one
of which controls a majority of the voting interests of Boca
Resorts.

The Company has purchased certain building
construction services and certain freight services from Alvada
Construction, Inc. and Alvada Trucking, Inc.
(Alvada), which totaled $13,000, $124,000 and $1,231,000 for
the years ended December 31, 2002, 2001 and
2000, respectively. Alvada is controlled by the estate of a
relative of the former CEO of the Company.

The Company leased certain facilities and related
services from South Florida Stadium Corporation at Pro Player
Stadium which is owned by one of the Companys directors.
Lease payments for such facilities totaled zero, $177,000 and $179,000
for the years ended December 31, 2002, 2001
and 2000, respectively.

The Company obtained certain investment banking
services from Rhone Group, which totaled $362,000 for the year
ended December 31, 2000. One of the Companys
directors is a managing director of Rhone Group. No such
services were provided in 2002 and 2001.

The Company purchased certain fabrication
services from Findlay Machine and Tool (FMT), which
totaled $16,000, $510,000 and $118,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. The
principal shareholder of FMT is directly related to the former
CEO of the Company.

In connection with the acquisition of A-1 Rental
in 1998, the Company issued subordinated debt to and leases
certain facilities from a previous owner who served as an
officer of the Company until March 2000. Subsequently, the
subordinated debt was converted to Common Stock of the Company.
Lease payments for such facilities totaled $1,547,000 for the year ended December 31, 2000.

In connection with the acquisition of Sams
Equipment Rental, Inc. and Gabriel Trailer Manufacturing
Company, Inc., the Company issued subordinated debt to a
previous owner who served as a director of the Company until
March 2001. Interest payments related to this debt totaled
$104,000 for the year ended December 31, 2001 and $263,000
for the year ended December 31, 2000.

55



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In connection with the recruiting and relocation
of the Companys Executive Vice President and Chief
Financial Officer, the Company loaned such executive $250,000,
the principal and interest of which will be forgiven by the
Company one-third a year commencing January 2002.

18.  NON-RECURRING ITEMS

As a part of the purchase of a certain business
during 1999, the Company acquired an equipment dealership, which
the Company intended to dispose of and accounted for as an asset
held for sale pursuant to EITF No. 87-11 Allocation
of Purchase Price to Assets to be Sold. In May 2000, the
Company decided to close the locations that comprised the
dealership portion of the acquisition after it was unable to
obtain the manufacturers approval for the sale of the
dealership to a third party. As such, the Company liquidated the
assets of the acquired dealership. The results of operations
related to the dealership through the date of disposal, which aggregated $4,645,000 of losses
and $525,000 of interest expense, have been excluded from the
Companys 2000 consolidated statements of operations.

19.  RETIREMENT PLAN

In November 1998, the Company adopted the
NationsRent 401(k) Retirement Plan (the Plan) which
allows its eligible employees to make contributions, up to a
certain limit, to the Plan on a tax-deferred basis under
Section 401(k) of the Internal Revenue Code of 1986, as
amended. Eligible employees are those who have completed their
90 day probationary period and are over twenty-one years of age.
The Company may, at its discretion, make matching contributions
to the Plan. The Company made matching contributions of
zero, $511,000 and $1,170,000 to the Plan for the years
ended December 31, 2002, 2001 and 2000, respectively.

20.  COMPREHENSIVE LOSS

The objective of reporting comprehensive income
is to disclose all changes in equity of an enterprise that
result from transactions and other economic events in a period
other than transactions with owners. The comprehensive loss of the Company was equal to net loss for all
periods presented.

56



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##### 



NATIONSRENT, INC.


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


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

21.  QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)

The following tables set forth the Companys
condensed consolidated statements of operations by quarter for
the years ended December 31, 2002 and 2001.

|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|---------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | -------- | -
|                                                                                   |  | First                                 |         | Second  |  | Third   |         | Fourth 
|                                                                                   |  | Quarter                               |         | Quarter |  | Quarter |         | Quarter
|                                                                                   |  |                                       |         |         |  |         |         |        
|                                                                                   |  |                                      
|                                                                                   |  | (in thousands, except per share data)
|2002                                                                               |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Revenue                                                                            |  | $                                     | 98,638  |         |  | $       | 118,828 |         |  | $ | 124,230 |   |  | $ | 120,445  |  
|Gross profit (loss)                                                                |  |                                       | 9,188   |         |  |         | 21,506  |         |  |   | 2,324   |   |  |   | (15,917  | )
|Operating loss                                                                     |  |                                       | (15,231 | )       |  |         | (6,933  | )       |  |   | (24,453 | ) |  |   | (47,886  | )
|Net loss                                                                           |  |                                       | (31,005 | )       |  |         | (28,746 | )       |  |   | (43,937 | ) |  |   | (56,941  | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Basic net loss per share                                                           |  | $                                     | (0.54   | )       |  | $       | (0.50   | )       |  | $ | (0.77   | ) |  | $ | (0.99    | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Diluted net loss per share                                                         |  | $                                     | (0.54   | )       |  | $       | (0.50   | )       |  | $ | (0.77   | ) |  | $ | (0.99    | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|2001                                                                               |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Revenue                                                                            |  | $                                     | 148,786 |         |  | $       | 157,828 |         |  | $ | 157,856 |   |  | $ | 130,189  |  
|Gross profit (loss)                                                                |  |                                       | 35,031  |         |  |         | 54,338  |         |  |   | 47,562  |   |  |   | (25,779  | )
|Operating income (loss)                                                            |  |                                       | (3,648  | )       |  |         | 21,942  |         |  |   | 9,623   |   |  |   | (858,417 | )
|Loss before cumulative change in accounting
    principle                          |  |                                       | (26,022 | )       |  |         | (5,102  | )       |  |   | (19,759 | ) |  |   | (890,155 | )
|Cumulative effect of change in accounting
    principle, net of income tax benefit |  |                                       | 1,359   |         |  |         |        |         |  |   |        |   |  |   |         |  
|Net loss                                                                           |  |                                       | (27,381 | )       |  |         | (5,102  | )       |  |   | (19,759 | ) |  |   | (890,155 | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Basic net loss per share                                                           |  | $                                     | (0.48   | )       |  | $       | (0.09   | )       |  | $ | (0.34   | ) |  | $ | (15.52   | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  
|Diluted net loss per share                                                         |  | $                                     | (0.48   | )       |  | $       | (0.09   | )       |  | $ | (0.34   | ) |  | $ | (15.52   | )
|                                                                                   |  |                                       |         |         |  |         |         |         |  |   |         |   |  |   |          |  

During the fourth quarter of 2000, the Company
recorded a pre-tax restructuring charge of approximately
$72,005,000 and during 2001, the Company recorded an additional
pre-tax restructuring charge of approximately $9,653,000 (see
Note 10).

During the fourth quarter of 2001, the Company
incurred an operating charge of $770,833,000 for the impairment
of intangible assets related to acquired businesses.

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

22.     SUBSEQUENT
EVENTS

In February 2003, the Bankruptcy Court approved the Disclosure
Statement which together with the Proposed Plan has been sent to all
creditors for approval.

57



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##### 



NATIONSRENT, INC.

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


VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES

SCHEDULE II

(in thousands)


|                                 |  |           |        |          |  |            |        |       |  |           |         |      |  |   |         |      |  |   |        | 
|-------------------------------- |  | --------- | ------ | -------- |  | ---------- | ------ | ----- |  | --------- | ------- | ---- |  | - | ------- | ---- |  | - | ------ | 
|                                 |  | Balance   |        | Charged  |  |            |        |       |  |          
|                                 |  | at        |        | to Costs |  |            |        |       |  | Balance  
|                                 |  | Beginning |        | and      |  |            |        |       |  | at End of
|Descriptions                     |  | of Period |        | Expenses |  | Deductions |        | Other |  | Year     
|                                 |  |           |        |          |  |            |        |       |  |          
|Allowance for Doubtful Accounts: |  |           |        |          |  |            |        |       |  |           |         |      |  |   |         |      |  |   |        | 
|2002                             |  | $         | 26,109 |          |  | $          | 11,645 |       |  | $         | (20,928 | )(a) |  | $ |        |      |  | $ | 16,826 | 
|2001                             |  |           | 13,746 |          |  |            | 24,245 |       |  |           | (11,882 | )(a) |  |   |        |      |  |   | 26,109 | 
|2000                             |  |           | 7,605  |          |  |            | 13,162 |       |  |           | (7,121  | )(a) |  |   | 100     | (b)  |  |   | 13,746 | 
|Restructuring reserves(c):       |  |           |        |          |  |            |        |       |  |           |         |      |  |   |         |      |  |   |        | 
|2002                             |  |           | 2,139  |          |  |            |       |       |  |           |        |      |  |   |        |      |  |   | 2,139  | 
|2001                             |  |           | 45,790 |          |  |            | 9,653  |       |  |           | (7,059  | )(c) |  |   | (46,245 | )(d) |  |   | 2,139  | 
|2000                             |  |           |       |          |  |            | 72,005 |       |  |           | (4,408  | )(c) |  |   | (21,807 | )(d) |  |   | 45,790 | 






|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(a) | Accounts written-off.                                                                       
|(b) | Represents allowance for doubtful accounts of
    acquired companies.                       
|(c) | Primarily cash payments of costs associated with
    restructuring activities.              
|(d) | Primarily non-cash asset write-offs and charges
    to the rental fleet disposition accrual.

58



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##### 





|         |                                                                                         
|-------- | ----------------------------------------------------------------------------------------
|Item  9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10.  Directors and
Executive Officers of the Registrant

Directors

Set forth below is biographical information for
each current director of the Company. Upon the effective date of the
Proposed Plan, the initial board of directors of Reorganized
NationsRent will consist of the individuals identified in the Proposed
Plan.

Thomas H. Bruinooge,age 59, joined the Company as a director in June 1998 and has served
as Chairman of the Board since February 2002.
Mr. Bruinooge is an attorney who has been in private
practice since 1968 and founded the firm of Bruinooge &
Associates in 1987.

Ivan W. Gorr,age
73, joined the Company as a director in June 1999. Mr. Gorr
served as Chairman of the Board of Directors and Chief Executive
Officer of Cooper Tire & Rubber Company, a manufacturer of
tires and other rubber products, from 1989 until he retired in
October 1994. Mr. Gorr also serves as a director of
Borg-Warner Automotive, Inc.

H. Wayne
Huizenga,age 65, joined the Company
as a director in June 1998. Since September 1996, Mr. Huizenga
has served as Chairman of Boca Resorts, Inc. Since January 1995,
Mr. Huizenga has served as Chairman of Extended Stay America,
Inc., an extended stay lodging company. Mr. Huizenga served as
Chairman of AutoNation, Inc. from August 1995 until December 2002, and
as Chief Executive Officer or Co-Chief Executive Officer of
AutoNation, Inc. from August 1995 until September 1999. He serves as a
director of AutoNation, Inc., Republic Services, Inc. and ANC Rental
Corporation, a car rental company.

Harris W. Hudson,age 60, joined the Company as a director in June 1998. Since May
1998, Mr. Hudson has served as Vice Chairman of Republic
Services, Inc., a solid waste services company. Mr. Hudson also
serves as a director of AutoNation, Inc., an automotive retailer, and
Boca Resorts, Inc., a luxury resort hotel company.

59



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##### 









M. Steven Langman,age 40, joined the Company as a director in August 2000. In
1996, Mr. Langman founded and since that time has served as
Managing Director of Rhône Group LLC, a private merchant
banking firm with offices in New York, Paris and London. Prior
to joining Rhône, Mr. Langman was Managing Director of
Lazard Frêres & Co. LLC where he specialized in mergers
and acquisitions working in both London and New York.
Mr. Langman joined Lazard in 1987. Before joining Lazard,
he worked in the mergers and acquisition department of Goldman,
Sachs & Co. Mr. Langman currently serves on the board
of directors of Dreyers Grand Ice Cream, Inc. as well as
the boards of several private companies controlled by Rhône
Capital LLC, a private equity fund affiliated with Rhône
Group LLC.

Executive Officers

Set forth below is biographical information for
each of the Named Executive Officers (as defined below). Upon the
effective date of the Proposed Plan, the executive officers of
Reorganized NationsRent shall consist of the individuals identified
in the Proposed Plan.

D. Clark Ogle, age
56, joined NationsRent in August 2002 as Chief Executive Officer.
Commencing in 1998, Mr. Ogle served as President and Chief Executive
Officer of Johnson Industries, a textile company with annual revenues
of approximately $300,000,000 that employs 2,200 people in 11 plants
located in three states. His efforts resulted in a restructuring of
Johnston Industries operations, significantly reducing bank
debt and the successful privatization of the company with a new
investment group. From 1996 to 1998, Mr. Ogle was a Managing Director
of KPMG Peat Marwick, LLP, where he had been recruited to lead the
national consulting recovery practice for the U.S. retail and wholesale
food industry. Prior to joining KPMG, he was President and Chief
Executive Officer of several large multi-operational companies.

Joseph H. Izhakoff,
age 37, was appointed Executive Vice President and General Counsel
and Secretary in August 2002. He joined the Company as Vice President and General Counsel
in September 1998. Commencing October 1998, Mr. Izhakoff
also began serving as Secretary. From 1995 until he joined the Company,
Mr. Izhakoff was an attorney at Akerman, Senterfitt &
Eidson, P.A., most recently as a shareholder
of the firm, where his practice focused on corporate finance and
mergers and acquisitions.

Philip V.
Petrocelli, age 44, was appointed President
and Chief Operating Officer in August 2002 and served as
President and Chief Executive Officer from February 2002 to
August 2002. He
joined the Company as Executive Vice President in February 1998.
From August 1993 to February 1998, Mr. Petrocelli was Vice
President  Western Region of OHM. Before joining OHM,
Mr. Petrocelli was a Regional Director and acting Vice
President  Analytical Labs with IT Corporation, a
provider of engineering services, since September 1988.

Ezra Shashoua, age
48, joined the Company as Executive Vice President and Chief
Financial Officer in January 2001. Previously, Mr. Shashoua
worked at 7-Eleven, Inc., a national convenience store chain, in
Dallas, Texas, where he served in various capacities of
increasing responsibility from 1982 to January 2001, most
recently as Vice President and Chief Financial Officer. Prior to
joining 7-Eleven, Mr. Shashoua was an attorney at
Sonnenschein, Nath and Rosenthal in Chicago, Illinois.

Kris E. Hansel,
age 45, was appointed Vice President of Planning and Process in
September 2002. He joined the Company as Vice President and
Controller in March 1998. Prior to joining the Company, Mr. Hansel
served in various positions of increasing responsibility at OHM
Corporation since 1988, most recently as Vice President and
Controller. Prior to joining OHM, Mr. Hansel was General
Accounting Manager of Wearever  Proctor Silex.

Compensation of Directors

Directors are reimbursed for their reasonable
expenses incurred in connection with their attendance at Board
and Committee meetings. In addition, until March, 2002,
non-employee directors of the Company received grants of stock
options under the Companys 1998 Stock Option Plan (the
1998 Plan). The 1998 Plan provided for an automatic
grant of options to purchase 50,000 shares of NationsRent
common stock when a non-employee director joined the Board.
Additional automatic grants of options to purchase
10,000 shares of NationsRent common stock were made at the
beginning of each year to non-employee directors continuing to
serve on the Board. These options were fully vested and
immediately exercisable on the grant date, and remain
exercisable for a term of ten years from the date of grant as
long as the optionee continues to serve on the Board. The
exercise price per share was set at the closing price of
NationsRents common stock on the date immediately prior to
the grant date. In order to retain the services of non-employee
directors, the Company determined that in lieu of future grants
under the 1998 Plan, non-employee directors

60



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##### 



would receive cash payments for service on the
Board. As of January 1, 2002, future grants of options to
non-employee directors under the 1998 Plan were suspended.
Non-employee directors now receive $2,500 for each in person
Board meeting, $1,500 for each telephonic meeting and $1,000 per
Committee meeting, whether in person or telephonic.


In February 2002, Mr. Bruinooge was elected
the non-executive Chairman of the Board in connection with the
Chapter 11 Cases. As compensation for his increased
services to the Company, Mr. Bruinooge will receive $25,000
per month, plus reasonable out of pocket costs and expenses, for
as long as he serves in such capacity.

Commencing on the effective date of the Proposed Plan,
directors of Reorganized NationsRent will receive such compensation
as may be determined by Reorganized NationsRent.

Compliance with Section 16(a) of the Exchange
Act

Section 16(a) of the Securities Exchange Act
of 1934, as amended, requires officers and directors, and
persons who own more than ten percent of a registered class of
the Companys equity securities, to file reports of
ownership and changes in ownership with the Securities and
Exchange Commission (the SEC). Officers, directors
and greater than ten-percent stockholders are required by the
SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file.

Based solely upon review of the copies of such
reports furnished to the Company and written representations
from certain executive officers and directors that no other such
reports were required, the Company believes that during fiscal
year ended December 31, 2002, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with on a
timely basis.

61



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##### 



Item 11.  Executive
Compensation

Summary Compensation Table

The following table sets forth the annual base
salaries and other compensation that the Company paid for, and
stock options granted during, the fiscal years ended
December 31, 2000, 2001 and 2002 to the persons listed
below, who were serving as executive officers as of
December 31, 2002 (the Named Executive
Officers):

|                            |                                            |        |      |                         |  |              |         |         |  |                    |        |        |  |  |        |         |     |  |   |         |    
|--------------------------- | ------------------------------------------ | ------ | ---- | ----------------------- |  | ------------ | ------- | ------- |  | ------------------ | ------ | ------ |  |  | ------ | ------- | --- |  | - | ------- | ---
|                            |                                            |        |      |                         |  |              |         |         |  | Long-Term         
|                            |                                            |        |      |                         |  | Compensation
|                            |                                            |        |      | Annual Compensation ($) |  |             
|                            |                                            | Fiscal |      |                         |  | Securities  
|Name and Principal Position |                                            | Year   |      | Salary                  |  | Bonus        |         | Other   |  | Underlying Options
|                            |                                            |        |      |                         |  |              |         |         |  |                   
|D. Clark Ogle               |                                            |        | 2002 |                         |  |              | 184,615 |         |  |                    |       |        |  |  | 23,406 | (2)     |     |  |  |        
|                            | Chief Executive Officer(1)                 |        |      |                         |  |              |         |         |  |                    |        |        |  |  |        |         |     |  |   |        |    
|Philip V. Petrocelli        |                                            |        | 2002 |                         |  |              | 488,500 |         |  |                    |       |        |  |  |       |         |     |  |  |        
|                            | President and Chief                        |        |      | 2001                    |  |              |         | 309,616 |  |                    |        |       |  |  |        |        |     |  |   | 250,000 | (4)
|                            | Operating Officer(3)                       |        |      | 2000                    |  |              |         | 301,816 |  |                    |        |       |  |  |        | 1,912   | (5) |  |   | 350,000 | (6)
|Joseph H. Izhakoff          |                                            |        | 2002 |                         |  |              | 300,000 |         |  |                    |       |        |  |  |       |         |     |  |  |        
|                            | Executive Vice President, General Counsel  |        |      | 2001                    |  |              |         | 279,808 |  |                    |        |       |  |  |        |        |     |  |   | 200,000 | (4)
|                            | and Secretary                              |        |      | 2000                    |  |              |         | 257,842 |  |                    |        |       |  |  |        |        |     |  |   | 250,000 | (6)
|Ezra Shashoua               |                                            |        | 2002 |                         |  |              | 300,000 |         |  |                    | 60,000 |        |  |  | 99,057 | (8)     |     |  |  |        
|                            | Executive Vice President and               |        |      | 2001                    |  |              |         | 271,154 |  |                    |        |       |  |  |        | 135,188 | (2) |  |   | 450,000 | (9)
|                            | Chief Financial Officer(7)                 |        |      |                         |  |              |         |         |  |                    |        |        |  |  |        |         |     |  |   |         |    
|Kris E. Hansel              |                                            |        | 2002 |                         |  |              | 200,000 |         |  |                    |       |        |  |  |       |         |     |  |  |        
|                            | Vice President of Planning and Process(10) |        |      | 2001                    |  |              |         | 179,808 |  |                    |        |       |  |  |        |        |     |  |   | 100,000 | (4)
|                            |                                            |        |      | 2000                    |  |              |         | 175,000 |  |                    |        | 50,000 |  |  |        |        |     |  |   | 100,000 | (6)






| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)  | Mr. Ogle joined the Company in August 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2)  | Consists of relocation expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (3)  | Mr. Petrocelli was appointed Chief Executive
Officer and President on an interim basis in February 2002. Following
the hiring of Mr. Ogle in August 2002, Mr. Petrocelli was
appointed President and
    Chief Operating Officer.                                                                                                                                                                                                                                                                                                                                                    
| | (4)  | These options have an exercise price of $0.45 per
    share and vest in a four-year period at the rate of 25% per year
    commencing in May 2002. These options become immediately
    exercisable upon a change of control of the Company (as defined
    in the 1998 Stock Option Plan). Pursuant to the Proposed Plan,
there will be no value or distribution on account of these options.                                                                                                                                                                                       
| | (5)  | Consists of personal use of the Companys
    aircraft calculated under applicable IRS formula.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (6)  | One-half of these options have an exercise price
    of $4.625 and vest over a four-year period at a rate of 25% per
    year commencing in March 2001, and one-half of these options
    have an exercise price of $1.6875 and vest over a four-year
    period at a rate of 25% per year commencing in November 2001.
    These options become immediately exercisable upon a change of
    control of the Company (as defined in the 1998 Stock Option
    Plan). Pursuant to the Proposed Plan,
there will be no value or distribution on account of these options.              
| | (7)  | Mr. Shashoua joined the Company in January 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (8)  | Consists of annual forgiven portion of $250,000
promissory note issued in January 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (9)  | 200,000 of these options have an exercise price
    of $1.75 per share and vest over a four-year period at the rate
    of 25% per year commencing in January 2002 and 250,000 of these
    options have an exercise price of $0.45 per share and vest over
    a four-year period at the rate of 25% per year commencing in May
    2002. These options become immediately exercisable upon a change
    of control of the Company (as defined in the 1998 Stock Option
    Plan). Pursuant to the Proposed Plan
there will be no value or distribution on account of these options.
| | (10) | Mr. Hansel was appointed Vice President of
Planning and Process in September 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

62



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##### 



Fiscal Year End Option Values

As of
December 31, 2002 the named executive officers held options for
an aggregate of 2,679,041 shares of common stock, 1,726,541 of which
were exercisable at that time. Pursuant to the Proposed Plan, no
value or other distribution will be made on account of these options
and therefore they have no value.

1998 Stock Option Plan

The Board of Directors and stockholders adopted
the 1998 Stock Option Plan effective August 6, 1998 (the
1998 Plan). Pursuant to the
1998 Plan, as amended, options to acquire a maximum of
12,000,000 shares of common stock may be granted to employees,
directors (including employee and non-employee directors) and
certain independent contractors and consultants of the Company
or any Subsidiary (as defined therein). As of March 20,
2003, there were outstanding options to purchase 4,534,938
shares at exercise prices ranging from $8.00 per share to $0.16
per share granted under the 1998 Plan, 2,879,186 of which were
immediately exercisable at that time.

63



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##### 



The Compensation Committee of the Companys Board
of Directors administers the 1998
Plan. The Compensation Committee determines which persons will
receive options and the number of options to be granted to such
persons. The 1998 Stock Option Plan also provides for annual
mandatory grants of options to non-employee directors, which
were suspended as of January 1, 2002. See
 Compensation of Directors. The Board of
Directors or the Compensation Committee, as the case may be,
makes all determinations that it may deem necessary or advisable
for the administration of the 1998 Plan.

Pursuant to the 1998 Plan, the Company may grant
Incentive Stock Options (ISOs) as defined in
Section 422 of the Internal Revenue Code of 1986, as
amended (the Code), and Non-Qualified Stock Options
(NQSOs), not intended to qualify under
Section 422 of the Code. The price at which the common
stock may be purchased upon the exercise of options granted
under the 1998 Stock Option Plan is not less than the per share
fair market value of the common stock on the date the particular
options are granted. Options granted under the 1998 Plan may
have maximum terms of not more than ten years and are not
transferable, except by will or the laws of descent and
distribution.

Generally, options granted under the 1998 Plan
terminate upon the date the person to whom such options were
granted is no longer employed or retained by the Company or
serving on our Board of Directors other than by reason of death
or disability. However, if any of the options granted under the
1998 Plan had vested by such date, then the person to whom such
options were granted has five business days during which he or
she may exercise any vested options, provided such person was
not terminated by the Company for cause.

Options granted pursuant to the 1998 Plan, unless
otherwise determined by the Board of Directors, vest over a
four-year period at the rate of 25.0% per year commencing on the
first anniversary of the date of grant. These options become
immediately exercisable upon a change in control of the Company.
A change in control of the Company is deemed to
occur when any person becomes the beneficial owner of or
acquires more than 50.0% of the total combined voting power with
respect to the election of directors of the Companys
issued and outstanding capital stock.

ISOs granted under the 1998 Plan are subject to
the restriction that the aggregate fair market value (determined
as of the date of grant) of options which first become
exercisable in any calendar year cannot exceed $100,000.

In 2001 the Company granted
3,030,000 options to purchase shares of the Companys
common stock under the 1998 Plan. Following the commencement of the
Chapter 11 Cases, the Company did not grant any additional
options under the 1998 Plan. Pursuant to the Proposed Plan, there will be no
value or distribution on account of options granted under the 1998
Plan.

Certain Other Stock Options

Certain of the Companys executive officers
and other employees were granted stock options to purchase
shares of the Companys common stock prior to the adoption
of the 1998 Plan (collectively, the Non-Plan Options). As of December 31, 2002, there were
outstanding options, granted prior to the adoption of the plan,
to purchase 540,211 shares at exercise prices ranging from $5.77
per share to $6.67 per share of which approximately 412,000 were exercisable
at that time. These options vest over a four-year period at the
rate of 25.0% per year commencing on the first anniversary of
the date of grant. Also, these options become immediately
exercisable upon a change in control of the Company. A
change in control of the Company is deemed to occur
when any person becomes the beneficial owner of or acquires
voting control with respect to more than 50.0% of the common
stock or any person has the ability to elect or to cause the
election of directors consisting at the time of such election of
a majority of the Board.

Pursuant to the Proposed Plan, there will be no
value or distribution on account of these options.

Equity Compensation Plan
Information

The following table sets forth information as of
December 31, 2002 related to the 1998 Plan and our Non-Plan
Options. These plans and arrangements are described above under
 1998 Stock Option Plan and
 Certain Other Stock Options. Pursuant to the
Proposed Plan, there will be no value or distribution on account
of these options.

|                                                               |                  |                  |  |                   |           |                      |   |      |      |  |  |                |           | 
|-------------------------------------------------------------- | ---------------- | ---------------- |  | ----------------- | --------- | -------------------- | - | ---- | ---- |  |  | -------------- | --------- | 
|                                                               |                  | Number of        |  |                   |           |                     
|                                                               |                  | securities to be |  |                   |           | Number of           
|                                                               |                  | issued upon      |  | Weighted average  |           | securities          
|                                                               |                  | exercise of      |  | exercise price of |           | remaining           
|                                                               |                  | outstanding      |  | outstanding       |           | available for future
|Plan category                                                  |                  | options          |  | options           |           | issuance            
|                                                               |                  |                  |  |                   |           |                     
|Equity compensation plans
    approved by security holders     |                  |                  |  |                   |           |                      |   |      |      |  |  |               
|                                                               | 1998 Plan        |                  |  | 4,534,938         |           |                      | $ | 3.09 |      |  |  | 7,465,062      |          
|                                                               | Non-Plan Options |                  |  | 540,211           |           |                      | $ | 6.03 |      |  |  | Not applicable |          
|                                                              
|Equity compensation plans
    not approved by security holders |                  |                  |  |                   |           |                      |   |      |      |  |  |               
|                                                               | None             |                  |  |                  |           |                      |   |     |      |  |  |               |          
|                                                               |                  |                  |  |                   |           |                      |   |      |      |  |  |               
|                                                               |                  | Total            |  |                   | 5,075,149 |                      |   | $    | 3.40 |  |  |                | 7,465,062 | 
|                                                               |                  |                  |  |                   |           |                      |   |      |      |  |  |               

401(k) Plan and Other Benefits

The Companys 401(k) Retirement Savings Plan
(the 401(k) Plan) provides retirement and other
benefits to its employees and permits employees a means to save
for their retirement. The Company may, at its discretion, make
matching contributions under the 401(k) Plan. The 401(k) Plan is
intended to be a tax-qualified plan under Section 401(a) of
the Code. The Company also provides welfare benefits to its
employees, including health, life and disability. The
Companys executive officers participate in these plans,
however the benefits do not exceed 10.0% of their respective
salaries. The Company did not make any matching contributions under
the 401(k) Plan for the twelve months ended December 31, 2002.

64



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##### 



Key Employee Retention and Severance
Plans

In January 2002, the Bankruptcy Court approved
the key employee retention and severance plans described below.

Retention
Plan

Under the retention plan, certain of our key
employees, including the Named Executive Officers, are eligible
for a retention bonus. The key employees are classified into
different bands based on their level of responsibility and role
within NationsRent. The amount of retention bonuses is based on
a key employees band and base salary at the time the bonus
is determined. Key employees below a certain band are eligible
for a retention bonus at the discretion of the Company payable
in one or more installments so long as they remain with the
Company for a specified period of time. Key employees above a
certain band, including the Named Executive Officers, are
eligible for a retention bonus only upon Emergence (as defined
in the plan), subject to approval of the allocations of such
amounts by the Companys permanent president and chief
executive officer and the Board of Directors. In order to
receive payment of a retention bonus, the key employee must be
employed in good standing on the due date of the payment or have
been discharged without cause (as defined in the plan), died,
become disabled, or have resigned with good reason (as defined
in the plan) within 180 days prior to the due date for the
payment.

Severance
Plan

Under the severance plan, certain of our key
employees, including the Named Executive Officers, are eligible
for a lump sum severance payment and continuance of employee
benefits, including continuing coverage under NationsRents
directors and officers insurance policies if applicable, in the
event of an employment loss. Employment loss is defined as a
termination of the key employees employment without cause
(as defined in the plan) or a termination initiated by the key
employee with good reason (as defined in the plan). The lump sum
severance payment is equal to the key employees monthly
base salary in effect at the time of the employment loss
multiplied by a severance award factor. If a key employee
becomes eligible to receive payments and benefits under the
severance plan and any other severance plan of the Company, the
key employee may only receive the greater of the two payments
and benefits. In order to receive the payment and benefits under
the plan, at the time of the eligible employment loss the key
employee must execute a general release releasing NationsRent
and its affiliates from certain claims arising in connection
with his or her employment or separation from NationsRent.
Pursuant to the severance plan, the Named Executive Officers are
eligible to receive severance payments equal to up to 18 months of
their base salary in effect at the time of employment loss.

Change in Control Severance Agreements

In January 2001, the Company entered into change
in control severance agreements with each of the Named Executive
Officers. However, pursuant to the terms of the key employee
severance plan described above, the Named Executive Officers
waived all rights they had under the change of control severance
agreements as a condition precedent to participation in the new
key employee severance plan. In addition, the
change in control severance agreement of James Kirk, our former
President and Chief Executive Officer, was terminated in
connection with his Executive Transition Agreement.

Employment Agreement with Chief Executive Officer

In August 2002, the Company entered into an
employment agreement with Mr. Ogle, that was approved by the
Bankruptcy Court in September 2002. The terms of Mr. Ogles employment agreement
provide that the Debtors will employ Mr. Ogle for a term of two years,
and, in his position as Chief Executive Officer, Mr. Ogle will report
directly to the Board of Directors of NationsRent. As Chief Executive Officer, Mr. Ogle receives an annual
salary of $600,000 that is paid in installments in accordance with
the Debtors normal payroll practices. Mr. Ogle is also eligible
to receive an incentive bonus, health benefits (along with the other
members of senior management) and certain severance benefits.
Further, Mr. Ogle is entitled to receive a one time bonus equal to
100 percent of his base salary that is in effect at that time upon
the earliest to occur of: (i) the effective date of a confirmed
plan of reorganization in the Debtors chapter 11 cases;
(ii) date of consummation of the sale of substantially all of the
assets of NationsRent; (iii) the date that NationsRent is
merged, consolidated or reorganized into or with any other entity; or
(iv) the date of the consummation of a transaction that is a
change in control transaction of the type required to be reported
under Item 1 of Form 8-K (or any successor schedule, form
or report or item therein) promulgated by the Securities and Exchange Commission.

Further, in exchange for the execution of the release that is attached to his employment agreement, Mr. Ogle is entitled
to receive the following severance benefits in the event the Debtors
or Reorganized Debtors terminate Mr. Ogles employment without
cause or Mr. Ogle voluntarily resigns his position for good reason:
(i) a lump sum payment equal to two times his annual base salary
in effect at that time; (ii) the continuation of the health and welfare benefits for a period of two years after his employment terminates;
(iii) the payment of the emergence bonus referenced above if an even that triggers the payment of such bonus occurs within 180 days after his employment
terminates; (iv) the continuation of his coverage under the
Debtors director and officer insurance policy, or, in the alternative, the Debtors are to provide Mr. Ogle with similar coverage, in either case,
for a period of three years after his employment terminates; and
(v) the payment of any unpaid salary and unused accrued vacation through the date of the termination of his employment.

Compensation Committee Interlocks and Insider
Participation

No member of the Compensation Committee was an
officer or employee of the Company or of any of its subsidiaries
during the prior year or was formerly an officer of the Company
or of any of its subsidiaries. During the last fiscal year, none
of the executive officers of the Company have served on the
board of directors or compensation committee of any other
entity, any of whose officers served either on the Board of the
Company or on the Compensation Committee of the Company.

65



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##### 



Item 12.  Security Ownership
of Certain Beneficial Owners and Management

The following table sets forth, as of
March 20, 2003, information with respect to the beneficial
ownership of the Common Stock by (1) each Named Executive
Officer in the summary compensation table, (2) each of the
Companys directors, (3) all of the Companys
directors and executive officers as a group, and (4) each
person the Company believes beneficially owns more than 5% of
the outstanding shares of Common Stock, based upon such
persons filings with the SEC. Unless otherwise indicated,
each such stockholder has sole voting and investment power with
respect to the shares beneficially owned by such stockholder.
Percentages of shares beneficially owned are based upon
57,359,437 shares of Common Stock outstanding as of
March 20, 2003 plus for each person named below any shares
of Common Stock that may be acquired by such person within
60 days of such date upon exercise of outstanding options
or other rights.

|                                                                 |                               |                    |            |              |  |  |       |   | 
|---------------------------------------------------------------- | ----------------------------- | ------------------ | ---------- | ------------ |  |  | ----- | - | 
|                                                                 |                               | Number of Shares   |            | Percent of  
|Name                                                             |                               | Beneficially Owned |            | Common Stock
|                                                                 |                               |                    |            |             
|Executive Officers And Directors                                 |                               |                    |            |              |  |  |       |  
|D. Clark Ogle                                                    |                               |                    |           |              |  |  |       | %
|Joseph H. Izhakoff                                               |                               |                    | 405,000    | (1)          |  |  | *     |  
|Ezra Shashoua                                                    |                               |                    | 162,500    | (2)          |  |  | *     |  
|Philip V. Petrocelli                                             |                               |                    | 882,748    | (3)          |  |  | *     |  
|Kris E. Hansel                                                   |                               |                    | 274,661    | (4)          |  |  | *     |  
|Thomas H. Bruinooge                                              |                               |                    | 117,092    | (5)          |  |  | *     |  
|Ivan W. Gorr                                                     |                               |                    | 75,700     | (6)          |  |  | *     |  
|Harris W. Hudson                                                 |                               |                    | 1,043,650  | (7)          |  |  | 1.8   | %
|H. Wayne Huizenga                                                |                               |                    | 80,000     | (8)          |  |  | *     |  
|M. Steven Langman                                                |                               |                    | 95,492     | (9)          |  |  | *     |  
|All executive officers and directors as a group
    (12 persons) |                               |                    | 5,513,497  | (10)         |  |  | 9.39  | %
|Stockholders of Five Percent or More                             |                               |                    |            |              |  |  |       |  
|Investcorp S.A.                                                  |                               |                    | 20,131,313 | (11)         |  |  | 26.4  | %
|                                                                 | 6 Rue Adolph Fischer          |                    |            |              |  |  |       |   | 
|                                                                 | L-1520 Luxembourg             |                    |            |              |  |  |       |   | 
|Daniel J. Breedan                                                |                               |                    | 18,106,764 |              |  |  | 31.56 | %
|                                                                 | 450 East Las Olas Boulevard   |                    |            |              |  |  |       |   | 
|                                                                 | Ft. Lauderdale, Florida 33301 |                    |            |              |  |  |       |   | 
|MidOcean Capital Investors, L.P.                                 |                               |                    | 9,233,717  | (12)         |  |  | 13.9  | %
|                                                                 | 345 Park Avenue, 16th Floor   |                    |            |              |  |  |       |   | 
|                                                                 | New York, New York 10154      |                    |            |              |  |  |       |   | 
|J.P. Morgan Capital Corporation                                  |                               |                    | 9,233,717  | (13)         |  |  | 13.9  | %
|                                                                 | 60 Wall Street, 14th Floor    |                    |            |              |  |  |       |   | 
|                                                                 | New York, New York 10260      |                    |            |              |  |  |       |   | 
|Don R. ONeal                                                    |                               |                    | 5,019,531  | (14)         |  |  | 8.7   | %
|                                                                 | 5310 Normandy                 |                    |            |              |  |  |       |   | 
|                                                                 | Colleyville, TX 76034         |                    |            |              |  |  |       |   | 






| |   |             
| | - | ------------
| | * | Less than 1%

| |     |                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Consists of 405,000 shares issuable upon exercise
    of options.                                                                                                                                                                          
| | (2) | Consists of 162,500 shares issuable upon exercise
    of options.                                                                                                                                                                          
| | (3) | Consists of (a) 123,776 shares and
    (b) 758,972 shares issuable upon exercise of options.                                                                                                                                               
| | (4) | Consists of (a) 37,092 shares and
(b) 237,569 shares issuable upon exercise of options.                                                                                                                                                    
| | (5) | Consists of (a) 37,092 shares and
    (b) 80,000 shares issuable upon exercise of options.                                                                                                                                                 
| | (6) | Consists of (a) 5,700 shares and
    (b) 70,000 shares issuable upon exercise of options.                                                                                                                                                  
| | (7) | Consists of (a) 713,650 shares held directly
    by Mr. Hudson, (b) 250,000 shares owned by
    Mr. Hudsons spouse, as to which Mr. Hudson
    disclaims beneficial ownership and (c) 80,000 shares
    issuable upon exercise of options.
| | (8) | Consists of 80,000 shares issuable upon exercise
    of options.                                                                                                                                                                           

66



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##### 



| |     |                                                                                           
| | --- | ------------------------------------------------------------------------------------------
| | (9) | Consists of (a) 35,492 shares and
    (b) 60,000 shares issuable upon exercise of options.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes an aggregate of 1,327,423 shares
    issuable upon exercise of options held by certain executive
    officers and directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(11) | Investcorp S.A. does not directly own any shares
    of Common Stock or Preferred Stock. The number of shares of
    Common Stock shown as owned by Investcorp S.A. includes
    (a) 3,000,000 shares of Common Stock issuable upon
    conversion of 21,000 shares of Series A Preferred Stock
    held by Investcorp NationsRent Limited Partnership, a Cayman
    Islands limited partnership in which Investcorp owns a majority
    economic ownership interest and is the sole general partner,
    (b) 11,285,714 shares of Common Stock issuable upon
    conversion of 79,000 shares of Series A Preferred Stock
    held by NR Holdings Limited (which represents beneficial
    ownership by NR Holdings Limited of approximately 16.4% of the
    outstanding Common Stock calculated in accordance with
    Rule 13d-3 under the Exchange Act), (c) 4,444,444
    shares of Common Stock issuable upon conversion of 20,000 shares
    of Series B Preferred Stock held by NR2 Holdings Limited
    (which represents beneficial ownership by NR2 Holdings Limited
    of approximately 7.1% of the outstanding Common Stock calculated
    in accordance with Rule 13d-3 under the Exchange Act), and
    (d) 1,401,155 shares of Common Stock held by REF Equity
    Limited. Investcorp S.A. may be deemed to share beneficial
    ownership of the shares held by NR Holdings Limited, NR2
    Holdings Limited and REF Equity Limited because such entities,
    the holders of their voting securities or their principals have
    entered into revocable management services or similar agreements
    with an affiliate of Investcorp S.A. pursuant to which each such
    person or entity indirectly has granted such affiliate of
    Investcorp S.A. the authority to direct the voting of the voting
    securities of NR Holdings, NR2 Holdings and/or REF Equity
    Limited for so long as such agreement is in effect. Sipco
    Limited, a passive holding company entity without operations or
    employees, may be deemed to be the beneficial owner of the
    shares of Common Stock beneficially owned by Investcorp S.A.
    because Sipco Limited may be deemed to control Investcorp S.A.
    through its ownership of a majority of the stock of a company
    which indirectly owns a majority of the outstanding stock of
    Investcorp.
|(12) | Consists of (a) 8,888,889 shares of Common
    Stock issuable upon conversion of 40,000 shares of Series B
    Preferred Stock and (b) 344,828 shares of Common Stock held
by MidOcean Capital Investors, L.P., formerly DB
    Capital Partners, L.P. Ultramar Capital, Ltd., MidOcean Capital
Partners, L.P., Existing Fund GP, Ltd., MidOcean Partners, LP and
MidOcean Associates, SPC may all be deemed to be beneficial owners of
the shares as a result of their direct or indirect control
relationship with MidOcean Capital Investors, L.P. MidOcean Capital
Partners, L.P. is the general partner of MidOcean Capital Partners,
L.P. MidOcean Partners, LP is the sole owner of Existing Fund GP,
Ltd. and MidOcean Partners, LP is the sole owner of Existing Fund GP,
Ltd. and MidOcean Associates, SPC is the general partner of MidOcean
Partners, LP. On February 21, 2003, MidOcean Partners, LP, and
Existing Fund GP, Ltd. acquired an 80% limited partnership interest
and a general partnership interest, respectively, in DB Capital
Partners, L.P. from DB Capital Partners, Inc. Prior to this time,
none of Ultramar Capital, Ltd., Existing Fund GP, Ltd., MidOcean
Partners, LP or MidOcean Associates, SPC had a beneficial ownership
interest in the common stock. J. Edward Virtue may be deemed the
beneficial owner of the shares because he indirectly controls the
securities, but disclaims the beneficial ownership except to the
extent of his pecuniary interest therein. The address for MidOcean
Capital Investors, L.P., MidOcean Capital Partners, L.P., Existing
Fund GP, Ltd., MidOcean Partners, LP and MidOcean Associates, SPC is
345 Park Avenue, 16th Floor, New York, New York 10054.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(13) | Consists of (a) 6,666,667 shares of Common
    Stock issuable upon conversion of 30,000 shares of Series B
    Preferred Stock owned by J.P. Morgan Capital Corporation,
    (b) 2,222,222 shares of Common Stock issuable upon
    conversion of 10,000 shares of Series B Preferred Stock
    held by Sixty Wall Street Fund, L.P., an affiliate of J.P.
    Morgan, and (c) 344,828 shares of Common Stock owned by
    J.P. Morgan Capital Corporation. J.P. Morgan and Sixty Wall
    Street share beneficial ownership of each of their respective
    shares with J.P. Morgan Chase & Co. (formerly J.P. Morgan
    & Co. Incorporated). J.P. Morgan Capital Corporation is an
    indirect wholly-owned subsidiary of J.P. Morgan Chase & Co.
    Sixty Wall Street Corporation, which is the general partner of
    Sixty Wall Street Fund, is an indirect wholly-owned subsidiary
    of J.P. Morgan Chase & Co.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(14) | Consists of (a) 775,180 shares of Common
    Stock owned by Mr. ONeals spouse, as to which
    Mr. ONeal disclaims beneficial ownership,
    (b) 2,452,564 shares of Common Stock held by the 1997
    Ray L. ONeal and Ellen M. ONeal
    irrevocable trust for Don R. ONeal of which
    Mr. ONeal is a trustee, and (c) 1,791,787 shares
    of Common Stock owned directly by Mr. ONeal.
    Mr. ONeal served as President of the Company from
    October 1998 until May 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Item 13.  Certain
Relationships and Related Transactions

As part of our Chapter 11 filing, the Debtors
have the right, subject to Bankruptcy Court approval and other
conditions, to assume or reject any prepetition executory
contracts and unexpired leases. Parties affected by these
rejections may file claims with the Bankruptcy Court. We can
provide no assurance that after negotiations with various
parties in interest, the terms of the agreements described
herein will or will not be significantly revised or that any of
these agreements will be assumed or rejected.

The Company subleases certain office space from
AutoNation in downtown Ft. Lauderdale. The Company also
leases certain data storage space from AutoNation. Lease
payments for this space totaled $0.8 million for the year
ended December 31, 2002. Messrs. Huizenga and Hudson
serve as directors of AutoNation.

The Company subleases certain office space from
Extended Stay in downtown Ft. Lauderdale. Lease payments for this
space totaled $0.6 million for the year ended December 31, 2002. Mr.
Huizenga serves as a director of Extended Stay.

The Company licensed the use of an executive
suite from South Florida Stadium Corporation at Pro Player
Stadium, a professional sports stadium in South Florida which is
owned by Mr. Huizenga, pursuant to a seven year agreement
which was set to expire in 2005. Payments for such facility totaled
$0.2 million for the year ended December 31, 2001. In July
2002, pursuant to the rules of the bankruptcy code, the Company rejected this
agreement.

67



---



##### 



In connection with the recruiting and relocation
of Ezra Shashoua, the Companys Executive Vice President
and Chief Financial Officer, in January 2001 the Company loaned
Mr. Shashoua $0.3 million, the principal and interest
of which will be forgiven by the Company one-third a year
commencing January 2002. The amount forgiven shall be reported
as compensation to Mr. Shashoua.

With respect to transactions discussed in this
section, no independent determination has been made as to the
fairness or reasonableness of the terms thereof. The Company
believes, however, based on its prior experience, that the terms
of each transaction were as favorable to the Company as it could
have obtained from an unaffiliated party.

68



---



##### 





|          |                        
|--------- | -----------------------
|Item  14. | Controls and Procedures

Within the 90-day period prior to the filing of this report, NationsRent, Inc.
management, including the Chief Executive Officer and Chief Financial Officer, conducted
an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as defined in Exchange Act Rule 13a-14(c). Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of the date of that evaluation.
There have been no significant changes in internal controls, or in factors that could significantly
affect internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.



|          |                                                                     
|--------- | --------------------------------------------------------------------
|Item  15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) Exhibits and Financial Statement
Schedules



| |                                                                              
| | -----------------------------------------------------------------------------
| | (1) Financial Statements of the Company are
    set forth in Part II, Item 8.



| |     |                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Schedule II  Valuation and
    Qualifying Accounts and Reserves  is set forth
    following the notes to the Consolidated Financial Statements.



| |                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Other schedules are omitted because they are not
    applicable, are not present in amounts sufficient to require
    submission of the schedules or the required information is
    presented in the Consolidated Financial Statements or related
    notes.



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | (3) Exhibits  (See Index to
    Exhibits set forth following the signature page to this Report.)

(b) Reports on Form 8-K



| |      
| | -----
| | None.

69



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized.

March 31, 2003

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



| |     |                  
| | --- | -----------------
| | By: | /s/ D. CLARK OGLE

| |                            
| | ---------------------------
| |                            
| | D. Clark Ogle,             
| | Chief Executive
    Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, this Report on Form 10-K has
been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

|                                           |  |                                                                                        |  |      |                | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | ---- | -------------- | 
|Signature                                  |  | Title                                                                                  |  | Date
|                                           |  |                                                                                        |  |     
|/s/ D. CLARK OGLED. Clark Ogle             |  | Chief Executive Officer (Principal
    Executive Officer)                              |  |      | March 31, 2003 | 
|                                          
|/s/ EZRA SHASHOUAEzra Shashoua             |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer) |  |      | March 31, 2003 | 
|                                          
|/s/ BRENT D. HOUSEBrent D. House           |  | Controller (Principal
    Accounting Officer)                                          |  |      | March 31, 2003 | 
|                                          
|/s/ THOMAS H. BRUINOOGEThomas H. Bruinooge |  | Director                                                                               |  |      | March 31, 2003 | 
|                                          
|/s/ IVAN W. GORRIvan W. Gorr               |  | Director                                                                               |  |      | March 31, 2003 | 
|                                          
|/s/ HARRIS W. HUDSONHarris W. Hudson       |  | Director                                                                               |  |      | March 31, 2003 | 
|                                          
|/s/ H. WAYNE HUIZENGAH. Wayne Huizenga     |  | Director                                                                               |  |      | March 31, 2003 | 
|                                          
|/s/ M. STEVEN LANGMANM. Steven Langman     |  | Director                                                                               |  |      | March 31, 2003 | 

70



---



##### 



CERTIFICATION

I, D. Clark Ogle, certify that:

1. I have reviewed this annual report on
Form 10-K of NationsRent, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                        
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors an the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



Date: March 28, 2003




/s/ D. CLARK OGLE





D. Clark Ogle


Chief Executive Officer




---



##### 



CERTIFICATION

I, Ezra Shashoua, certify that:

1. I have reviewed this annual report on
Form 10-K of NationsRent, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                        
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors an the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



Date: March 28, 2003




/s/ EZRA SHASHOUA





Ezra Shashoua


Executive Vice President and Chief Financial Officer




---



##### 



EXHIBIT INDEX

|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ---- |  |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 2.1  |  |  |            |  | Joint Plan of Reorganization, dated February 7,
2003, of NationsRent, Inc. and its subsidiaries.(12)                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 3.1  |  |  |            |  | Amended and Restated Certificate of Incorporation
    of the Company.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.2  |  |  |            |  | Amended and Restated By-Laws of the Company.(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3.3  |  |  |            |  | Certificate of Designation for Series A
    Convertible Preferred Stock.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.4  |  |  |            |  | Certificate of Amendment to Certificate of
    Designation for Series A Convertible Preferred Stock.(3)                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3.5  |  |  |            |  | Certificate of Designation for Series B
    Convertible Preferred Stock.(5)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.1  |  |  |            |  | Unregistered 10 3/8% Global Senior
    Subordinated Notes due 2008.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.2  |  |  |            |  | Registered 10 3/8% Senior Subordinated Notes
    due 2008.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 4.3  |  |  |            |  | Senior Subordinated Guarantee dated
    December 11, 1998, of the Guarantors as defined therein.(2)                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 4.4  |  |  |            |  | Indenture, dated December 11, 1998, by and
    among Company, the Guarantors and The Bank of New York.(2)                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4.5  |  |  |            |  | Registration Rights Agreement, dated
    December 11, 1998, by and among the Company, the Guarantors
    and the Initial Purchasers as defined therein.(2)                                                                                                                                                                                                                                                                                                                                                        
|        | 4.6  |  |  |            |  | Fifth Amended and Restated Revolving Credit and
    Term Loan Agreement, dated as of August 2, 2000, by and
    among the Company, certain of its subsidiaries, Fleet National
    Bank (f/k/a BankBoston, N.A.) and the other lending institutions
    party thereto, Fleet National Bank, as administrative agent,
    Bankers Trust Company, as syndication agent, and Scotiabanc
    Inc., as documentation agent.(5)                                                                                         
|        | 4.7  |  |  |            |  | Second Amended Restated Security Agreement, dated
    as of August 2, 2000, between the Company, certain of its
    subsidiaries, and Fleet National Bank (f/k/a BankBoston, N.A.),
    as administrative agent.(5)                                                                                                                                                                                                                                                                                               
|        | 4.8  |  |  |            |  | First Amendment to the Fifth Amended and Restated
    Revolving Credit and Term Loan Agreement and to the Second
    Amended and Restated Security Agreement, dated as of
    March 14, 2001, by and among the Company, certain of its
    subsidiaries, Fleet National Bank (f/k/a BankBoston, N.A.) and
    the other lending institutions party thereto, Fleet National
    Bank, as administrative agent, Bankers Trust Company, as
    syndication agent, and Scotiabanc Inc., as documentation
    agent.(6)
|        | 4.9  |  |  |            |  | Second Amendment to the Fifth Amended and
    Restated Revolving Credit Agreement and Term Loan Agreement,
    dated as of August 10, 2001, by and among the Company,
    certain of its subsidiaries, the lending institutions party
    thereto, Fleet National Bank (f/k/a BankBoston, N.A.), as
    administrative agent, Bankers Trust Company, as syndication
    agent, and The Bank of Nova Scotia, as documentation agent.(7)                                                                            
|        | 4.10 |  |  |            |  | Third Amendment to the Fifth Amended and Restated
    Revolving Credit and Term Loan Agreement, dated as of
    December 14, 2001, by and among the Company, certain of its
    subsidiaries, the lending institutions party thereto, Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative agent,
    Bankers Trust Company, as syndication agent, and The Bank of
    Nova Scotia, as documentation agent.(9)                                                                                     
|        | 4.11 |  |  |            |  | Fourth Amendment to the Fifth Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of December 5,
2002, by and among the Company, certain of its subsidiaries, the
lending institutions party thereto, Fleet National Bank (f/k/a BankBoston,
N.A.), as administrative agent, Bankers Trust Company as syndication
agent, and the Bank of Nova Scotia,
as documentation agent.(12)                                                                                                             
|        | 4.12 |  |  |            |  | Debtor In Possession Revolving Credit Agreement,
    dated as of December 18, 2001, among NationsRent, Inc. and its
    subsidiaries party thereto, as debtors and debtors in possession
    and as joint and several Borrowers, and the lending institutions
    referred to therein as Banks and Fleet National Bank, as
    administrative agent, syndication agent, swing lender, and
    issuing bank, and Fleet Securities, Inc. as lead arranger and
    book manager.(9)                                  
|        | 4.13 |  |  |            |  | Security Agreement, dated as of December 18,
    2001, among the Company, certain of its subsidiaries, and Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative
    agent.(9)                                                                                                                                                                                                                                                                                                                      
|        | 4.14 |  |  |            |  | First Amendment to Debtor In Possession Revolving
    Credit Agreement and to Security Agreement, dated as of
    January 31, 2002, by and among the Company, certain of its
    subsidiaries, the financial institutions party thereto, Fleet
    National Bank (f/k/a BankBoston, N.A.), as administrative agent,
    and First Union National Bank, as syndication agent.(9)                                                                                                                                   

71



---



##### 



|        |      |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ---- |  |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 4.15 |  |  |            |  | Second Amendment to Debtor In Possession
    Revolving Credit Agreement, dated as of June 28, 2002, by
    and among the Company, certain of its subsidiaries, the
    financial institutions party thereto, Fleet National Bank (f/k/a
    BankBoston, N.A.), as administrative agent, and First Union
    National Bank, as syndication agent.(10)                            
|        | 4.16 |  |  |            |  | Third Amendment to Debtor In Possession Revolving
Credit Agreement, dated as of September 27, 2002, by and among
the Company, certain of its subsidiaries, the financial institutions
party thereto, Fleet National Bank (f/k/a Bank Boston, N.A.), as
administrative agent, and First Union National Bank, syndication
agent.(11)                                              
|        | 4.17 |  |  |            |  | Amended and Restated Debtor In Possession Revolving
Credit Agreement, dated as of December 31, 2002, by and among
the Company, certain of its subsidiaries, the financial institutions
party thereto, General Electric Capital Corporation as
administrative agent, syndication
agent, and co-agent and GECC Capital Markets Group, Inc., as Lead
Arranger and Book Manager.(12)

72



---



##### 



|        |      |  |  |             |  |                                                                                                                            
|------- | ---- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 10.1 |  |  |            |  | Form of Key Employee Severance Benefit Plan.(9)                                                                            
|        | 10.2 |  |  |            |  | Form of Key Employee Retention Bonus Plan.(9)                                                                              
|        | 10.3 |  |  |            |  | Executive Transition Agreement dated as of
    December 14, 2001 by and between the Company and James L.
    Kirk.(9)      
|        | 10.4 |  |  |            |  | Employment Agreement dated as of August 19,
2002 by and between the Company and D. Clark Ogle.(11)                         
|
|        | 99.1 |  |  |            |  | Letter to Securities and Exchange Commission,
    dated May 24, 2002, regarding Temporary Note 3T.(9)                      
|        | 99.3 |  |  |            |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002(12).
|        | 99.4 |  |  |            |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002(12).






|     |                                                                                                                       
|---- | ----------------------------------------------------------------------------------------------------------------------
|(1)  | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ended
    June 30, 1998.  
|(2)  | Incorporated by reference to the Companys
    Registration Statement on Form S-4, Commission File
    No. 333-69691. 
|(3)  | Incorporated by reference to the Companys
    Registration Statement on Form S-3, Commission File
    No. 333-88603. 
|(4)  | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ended
    June 30, 1999.  
|(5)  | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ending
    June 30, 2000. 
|(6)  | Incorporated by reference to the Companys
    Annual Report on Form 10-K for the year ended
    December 31, 2000.   
|(7)  | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ending
    June 30, 2001. 
|(8)  | Incorporated by reference to the Companys
    Current Report on Form 8-K filed on August 31, 2001.                   
|(9)  | Incorporated by reference to the Companys
    Annual Report on Form 10-K for the year ended
    December 31, 2001.   
|(10) | Incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ending
    March 31, 2002.
|(11) | Incorporated by reference to the Companys
Quarterly Report on Form 10-Q for the period ending September 30,
2002.    
|(12) | Filed herewith                                                                                                        

73