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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-Q



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(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003

OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



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Commission File Number 0-22026

RENT-WAY, INC.

(Exact name of registrant as specified in its charter)




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|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|PENNSYLVANIA                                   |  | 25-1407782                          
|                                               |  |                                     
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

ONE RENTWAY PLACE, ERIE, PENNSYLVANIA 16505




(Address of principal executive offices)


(814) 455-5378




(Registrants telephone number)


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 [  ]

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

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|             |  |                                   
|------------ |  | ----------------------------------
|Class        |  | Outstanding as of February 9, 2004
|             |  |                                   
|Common Stock |  | 26,148,676                        





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TABLE OF CONTENTS



|                          |                                                                                                |                                                      |  |  |  |  |  | 
|------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|                          |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                          |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                          |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                          |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                          | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
|                          | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            
|                          | ITEM 4. CONTROLS AND PROCEDURES                                                               
|PART IIOTHER INFORMATION
|                          | ITEM 1. LEGAL PROCEEDINGS                                                                     
|                          | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES               
|EXHIBIT INDEX            
|Exhibit 31.1             
|Exhibit 31.2             
|Exhibit 32.1             



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RENT-WAY, INC.

|        |  |                       |  |            |  |                                                                                       |    |                                                                                                            |    |      |   | 
|------- |  | --------------------- |  | ---------- |  | ------------------------------------------------------------------------------------- | -- | ---------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|        |  |                       |  |            |  |                                                                                       |    |                                                                                                            |    | PAGE
|PART I  |  | FINANCIAL INFORMATION |  |            |  |                                                                                      
|        |  |                       |  | Item 1.    |  | Financial Statements:                                                                 |    |                                                                                                            |    |     
|        |  |                       |  |            |  |                                                                                       |    | Condensed Consolidated Balance Sheets as of December 31, 2003
(unaudited) and September 30, 2003           |    |      | 3 | 
|        |  |                       |  |            |  |                                                                                       |    | Condensed Consolidated Statements of Operations, three months
ended December 31, 2003 and 2002 (unaudited) |    |      | 4 | 
|        |  |                       |  |            |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows, three months
ended December 31, 2003 and 2002 (unaudited) |    |      | 5 | 
|        |  |                       |  |            |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements (unaudited)                                           |    |      | 6 | 
|        |  |                       |  | Item 2.    |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |    |                                                                                                            | 22 |     
|        |  |                       |  | Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                                                                                            | 28 |     
|        |  |                       |  | Item 4.    |  | Controls and Procedures                                                               |    |                                                                                                            | 29 |     
|PART II |  | OTHER INFORMATION     |  |            |  |                                                                                      
|        |  |                       |  | Item 1.    |  | Legal Proceedings                                                                     |    |                                                                                                            | 30 |     
|        |  |                       |  | Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                            | 30 |     
|        |  |                       |  | Signatures |  |                                                                                       | 31 |                                                                                                           

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##### Table of Contents



RENT-WAY, INC.




CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)


|                                                                                                                                                |                                            |   |              |         |               |   |          |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------ | ------- | ------------- | - | -------- | ------- | 
|                                                                                                                                                |                                            |   | DECEMBER 31, |         | SEPTEMBER 30,
|                                                                                                                                                |                                            |   | 2003         |         | 2003         
|                                                                                                                                                |                                            |   |              |         |              
|                                                                                                                                                |                                            |   | (unaudited)  |         |               |   |         
|ASSETS                                                                                                                                          |                                            |   |              |         |               |   |          |        
|Cash and cash equivalents                                                                                                                       |                                            | $ | 5,715        |         |               | $ | 3,303    |        
|Restricted cash                                                                                                                                 |                                            |   |             |         |               |   | 10,000   |        
|Prepaid expenses                                                                                                                                |                                            |   | 4,903        |         |               |   | 8,144    |        
|Income tax receivable                                                                                                                           |                                            |   | 4,245        |         |               |   | 4,245    |        
|Rental merchandise, net                                                                                                                         |                                            |   | 198,884      |         |               |   | 171,982  |        
|Rental merchandise credits due from vendors                                                                                                     |                                            |   | 3,913        |         |               |   | 4,156    |        
|Property and equipment, net                                                                                                                     |                                            |   | 39,162       |         |               |   | 38,765   |        
|Goodwill                                                                                                                                        |                                            |   | 188,499      |         |               |   | 188,499  |        
|Deferred financing costs, net                                                                                                                   |                                            |   | 7,972        |         |               |   | 8,316    |        
|Intangible assets, net                                                                                                                          |                                            |   | 388          |         |               |   | 503      |        
|Other assets                                                                                                                                    |                                            |   | 9,071        |         |               |   | 19,946   |        
|                                                                                                                                                |                                            |   |              |         |               |   |          |        
|                                                                                                                                                | Total assets                               |   | $            | 462,752 |               |   | $        | 457,859 | 
|                                                                                                                                                |                                            |   |              |         |               |   |          |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                            |                                            |   |              |         |               |   |          |        
|Liabilities:                                                                                                                                    |                                            |   |              |         |               |   |          |        
|Accounts payable                                                                                                                                |                                            | $ | 32,191       |         |               | $ | 30,244   |        
|Other liabilities                                                                                                                               |                                            |   | 49,050       |         |               |   | 85,328   |        
|Deferred tax liability                                                                                                                          |                                            |   | 6,310        |         |               |   | 4,915    |        
|Debt                                                                                                                                            |                                            |   | 252,418      |         |               |   | 214,592  |        
|                                                                                                                                                |                                            |   |              |         |               |   |          |        
|                                                                                                                                                | Total liabilities                          |   |              | 339,969 |               |   |          | 335,079 | 
|Contingencies                                                                                                                                   |                                            |   |             |         |               |   |         |        
|Convertible redeemable preferred stock                                                                                                          |                                            |   | 21,787       |         |               |   | 15,991   |        
|Shareholders equity:                                                                                                                           |                                            |   |              |         |               |   |          |        
|Preferred stock, without par value; 1,000,000 shares
authorized; 1,500 shares issued and outstanding as Series
A convertible preferred shares   |                                            |   |             |         |               |   |         |        
|Common stock, without par value; 50,000,000 shares
authorized; 26,135,336 and 26,022,037 shares issued and
outstanding per period, respectively |                                            |   | 303,920      |         |               |   | 303,220  |        
|Common stock warrants; 0 and 100,000 outstanding,
respectively                                                                                  |                                            |   |             |         |               |   | 156      |        
|Option to purchase convertible preferred stock                                                                                                  |                                            |   | 142          |         |               |   | 142      |        
|Accumulated other comprehensive loss                                                                                                            |                                            |   | (192         | )       |               |   | (69      | )      
|Accumulated deficit                                                                                                                             |                                            |   | (202,874     | )       |               |   | (196,660 | )      
|                                                                                                                                                |                                            |   |              |         |               |   |          |        
|                                                                                                                                                | Total shareholders equity                 |   |              | 100,996 |               |   |          | 106,789 | 
|                                                                                                                                                |                                            |   |              |         |               |   |          |        
|                                                                                                                                                | Total liabilities and shareholders equity |   | $            | 462,752 |               |   | $        | 457,859 | 
|                                                                                                                                                |                                            |   |              |         |               |   |          |        

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

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##### Table of Contents



RENT-WAY, INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands, except per share data)
(Unaudited)


|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |        |         |  
|------------------------------- | ------------------------------------------- | ------------------------------------------------------ | --------------------------- | ---------------------------------- | ------- | ------------------ | ------- | ---- | ------ | ------ | ------- | -
|                                |                                             |                                                        |                             |                                    |         | Three Months Ended
|                                |                                             |                                                        |                             |                                    |         | December 31,      
|                                |                                             |                                                        |                             |                                    |         |                   
|                                |                                             |                                                        |                             |                                    |         | 2003               |         | 2002
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|REVENUES:                       |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Rental revenue                                         |                             | $                                  | 102,428 |                    |         | $    | 96,787 |       
|                                |                                             | Prepaid phone service revenue                          |                             |                                    | 6,190   |                    |         |      | 9,261  |       
|                                |                                             | Other revenues                                         |                             |                                    | 14,991  |                    |         |      | 13,790 |       
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             |                                                        |                             | Total revenues                     |         |                    | 123,609 |      |        |        | 119,838 |  
|COSTS AND OPERATING EXPENSES:   |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Depreciation and amortization:                         |                             |                                    |         |                    |         |      |        |       
|                                |                                             |                                                        | Rental merchandise          |                                    |         | 32,872             |         |      |        | 28,693 |        
|                                |                                             |                                                        | Property and equipment      |                                    |         | 3,982              |         |      |        | 5,656  |        
|                                |                                             |                                                        | Amortization of intangibles |                                    |         | 115                |         |      |        | 478    |        
|                                |                                             | Cost of prepaid phone service                          |                             |                                    | 3,979   |                    |         |      | 5,727  |       
|                                |                                             | Salaries and wages                                     |                             |                                    | 33,642  |                    |         |      | 33,745 |       
|                                |                                             | Advertising, net                                       |                             |                                    | 6,129   |                    |         |      | 8,760  |       
|                                |                                             | Occupancy                                              |                             |                                    | 8,701   |                    |         |      | 7,660  |       
|                                |                                             | Other operating expenses                               |                             |                                    | 25,670  |                    |         |      | 24,625 |       
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             |                                                        |                             | Total costs and operating expenses |         |                    | 115,090 |      |        |        | 115,344 |  
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             |                                                        |                             | Operating income                   |         |                    | 8,519   |      |        |        | 4,494   |  
|OTHER INCOME (EXPENSE):         |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Interest expense                                       |                             |                                    | (7,859  | )                  |         |      | (8,698 | )     
|                                |                                             | Interest income                                        |                             |                                    | 770     |                    |         |      | 11     |       
|                                |                                             | Amortization and write-off of deferred financing costs |                             |                                    | (344    | )                  |         |      | (398   | )     
|                                |                                             | Other income (expense)                                 |                             |                                    | (4,236  | )                  |         |      | 1,487  |       
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Loss before income taxes and discontinued operations   |                             |                                    | (3,150  | )                  |         |      | (3,104 | )     
|                                |                                             | Income tax expense                                     |                             |                                    | 1,395   |                    |         |      | 1,430  |       
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Loss before discontinued operations                    |                             |                                    | (4,545  | )                  |         |      | (4,534 | )     
|                                |                                             | Loss from discontinued operations                      |                             |                                    | (1,272  | )                  |         |      | (827   | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             |                                                        |                             | Net loss                           |         |                    | (5,817  | )    |        |        | (5,361  | )
|                                |                                             | Dividend and accretion of preferred stock              |                             |                                    | (395    | )                  |         |      |       |       
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             | Net loss allocable to common shareholders              |                             | $                                  | (6,212  | )                  |         | $    | (5,361 | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |       
|LOSS PER COMMON SHARE (NOTE 4): |                                             |                                                        |                             |                                    |         |                    |         |     
|                                | Basic loss per common share:                |                                                        |                             |                                    |         |                    |         |      |       
|                                |                                             | Loss before discontinued operations                    |                             | $                                  | (0.17   | )                  |         | $    | (0.18  | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |       
|                                |                                             | Net loss allocable to common shareholders              |                             | $                                  | (0.24   | )                  |         | $    | (0.21  | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |       
|                                | Diluted loss per common share:              |                                                        |                             |                                    |         |                    |         |      |       
|                                |                                             | Loss before discontinued operations                    |                             | $                                  | (0.17   | )                  |         | $    | (0.18  | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |       
|                                |                                             | Net loss allocable to common shareholders              |                             | $                                  | (0.24   | )                  |         | $    | (0.21  | )     
|                                |                                             |                                                        |                             |                                    |         |                    |         |      |        |       
|                                | Weighted average common shares outstanding: |                                                        |                             |                                    |         |                    |         |      |       
|                                |                                             |                                                        |                             | Basic                              |         |                    | 26,078  |      |        |        | 25,686  |  
|                                |                                             |                                                        |                             |                                    |         |                    |         |     
|                                |                                             |                                                        |                             | Diluted                            |         |                    | 26,078  |      |        |        | 25,686  |  
|                                |                                             |                                                        |                             |                                    |         |                    |         |     

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

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RENT-WAY, INC.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands)
(Unaudited)


|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |          |         |        |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ------- | ------------------ | ------- | -------- | ------- | ------ | ------- | -
|                                                                            |                                                                    |                                           |                                                  |                                          |         | Three Months Ended
|                                                                            |                                                                    |                                           |                                                  |                                          |         | December 31,      
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                   
|                                                                            |                                                                    |                                           |                                                  |                                          |         | 2003               |         | 2002    
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|OPERATING ACTIVITIES:                                                       |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|Net loss                                                                    |                                                                    | $                                         | (5,817                                           | )                                        |         | $                  | (5,361  | )       
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            | Loss from discontinued operations                                  |                                           |                                                  | 1,272                                    |         |                    |         | 827      |        
|                                                                            | Depreciation and amortization                                      |                                           |                                                  | 37,271                                   |         |                    |         | 34,988   |        
|                                                                            | Deferred income taxes                                              |                                           |                                                  | 1,395                                    |         |                    |         | 1,430    |        
|                                                                            | Market adjustment for interest rate swap derivative                |                                           |                                                  | (1,293                                   | )       |                    |         | (1,205   | )      
|                                                                            | Market adjustment for preferred stock conversion option derivative |                                           |                                                  | 5,703                                    |         |                    |         |         |        
|                                                                            | Write-off of property and equipment                                |                                           |                                                  | 139                                      |         |                    |         | 102      |        
|                                                                            | Gain on sale of assets                                             |                                           |                                                  |                                         |         |                    |         | (195     | )      
|Changes in assets and liabilities:                                          |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            | Restricted cash                                                    |                                           |                                                  | 10,000                                   |         |                    |         |         |        
|                                                                            | Prepaid expenses                                                   |                                           |                                                  | 3,241                                    |         |                    |         | 466      |        
|                                                                            | Rental merchandise                                                 |                                           |                                                  | (59,774                                  | )       |                    |         | (53,900  | )      
|                                                                            | Rental merchandise deposits and credits due from vendors           |                                           |                                                  | 243                                      |         |                    |         | 75       |        
|                                                                            | Income tax receivable                                              |                                           |                                                  |                                         |         |                    |         | 4        |        
|                                                                            | Other assets                                                       |                                           |                                                  | 344                                      |         |                    |         | (392     | )      
|                                                                            | Accounts payable                                                   |                                           |                                                  | 9,334                                    |         |                    |         | 3,875    |        
|                                                                            | Other liabilities                                                  |                                           |                                                  | (22,104                                  | )       |                    |         | 3,261    |        
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            |                                                                    | Net cash used in continuing operations    |                                                  |                                          | (20,046 | )                  |         |          | (16,025 | )     
|                                                                            |                                                                    |                                           |                                                  | Net cash used in discontinued operations |         |                    | (245    | )        |         |        | (2,205  | )
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            |                                                                    |                                           |                                                  | Net cash used in operating activities    |         |                    | (20,291 | )        |         |        | (18,230 | )
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|INVESTING ACTIVITIES:                                                       |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            | Purchase of businesses, net of cash acquired                       |                                           |                                                  |                                         |         |                    |         | (259     | )      
|                                                                            | Purchases of property and equipment                                |                                           |                                                  | (1,981                                   | )       |                    |         | (1,991   | )      
|                                                                            | Proceeds from sale of stores and other assets                      |                                           |                                                  |                                         |         |                    |         | 303      |        
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            |                                                                    | Net cash used in investing activities     |                                                  |                                          | (1,981  | )                  |         |          | (1,947  | )     
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|FINANCING ACTIVITIES:                                                       |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            | Proceeds from borrowings                                           |                                           |                                                  | 64,000                                   |         |                    |         | 174,000  |        
|                                                                            | Payments on borrowings                                             |                                           |                                                  | (29,255                                  | )       |                    |         | (166,170 | )      
|                                                                            | Payments on note for settlement of class action lawsuit            |                                           |                                                  | (1,000                                   | )       |                    |         |         |        
|                                                                            | Payments on capital leases                                         |                                           |                                                  | (1,913                                   | )       |                    |         | (2,688   | )      
|                                                                            | Book overdraft                                                     |                                           |                                                  | (7,389                                   | )       |                    |         | 13,509   |        
|                                                                            | Issuance of common stock                                           |                                           |                                                  | 544                                      |         |                    |         |         |        
|                                                                            | Dividends paid                                                     |                                           |                                                  | (303                                     | )       |                    |         |         |        
|                                                                            | Payment of loans by directors                                      |                                           |                                                  |                                         |         |                    |         | 251      |        
|                                                                            | Interest on shareholder loans                                      |                                           |                                                  |                                         |         |                    |         | (3       | )      
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            |                                                                    | Net cash provided by financing activities |                                                  |                                          | 24,684  |                    |         |          | 18,899  |       
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|                                                                            |                                                                    |                                           | Increase (decrease) in cash and cash equivalents |                                          |         | 2,412              |         |          |         | (1,278 | )      
|Cash and cash equivalents at beginning of period                            |                                                                    |                                           | 3,303                                            |                                          |         |                    | 7,295   |         
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         
|Cash and cash equivalents at end of period                                  |                                                                    | $                                         | 5,715                                            |                                          |         | $                  | 6,017   |         
|                                                                            |                                                                    |                                           |                                                  |                                          |         |                    |         |         

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

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##### Table of Contents



RENT-WAY, INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

1. SUMMARY OF CRITICAL ACCOUNTING POLICIES:

BUSINESS AND ORGANIZATION. Rent-Way, Inc. is a corporation organized under the
laws of the Commonwealth of Pennsylvania. The Company operates a chain of
stores that rent durable household products such as home entertainment
equipment, furniture, major appliances, computers, and jewelry to consumers on
a weekly or monthly basis in thirty-three states. The stores are primarily
located in the Midwestern, Eastern and Southern regions of the United States.
The Company also provides prepaid local phone service to consumers on a monthly
basis through its majority-owned subsidiary, dPi Teleconnect, LLC (DPI).

BASIS OF PRESENTATION. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the instructions to
Form 10-Q, and therefore, do not include all information and notes necessary
for a fair presentation of financial position, results of operations and cash
flows in conformity with accounting principles generally accepted in the United
States of America. In the opinion of management, all adjustments which, except
as discussed herein, consist of normal recurring adjustments and are necessary
for a fair statement of the financial position, results of operations and cash
flows of the Company have been made. The results of operations for the interim
periods are not necessarily indicative of the results for the full year.

The Company presents an unclassified balance sheet to conform to practice in
the industry in which it operates. The consolidated financial statements
include the accounts of the Company and its wholly owned and majority owned
subsidiaries. All significant inter-company transactions and balances have
been eliminated.

These financial statements and the notes thereto should be read in conjunction
with the Companys audited financial statements included in its Annual Report
on Form 10-K for the fiscal year ended September 30, 2003.

ACCOUNTING ESTIMATES. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.

RESTRICTED CASH. The Company entered into an agreement settling the class
action, on April 18, 2003, which was approved by the court on December 23,
2003. The settlement required the Company to pay $25,000 to the class. The
$25,000 payment consisted of $21,000 in cash and $4,000 in two-year, unsecured
subordinated notes payable bearing interest at 6%. Of the $21,000 payable in
cash, $11,000 was funded from available insurance proceeds. The remaining
$10,000, which was previously funded into escrow was reflected as restricted
cash on the condensed consolidated balance sheet at September 30, 2003 and was
subsequently paid.

CONVERTIBLE REDEEMABLE PREFERRED STOCK. On June 2, 2003, the Company sold
$15,000 in newly authorized convertible redeemable preferred stock through a
private placement. The proceeds of $14,119, net of issuance costs of $881,
were used to repay the previous senior credit facility. The net proceeds are
classified outside of permanent equity because of the mandatory redemption date
and other redemption provisions, except for $142 classified as option to
purchase convertible preferred stock included in permanent equity (see Note 9).

DEFERRED FINANCING COSTS. Deferred financing costs consists of bond issuance
costs and loan origination costs which were incurred in connection with the
sale of $205,000 of senior secured notes and a new $60,000 revolving credit
facility that was closed June 2, 2003. The bond issuance costs of $6,711 are
amortized on a straight-line basis over the seven-year term of the bonds. The
loan origination costs of $2,062 are amortized on a straight-line basis over
the five-year bank credit agreement. There was no material difference had the
effective interest method of amortization been used. Deferred financing cost
amortization was $344 and $398 for the three-months ended December 31, 2003
and 2002, respectively.

COMPANY INSURANCE PROGRAMS. For fiscal years 2004 and 2003, the Company is
primarily self-insured for health insurance. The self-insurance liability for
health costs is determined based on funding factors determined by cost plus
rates for a fully insured plan and monthly headcount. The contracted rate is
determined based on experience, prior claims filed and an estimate of future
claims. A retrospective adjustment for over (under) funding of claims is
recorded when determinable and probable.

DISCONTINUED OPERATIONS. On February 8, 2003, the Company completed the
definitive purchase agreement and sold rental

6



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##### Table of Contents



RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

merchandise and related contracts of 295 stores to Rent-A-Center, Inc.
Rent-A-Center, Inc. purchased certain fixed assets and assumed related store
leases of 125 of these stores. Accordingly, for financial statement purposes,
the assets, liabilities, results of operations and cash flows of this component
have been segregated from those of continuing operations and are presented in
the Companys financial statements as discontinued operations (see Note 2).

RECLASSIFICATIONS. Certain amounts in the condensed consolidated balance sheet
for September 30, 2003, the condensed consolidated statement of operations for
the three-months ended December 31, 2002 and the condensed consolidated
statement of cash flows for the three-months ended December 31, 2002, were
reclassified to conform to the December 31, 2003 presentation.

2. DISCONTINUED OPERATIONS:

On December 17, 2002, the Company entered into a definitive purchase agreement
to sell rental merchandise and related contracts of 295 stores to
Rent-A-Center, Inc. for approximately $101,500. These stores were all included
in the household rental segment. Rent-A-Center, Inc. purchased certain fixed
assets and assumed related store leases of 125 of these stores. The transaction
closed on February 8, 2003. The final purchase price for the stores was
approximately $100,400. As required under the Companys credit agreement, all
proceeds of the sale, net of transaction costs, store closing and similar
expenses, were used to pay existing bank debt. Of the approximate $100,400
purchase price, $10,000 was held back by Rent-A-Center, Inc. to secure the
Companys indemnification obligations, $5,000 for 90 days following closing,
which was refunded to the Company in May 2003, and an additional $5,000 for 18
months following closing. The Company recorded a receivable for this based
upon its ability to fully satisfy the indemnification obligations of the
agreement. The $5,000 held back by Rent-A-Center, Inc. for 18 months was
discounted by $820 and recorded at its present value. The $820 discount will
be amortized into income over the 18-month hold back period. Also, there was a
$24,500 escrow held by National City Bank, which was used to pay transaction
costs, store closing and similar expenses. The balance of this escrow,
approximately $3,000, was used to pay down debt at the closing of the
refinancing on June 2, 2003. The assets sold included rental merchandise,
vehicles under capital leases and certain fixed assets. Vehicle lease
obligations were paid by the Company out of the proceeds from the sale.

The asset group is distinguishable as a component of the Company and classified
as held for sale in accordance with Statement of
Financial Accounting Standards No. 144 (SFAS 144), Accounting for the
Impairment on Disposal of Long-Lived Assets. Direct costs to transact the
sale were comprised of, but not limited to, broker commissions, legal and title
transfer fees and closing costs.

In connection with the sale of the stores, the Company has and will continue to
incur additional direct costs related to the sale and exit costs related to
these discontinued operations. Costs associated with an exit activity include,
but are not limited to termination benefits, costs to terminate a contract that
is not a capital lease and costs to consolidate facilities or relocate
employees, in accordance with Statement of Financial Accounting Standards No.
146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal
Activities. There was a transition period as defined in the asset purchase
agreement comprised of a period of thirty days from the date immediately
following the closing date. During this transition period, the Company was
liable for certain exit costs attributable to the operation and transition of
the purchased stores, including, but not limited to, rent, utilities, costs
applicable to office equipment, costs associated with vehicles, employee
payroll, health and other employee benefits, workers compensation claims,
health care claims and all other costs related to transition personnel. The
Company accrued employee separation costs as costs were incurred in accordance
with SFAS 146. These costs are included in the results of discontinued
operations in accordance with SFAS 144.

Related operating results have been reported as discontinued operations in
accordance with SFAS 144. The Company has reclassified the results of
operations of the component to be disposed for the prior period in accordance
with provisions of SFAS 144. There have been no corporate expenses (including
advertising expense) included in expenses from discontinued operations.
Interest on debt that is required to be repaid as a result of the disposal
transaction is allocated to income (loss) from discontinued operations. The
effective interest rate on the outstanding debt of the Company at the end of
the period reported is applied to the $68,643 estimated debt pay-down from the
proceeds. The amount of interest reclassified to loss from discontinued
operations is $0 and $2,072 for the three-month periods ended December 31, 2003
and 2002, respectively. Revenues and net income (loss) from the discontinued
operations were as follows:

7



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##### Table of Contents



RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

|                                                                           |  |                    |        |                    |  |   |         |  
|-------------------------------------------------------------------------- |  | ------------------ | ------ | ------------------ |  | - | ------- | -
|                                                                           |  | Three Months Ended |        | Three Months Ended
|                                                                           |  | December
31, 2003  |        | December
31, 2002 
|                                                                           |  |                    |        |                   
|Operating revenues                                                         |  | $                  |       |                    |  | $ | 31,290  |  
|Operating expenses from discontinued
operations (including exit costs) (1) |  |                    | (1,272 | ) (2)              |  |   | (28,678 | )
|Rental merchandise fair value adjustment                                   |  |                    |       |                    |  |   | (1,367  | )
|Interest expense                                                           |  |                    |       |                    |  |   | (2,072  | )
|                                                                           |  |                    |        |                    |  |   |         |  
|Net loss from discontinued operations                                      |  | $                  | (1,272 | )                  |  | $ | (827    | )
|                                                                           |  |                    |        |                    |  |   |         |  



|(1) |  | The Company recorded exit costs associated with the operation and
transition of the stores to Rent-A-Center, Inc. for 30 days after
closing, and monthly rent and common area maintenance charges until
leases are terminated or expired, in accordance with SFAS 146.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | This includes $1,000 of write-off of leasehold improvements.                                                                                                                                                                                                          

There were no assets or liabilities held for sale included in the Consolidated
Balance Sheet as of December 31, 2003 and September 30, 2003.

3. BUSINESS RATIONALIZATION:

The Company periodically closes under-performing stores and takes other actions
to maximize its overall profitability. In connection with the closing of
stores and taking other actions, it incurs employee severance, fixed asset
write offs, lease termination costs and other direct exit costs related to
these activities. Employee severance costs related to the closing of
under-performing stores were immaterial in each of the periods reported below.
The net amount of these costs were as follows:

|                                    |  |            |        |             |  |       |        |   |  |   |        |  
|----------------------------------- |  | ---------- | ------ | ----------- |  | ----- | ------ | - |  | - | ------ | -
|                                    |  | Fixed      |        | Lease       |  |       |        |  
|                                    |  | Asset      |        | Termination |  |       |        |  
|                                    |  | Write Offs |        | Costs       |  | Total
|                                    |  |            |        |             |  |      
|Balance at September 30, 2002       |  | $          |       |             |  | $     | 2,135  |   |  | $ | 2,135  |  
|                                    |  |            |        |             |  |       |        |   |  |   |        |  
|Fiscal 2003 Provision               |  |            | 2,299  |             |  |       | 488    |   |  |   | 2,787  |  
|Amount utilized in fiscal 2003      |  |            | (2,299 | )           |  |       | (1,628 | ) |  |   | (3,927 | )
|                                    |  |            |        |             |  |       |        |   |  |   |        |  
|Balance at September 30, 2003       |  |            |       |             |  |       | 995    |   |  |   | 995    |  
|                                    |  |            |        |             |  |       |        |   |  |   |        |  
|Fiscal 2004 Provision (Q1)          |  |            | 90     |             |  |       | 35     |   |  |   | 125    |  
|Amount utilized in Fiscal 2004 (Q1) |  |            | (90    | )           |  |       | (87    | ) |  |   | (177   | )
|                                    |  |            |        |             |  |       |        |   |  |   |        |  
|Balance at December 31, 2003        |  | $          |       |             |  | $     | 943    |   |  | $ | 943    |  
|                                    |  |            |        |             |  |       |        |   |  |   |        |  

Lease termination costs will be paid according to the contract terms.

During the second quarter of fiscal year 2003, the Company formulated a plan to
restructure the corporate office through reductions in the corporate workforce
to rationalize corporate costs for the remaining stores and to sublease, assign
or terminate operating leases that the Company would no longer operate as a
rent-to-own business activity subsequent to the sale to Rent-A-Center, Inc.
There were no restructuring costs for the three-months ending December 31, 2003
and 2002.

4.     LOSS PER COMMON SHARE:

Basic loss per common share is computed using loss available to common
shareholders divided by the weighted average number of common shares
outstanding. Diluted loss per common share is computed using loss available to
common shareholders and the weighted average number of shares outstanding
adjusted for the potential impact of options, warrants, conversion of
convertible redeemable preferred stock, convertible preferred stock conversion
derivative, dividends on convertible preferred stock and accretion of
convertible preferred stock discount where the effects are dilutive. Because
operating results were a loss for the three-month period ended December 31,
2003, and 2002, basic and diluted loss per common share were the same.

The following table discloses the reconciliation of numerators and denominators
of the basic and diluted loss per share computation:

8



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##### Table of Contents



RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |   | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | - | ------------------------------- | - |  | - | ------ | - | 
|                                          |                                                                                                         |                                                    |   | Three Months Ended December 31,
|                                          |                                                                                                         |                                                    |   |                                
|COMPUTATION OF EARNINGS
(LOSS) PER SHARE: |                                                                                                         | 2003                                               |   | 2002                           
|                                          |                                                                                                         |                                                    |   |                                 |   | 
|                                          | BASIC                                                                                                   |                                                    |   |                                 |   |  |   |        |  
|                                          | Loss before discontinued operations                                                                     |                                                    | $ | (4,545                          | ) |  | $ | (4,534 | )
|                                          | Loss from discontinued operations                                                                       |                                                    |   | (1,272                          | ) |  |   | (827   | )
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Net loss                                                                                                |                                                    |   | (5,817                          | ) |  |   | (5,361 | )
|                                          | Accrued deemed dividend and accretion of preferred stock                                                |                                                    |   | (395                            | ) |  |   |       |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Net loss allocable to common shareholders                                                               |                                                    | $ | (6,212                          | ) |  | $ | (5,361 | )
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Weighted average common shares outstanding                                                              |                                                    |   | 26,078                          |   |  |   | 25,686 |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Loss per share:                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Loss before discontinued operations                                                                     |                                                    | $ | (0.17                           | ) |  | $ | (0.18  | )
|                                          | Loss from discontinued operations                                                                       |                                                    |   | (0.05                           | ) |  |   | (0.03  | )
|                                          | Accretion of preferred stock                                                                            |                                                    |   | (0.02                           | ) |  |   |       |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Net loss allocable to common shareholders                                                               |                                                    | $ | (0.24                           | ) |  | $ | (0.21  | )
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | DILUTED                                                                                                 |                                                    |   |                                 |   |  |   |        |  
|                                          | Net loss allocable to common shareholders for basic earnings (loss) per share                           |                                                    | $ | (6,212                          | ) |  | $ | (5,361 | )
|                                          | Plus: income impact of assumed conversion:                                                              |                                                    |   |                                 |   |  |   |        |  
|                                          |                                                                                                         | Conversion derivative market value adjustment (2)  |   |                                 |  |  |   |        |  | 
|                                          |                                                                                                         | Dividends on 8% convertible preferred stock (2)    |   |                                 |  |  |   |        |  | 
|                                          |                                                                                                         | Accretion to preferred stock redemption amount (2) |   |                                 |  |  |   |        |  | 
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Net loss allocable to common shareholders for diluted earnings (loss) per share
and assumed conversion  |                                                    | $ | (6,212                          | ) |  | $ | (5,361 | )
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Weighted average common shares used in calculating basic earnings (loss) per share                      |                                                    |   | 26,078                          |   |  |   | 25,686 |  
|                                          | Add incremental shares representing:                                                                    |                                                    |   |                                 |   |  |   |        |  
|                                          | Shares issuable upon exercise of stock options and warrants (1)                                         |                                                    |   |                                |   |  |   |       |  
|                                          | Contingent shares issuable upon the exercise of warrants to purchase 8%
convertible preferred stock (2) |                                                    |   |                                |   |  |   |       |  
|                                          | Shares issuable upon conversion of 8% convertible preferred stock (2)                                   |                                                    |   |                                |   |  |   |       |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Weighted average number of shares used in calculation of diluted loss per share                         |                                                    |   | 26,078                          |   |  |   | 25,686 |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |       
|                                          | Loss per share:                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Loss before discontinued operations                                                                     |                                                    | $ | (0.17                           | ) |  | $ | (0.18  | )
|                                          | Income (loss) from discontinued operations                                                              |                                                    |   | (0.05                           | ) |  |   | (0.03  | )
|                                          | Accretion to preferred stock redemption amount                                                          |                                                    |   | (0.02                           | ) |  |   |       |  
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  
|                                          | Net loss allocable to common shareholders                                                               |                                                    | $ | (0.24                           | ) |  | $ | (0.21  | )
|                                          |                                                                                                         |                                                    |   |                                 |   |  |   |        |  



|(1) |  | Including the effects of these items for the periods ended December 31,
2003 and 2002 would be anti-dilutive. Therefore 1,730 and 7,854 of
anti-dilutive common shares are excluded from consideration in the
calculation of diluted loss per share for the three-months ended December
31, 2003, and December 31, 2002, respectively. There were also 4,186
contingent warrants not included in the computation of diluted earnings
per common share because they were anti-dilutive for the quarter ended
December 31, 2002.                                                                                                                                                                                                                                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Including the effects of these items for the three-month period ended
December 31, 2003 would be anti-dilutive. Therefore, 752 contingent
shares issuable upon exercise of warrants to purchase 8% convertible
preferred stock and 2,500 shares issuable upon conversion of 8%
convertible preferred stock are excluded from consideration in the
calculation of diluted earnings (loss) per share for the three-months
ended December 31, 2003. There were conversion derivative market value
adjustments of $5,703, dividends on convertible preferred stock of $303
and accretion to preferred stock redemption in the amount of $92 which
were not added back to net income (loss) allocable to common shareholders
for basic earnings (loss) per share on the diluted earnings (loss) per
share because including the effects of these items would be anti-dilutive.

5. GOODWILLADOPTION OF STATEMENT 142:

Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible
Assets. SFAS 142 requires that intangible assets not subject to amortization
and goodwill be tested for impairment annually, or more frequently if events or
changes in circumstances indicate that the carrying value may not be
recoverable. SFAS 142 prescribes a two-phase process for impairment testing of
goodwill. The first phase screens for impairment while the second phase, if
necessary, measures the impairment. Amortization of goodwill and intangible
assets with indefinite lives, including such assets recorded in past business
combinations, ceased upon adoption. Thus, no amortization for such goodwill
and indefinite lived intangibles was recognized in the accompanying condensed
consolidated statements of operations for the three-months ended

9



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##### Table of Contents



RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

December 31, 2003 and 2002. On an annual basis and when there is reason to
suspect that their values have been diminished or impaired, these assets must
be tested for impairment, and a write down may be necessary.

The Rent-A-Center transaction (see Note 2) was an event that triggered an
impairment assessment under the provisions of SFAS 142. The Company performed
an impairment test of the carrying value of goodwill remaining after allocation
of the fair value of goodwill to the assets held for sale as set forth in the
Rent-A-Center purchase agreement as of December 17, 2002, the date of the
agreement. There was no impairment of goodwill as a result of this assessment.

The following table shows the net carrying value of goodwill as of December 31,
2003, and September 30, 2003, for the Companys segments:

|         |  |                  |         |                   |  |          |       |  |  |   |         | 
|-------- |  | ---------------- | ------- | ----------------- |  | -------- | ----- |  |  | - | ------- | 
|         |  | Household Rental |         | Prepaid Telephone |  | Total   
|         |  | Segment          |         | Service Segment   |  | Segments
|         |  |                  |         |                   |  |         
|Goodwill |  | $                | 181,905 |                   |  | $        | 6,594 |  |  | $ | 188,499 | 

The following tables reflect the components of amortizable intangible assets at
December 31, 2003 and September 30, 2003:

|                               |                        |        |          |              |            |        |              |        |   |   |     |     | 
|------------------------------ | ---------------------- | ------ | -------- | ------------ | ---------- | ------ | ------------ | ------ | - | - | --- | --- | 
|                               |                        |        | Purchase |              | Cumulative |        | Net Carrying
|Balance at December 31, 2003:  |                        | Amount |          | Amortization |            | Amount
|                               |                        |        |          |              |            |       
|Amortizable intangible assets: |                        |        |          |              |            |        |              |        |   |   |     |    
|                               | Non-compete agreements |        | $        | 2,430        |            |        | $            | (2,068 | ) |   | $   | 362 | 
|                               | Customer contracts     |        |          | 142          |            |        |              | (116   | ) |   |     | 26  | 
|                               |                        |        |          |              |            |        |              |        |   |   |     |    
|                               |                        | $      | 2,572    |              |            | $      | (2,184       | )      |   | $ | 388 |    
|                               |                        |        |          |              |            |        |              |        |   |   |     |     | 

|                               |                        |        |          |              |            |        |              |        |   |   |     |     | 
|------------------------------ | ---------------------- | ------ | -------- | ------------ | ---------- | ------ | ------------ | ------ | - | - | --- | --- | 
|                               |                        |        | Purchase |              | Cumulative |        | Net Carrying
|Balance at September 30, 2003: |                        | Amount |          | Amortization |            | Amount
|                               |                        |        |          |              |            |       
|Amortizable intangible assets: |                        |        |          |              |            |        |              |        |   |   |     |    
|                               | Non-compete agreements |        | $        | 2,630        |            |        | $            | (2,177 | ) |   | $   | 453 | 
|                               | Customer contracts     |        |          | 1,164        |            |        |              | (1,114 | ) |   |     | 50  | 
|                               | Exclusivity agreement  |        |          | 2,050        |            |        |              | (2,050 | ) |   |     |    | 
|                               |                        |        |          |              |            |        |              |        |   |   |     |    
|                               |                        | $      | 5,844    |              |            | $      | (5,342       | )      |   | $ | 503 |    
|                               |                        |        |          |              |            |        |              |        |   |   |     |     | 

At December 31, 2003, future aggregate annual amortization of amortizable
intangible assets is as follows:

|               |      |        |     |    | 
|-------------- | ---- | ------ | --- | -- | 
|Fiscal Year    |      | Amount
|               |      |       
|Remaining 2004 |      | $      | 277 |   
|               | 2005 |        |     | 97 | 
|               | 2006 |        |     | 10 | 
|               | 2007 |        |     | 4  | 
|               |      |        |     |   
|               |      | $      | 388 |   
|               |      |        |     |   

There were no changes to the amortization methods and lives of the amortizable
intangible assets.

6. OTHER ASSETS:

Other assets consist of the following:

|                                      |  |              |       |               |  |   |        | 
|------------------------------------- |  | ------------ | ----- | ------------- |  | - | ------ | 
|                                      |  | December 31, |       | September 30,
|                                      |  | 2003         |       | 2003         
|                                      |  |              |       |              
|Receivable from insurance proceeds    |  | $            |      |               |  | $ | 11,000 | 
|Receivable from sale to Rent-A-Center |  |              | 4,669 |               |  |   | 4,532  | 
|Other receivables                     |  |              | 1,871 |               |  |   | 1,664  | 
|Deposits                              |  |              | 740   |               |  |   | 752    | 
|Prepaid tax                           |  |              | 391   |               |  |   | 406    | 
|Other                                 |  |              | 1,400 |               |  |   | 1,592  | 
|                                      |  |              |       |               |  |   |        | 
|Other assets, continuing operations   |  | $            | 9,071 |               |  | $ | 19,946 | 
|                                      |  |              |       |               |  |   |        | 

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

7. OTHER LIABILITIES:

Other liabilities consist of the following:

|                                               |  |              |        |               |  |   |        | 
|---------------------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | 
|                                               |  | December 31, |        | September 30,
|                                               |  | 2003         |        | 2003         
|                                               |  |              |        |              
|Accrual for settlement of class action lawsuit |  | $            |       |               |  | $ | 25,000 | 
|Accrued salaries, wages, tax and benefits      |  |              | 3,985  |               |  |   | 13,165 | 
|Capital lease obligations                      |  |              | 13,954 |               |  |   | 12,303 | 
|Accrued preferred dividend and interest        |  |              | 1,928  |               |  |   | 8,883  | 
|Vacant facility lease obligations              |  |              | 4,850  |               |  |   | 5,495  | 
|Swap liability                                 |  |              | 3,843  |               |  |   | 5,136  | 
|Accrued property taxes                         |  |              | 3,782  |               |  |   | 4,568  | 
|Accrued vacation                               |  |              | 3,299  |               |  |   | 2,899  | 
|Accrued sales and use tax                      |  |              | 1,911  |               |  |   | 1,593  | 
|Other                                          |  |              | 11,498 |               |  |   | 6,286  | 
|                                               |  |              |        |               |  |   |        | 
|Other liabilities, continuing operations       |  | $            | 49,050 |               |  | $ | 85,328 | 
|                                               |  |              |        |               |  |   |        | 

8. DEBT:

Debt consists of the following:

|                                 |  |              |         |               |  |   |         | 
|-------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | 
|                                 |  | December 31, |         | September 30,
|                                 |  | 2003         |         | 2003         
|                                 |  |              |         |              
|Senior secured notes             |  | $            | 201,602 |               |  | $ | 201,521 | 
|Revolving credit facility        |  |              | 47,750  |               |  |   | 13,000  | 
|Notes payable lawsuit settlement |  |              | 3,000   |               |  |   |        | 
|Note payable                     |  |              | 66      |               |  |   | 71      | 
|                                 |  |              |         |               |  |   |         | 
|                                 |  | $            | 252,418 |               |  | $ | 214,592 | 
|                                 |  |              |         |               |  |   |         | 

The Companys senior secured notes have the following important terms. The
$205,000 principal amount of senior secured notes bear interest at 11.875%.
The interest on the secured notes is payable semiannually on June 15 and
December 15 beginning December 15, 2003. The secured notes are guaranteed on a
senior basis by all existing and future domestic restricted subsidiaries of the
Company other than DPI, which is an unrestricted subsidiary. The Company may
redeem the secured notes, in whole or in part, at any time prior to June 15,
2010, at a redemption price equal to the greater of:



| | a) |  | 100% of the principal amount of the notes to be redeemed; and                                                                                                                                                                                                                                                                                                        
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | the sum of the present values of (i) 100% of the principal
amount of the notes to be redeemed at June 15, 2010, and (ii) the
remaining scheduled payments of interest from the redemption date
through June 15, 2010, but excluding accrued and unpaid interest to
the redemption date, discounted to the redemption date at the
treasury rate plus 175 basis points;

plus, in either case, accrued and unpaid interest to the redemption date.

In addition, at any time prior to June 15, 2006, up to 25% of the aggregate
principal amount of the secured notes may be redeemed at the Companys option,
within 75 days of certain public equity offerings, at a redemption price of
111.875% of the principal amount, together with accrued and unpaid interest.
Such redemption can occur provided that after giving effect to any such
redemption, at least 75% of the original aggregate principal amount of the
notes issued (including any notes issued in future permitted issuances) remains
outstanding.

The secured notes were offered at a discount of $3,583, which is being
amortized using the effective interest method, over the term of the secured
notes. Amortization of the discount was $80 for the three-month period ending
December 31, 2003 and is recorded as interest expense. Costs representing
underwriting fees and other professional fees of $6,711 are being amortized,
using the effective interest method, over the term of the secured notes. The
secured notes rank senior in right to all of the Companys
existing and future subordinated debt, have a lien position

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

ranking second to the bank revolving credit facility and effectively junior in
right of payment to all existing and future debt and other liabilities of the
Companys subsidiaries that are not subsidiary guarantors. The secured notes
contain covenants that will, among other things, limit the Companys ability to
incur additional debt, make restricted payments, incur any additional liens,
sell certain assets, pay dividend distributions from restricted subsidiaries,
transact with affiliates, conduct certain sale and leaseback transactions and
use excess cash flow.

The Company is in compliance with covenants at December 31, 2003, and expects
to comply with covenants based upon its fiscal 2004 projections.

The Companys new revolving credit facility has the following material terms.
The facility is with Harris Trust and Savings Bank, acting as administrative
agent, and Bank of Montreal as lead arranger, and provides for National City
Bank to act as syndication agent and provides for senior secured revolving
loans of up to $60,000 including a $15,000 sub-limit for standby and commercial
letters of credit and a $5,000 swingline sub-limit. The credit facility will
expire five years from closing (June 2, 2008). The balance outstanding at
December 31, 2003 was $47,750 with $3,550 available at December 31, 2003.
Deferred financing costs of $2,062 are being amortized over the 5-year term of the bank agreement. The credit facility is
guaranteed by all of the wholly owned domestic subsidiaries and collateralized
by first priority liens on substantially all of the Companys and subsidiary
guarantors assets, including rental contracts and the stock held in domestic
subsidiaries. The Company may elect that each borrowing of revolving loans be
either base rate loans or Eurodollar loans. The Eurodollar loans bear interest
at a rate per annum equal to an applicable margin plus LIBOR adjusted for a
reserve percentage. Under the base rate option, the Company will borrow money
based on the greater of (a) the prime interest rate or (b) the federal funds
rate plus 0.50%, plus, in each case, a specified margin. A 0.50% commitment
fee will be payable quarterly on the unused amount of the revolving credit
facility. Upon a default, interest will accrue at 2% over the applicable rate.
The Company will be required to make specified mandatory prepayments upon
subsequent debt or equity offerings and asset dispositions.

The Companys note payable for lawsuit settlement was agreed to in the
settlement of the class action lawsuit. The note payable is a $4,000 unsecured
subordinated note, which bears interest at 6% annually and is payable in four
equal installments over two years, payable on June 30 and December 31,
commencing December 31, 2003.

9.     CONVERTIBLE REDEEMABLE PREFERRED STOCK:

On June 2, 2003, the Company issued 1,500 shares of its Series A convertible
preferred stock, for $10,000 per share (the convertible preferred stock) and
granted a one-year option to purchase an additional 500 shares of convertible
preferred stock (the additional preferred shares). The net proceeds from the
sale of the convertible preferred stock were used to repay the senior credit
facility. The net proceeds of $14,119 from the issuance of the convertible
preferred stock are net of issuance costs of $881, and are classified outside
of permanent equity because of the redemption date and other redemption
provisions except for $142 classified as option to purchase convertible
preferred stock included in permanent equity. The convertible preferred stock
is being accreted to its maximum redemption amount possible pursuant to Topic
D-98, Classification and Measurement of Redeemable Securities, using the
effective interest method from the issuance date to the 7-year redemption date.

The terms of the convertible preferred stock include a number of conversion and
redemption provisions that represent derivative financial instruments under
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, (SFAS 133) (See Note 12). Certain
features of the convertible preferred stock are accounted for as embedded
derivative financial instruments. The Company has determined that the option
to purchase additional preferred shares is an embedded derivative financial
instrument that qualifies for scope exemption under the provisions of EITF
00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock (EITF-0019). As such, this
derivative was initially required to be bifurcated and recorded at fair value
upon issuance but does not require mark to market accounting. The market value
of this derivative financial instrument is $142 and is recorded as option to
purchase convertible preferred stock in the equity section of the consolidated
balance sheet. The Company also has determined the convertible feature of the
convertible preferred stock is a derivative financial instrument that does not
qualify for scope exemption under EITF 00-19; and, is required to be
bifurcated, recorded at fair value, and marked to market. The market value of
this derivative financial instrument is $16,213 at December 31, 2003, and is
recorded in convertible redeemable preferred stock in the consolidated balance
sheet. The fair values of the derivatives were determined with the assistance
of an independent valuation firm.

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

Dividends. Dividends will accrue daily at a rate of 8.0% per annum. Dividends
on the preferred stock will be payable on the first day of each calendar
quarter in cash or in shares of Company common stock at the Companys option;
provided, however, that if the Company elects to pay dividends in shares of
common stock, (i) a registration statement must be effective with respect to
such shares of common stock and (ii) the payment would be at 95% of the
arithmetic average of the daily volume weighted average prices of the common
stock for the five trading days immediately preceding the second trading day
prior to the applicable dividend payment date. The Company is required to pay
dividends in cash if a triggering event occurs. Dividends not paid within five
business days of the dividend payment date bear interest at 15.0% per annum
until paid in full. During the period commencing upon the occurrence of a
share liquidity event and ending when such event is cured, the dividend rate
shall increase to 15% per annum. Preferred dividends of $303 were accrued and
charged to accumulated deficit for the three-month period ending December 31,
2003.

10.     STOCK OPTIONS:

The Company accounts for stock based compensation issued to its employees and
directors in accordance with APB No. 25, and has elected to adopt the
disclosure only provisions of SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require new 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.

For SFAS No. 148 purposes, the fair value of each option granted under the 1992
Plan, the 1995 Plan, and the 1999 Plan is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for options granted in fiscal years 2000 through 2004:
expected volatility ranging from 47.41% to 99.61%, risk-free interest rates
between 2.91% and 6.81%, and an expected life of five years.

If the Company had elected to recognize the compensation cost of its stock
option plans based on the fair value of the awards under those plans in
accordance with SFAS No. 148, net loss and loss per common share would have
been increased to the pro-forma amounts below:

|                                           |                      |  |                                               |        |      |  |   |        |  
|------------------------------------------ | -------------------- |  | --------------------------------------------- | ------ | ---- |  | - | ------ | -
|                                           |                      |  | For the Three-Month Period Ended December 31,
|                                           |                      |  | 2003                                          |        | 2002
|                                           |                      |  |                                               |        |     
|Net loss before discontinued operations:   |                      |  |                                               |        |      |  |   |       
|                                           | As reported          |  | $                                             | (4,545 | )    |  | $ | (4,534 | )
|                                           | Compensation expense |  |                                               | (33    | )    |  |   | (295   | )
|                                           |                      |  |                                               |        |      |  |   |       
|                                           | Pro-forma            |  | $                                             | (4,578 | )    |  | $ | (4,829 | )
|                                           |                      |  |                                               |        |      |  |   |        |  
|Net loss allocable to common shareholders: |                      |  |                                               |        |      |  |   |       
|                                           | As reported          |  | $                                             | (6,212 | )    |  | $ | (5,361 | )
|                                           | Compensation expense |  |                                               | (33    | )    |  |   | (295   | )
|                                           |                      |  |                                               |        |      |  |   |       
|                                           | Pro-forma            |  | $                                             | (6,245 | )    |  | $ | (5,656 | )
|                                           |                      |  |                                               |        |      |  |   |        |  
|Diluted loss per common share:             |                      |  |                                               |        |      |  |   |       
|Net loss before discontinued operations:   |                      |  |                                               |        |      |  |   |       
|                                           | As reported          |  | $                                             | (0.17  | )    |  | $ | (0.18  | )
|                                           |                      |  |                                               |        |      |  |   |        |  
|                                           | Pro-forma            |  | $                                             | (0.17  | )    |  | $ | (0.19  | )
|                                           |                      |  |                                               |        |      |  |   |        |  
|Net loss allocable to common shareholders: |                      |  |                                               |        |      |  |   |       
|                                           | As reported          |  | $                                             | (0.24  | )    |  | $ | (0.21  | )
|                                           |                      |  |                                               |        |      |  |   |        |  
|                                           | Pro-forma            |  | $                                             | (0.24  | )    |  | $ | (0.22  | )
|                                           |                      |  |                                               |        |      |  |   |        |  

There were 80 options granted during fiscal year 2004 through December 31,
2003; 45 granted October 1, with a grant price of $5.34, expiring in 2008 and
35 granted October 29, with a grant price of $5.80, expiring in 2009.

11.     SHAREHOLDERS EQUITY:

On April 18, 2002, the Company sold 1.0 million restricted common shares and
warrants to receive 100,000 common shares to Calm

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

Waters Partnership and two other investors (the Investors) for $6,000. The
warrants had an exercise price of $9.35 per share, which was reduced to $4.90
per share pursuant to anti-dilution adjustments. The Company re-measured the
value of the warrants in accordance with the arrangement and reclassified the
change to common stock from warrants. These warrants were exercised in November
2003.

12.     DERIVATIVE FINANCIAL INSTRUMENTS:

On June 2, 2003, the Company issued 1,500 shares of convertible redeemable
preferred stock (see Note 9). The terms of this preferred stock include a
number of conversion and redemption provisions that represent derivatives under
SFAS No. 133. The Company has determined that the option to purchase
additional preferred shares is an embedded derivative financial instrument that
qualifies for SFAS 133 scope exemption under the provisions of EITF 00-19. As
such this derivative was initially bifurcated and recorded in shareholders
equity. This derivative does not require mark to market accounting and is
accreted into convertible redeemable preferred stock over the one-year option
period.

The Company also has determined the convertible feature of the convertible
redeemable preferred stock is a derivative financial instrument that does not
qualify for SFAS 133 scope exemption under EITF 00-19. It was bifurcated and
recorded in the temporary equity classification on the balance sheet. The
positive change in the fair market value of the convertible feature from
September 30, 2003 to December 31, 2003 was $5,703, which was recorded as an
expense to other income (expense) in the Companys condensed consolidated
statements of operations.

At December 31, 2003, the Company had interest rate swaps on a notional debt
amount of $51,400 and a fair market value of ($3,843). The variable pay
interest rate ranges from 5.09% to 6.97%. The maturity dates run through
August 2005.

The Companys interest rate swaps do not meet the qualifications for hedge
accounting treatment under SFAS No. 133. The Companys positive change in the
fair market value of the interest rate swap portfolio was $1,293 for the three
months ended December 31, 2003. This was recorded to other income in the
Companys condensed consolidated statements of operations.

13.     COMPREHENSIVE INCOME:

Comprehensive income encompasses net income and changes in the components of
accumulated other comprehensive income not reflected in the Companys condensed
consolidated statements of operations during the periods presented. Accumulated
other comprehensive income consists of the transition asset recorded at the
time of adoption of SFAS No. 133.

|                                                      |  |                     |        |                             |  |   |      |  
|----------------------------------------------------- |  | ------------------- | ------ | --------------------------- |  | - | ---- | -
|                                                      |  | Other Comprehensive |        | Accumulated Other          
|                                                      |  | Income (Loss)       |        | Comprehensive Income (Loss)
|                                                      |  |                     |        |                            
|Net loss for the three months
ended December 31, 2003 |  | $                   | (5,817 | )                           |  | $ |     |  
|SFAS 133 Transition amount                            |  |                     |       |                             |  |   | (69  | )
|Amortization of SFAS 133
Transition amount            |  |                     | (123   | )                           |  |   | (123 | )
|                                                      |  |                     |        |                             |  |   |      |  
|Total for the three months
ended December 31, 2003    |  | $                   | (5,940 | )                           |  | $ | (192 | )
|                                                      |  |                     |        |                             |  |   |      |  

14. CONTINGENCIES:

As previously reported, the Company, its former independent accountants, and
certain of its current and former officers were named in a consolidated class
action complaint filed in the U.S. District Court for the Western District of
Pennsylvania alleging violations of the securities laws and seeking damages in
unspecified amounts purportedly on behalf of a class of shareholders. On April
18, 2003, the Company entered into an agreement settling the class action. The
settlement required the Company to pay the class the sum of $25,000, with
$21,000 in cash and $4,000 in 6% unsecured subordinated notes payable in four
equal installments over two years commencing December 31, 2003. Of the $21,000
payable in cash, $11,000 has been funded from available insurance proceeds, the
remaining $10,000 was funded into escrow and was classified as restricted cash
on the consolidated balance sheet at September 30, 2003. The settlement
agreement provided for the release of the Company and all other defendants
except the Companys former

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

controller and the Companys former independent accountants. The settlement
received court approval and became final by virtue of an order dated December
22, 2003.

The Company is subject to legal proceedings and claims in the ordinary course
of its business that have not been finally adjudicated. Certain of these
cases, exclusive of the class action mentioned above, have resulted in initial
claims totaling $6,610. However, all but $137 of such claims are, in the
opinion of management, covered by insurance policies or indemnification
agreements, or create only remote potential of any liability exposure to the
Company and therefore should not have a material effect on the Companys
financial position, results of operations or cash flows. Additionally,
threatened claims exist for which management is not yet able to reasonably
estimate a potential loss. In managements opinion, none of these threatened
claims will have a material adverse effect on the Companys financial position,
results of operations or cash flows.

The Company is primarily self-insured for health insurance. The self-insurance
liability for health costs is determined based on funding factors determined by
cost plus rates for a fully insured plan and monthly headcounts. The contracted
rate is determined based on experience, prior claims filed and an estimate of
future claims. A retrospective adjustment for over (under) funding of claims is
recorded when determinable and probable.

15.     INCOME TAXES:

During the first quarter of fiscal 2004 the Company recorded income tax expense
of $1,395 million due to the Companys inability to book the reversal of the
deferred tax liability associated with tax deductible goodwill to offset a
portion of its deferred tax asset following the adoption of SFAS 142. The
deferred tax asset, net of liabilities excluding goodwill, decreased from
$73,095 at September 30, 2003, to $71,286 at December 31, 2003. This
represented a decrease of $1,809 for the quarter. A full valuation allowance
has been provided against the deferred tax asset. A deferred tax liability of
$6,310 has been established for goodwill.

16.     SEGMENT INFORMATION:

Rent-Way is a national rental-purchase chain that provides a variety of
services to its customers including rental of household items and prepaid local
telephone service on a week-by-week or a month-by-month basis. The Company has
determined that its reportable segments are those that are based on the
Companys method of internal reporting, which disaggregates its business by
product category. The Companys reportable segments are household rentals and
prepaid telephone service. Its household rental segment rents name brand
merchandise such as furniture, appliances, electronics and computers on a
weekly, biweekly, semimonthly or bimonthly basis. Its prepaid telephone service
segment provides a local dial tone on a month-by-month basis.

The financial results of the Companys segments follow the same accounting
policies as described in Summary of Significant Accounting Policies (see Note
1).

|                                             |  |                |         |                   |  |               |       |                |  |   |        |   |  |   |         |  
|-------------------------------------------- |  | -------------- | ------- | ----------------- |  | ------------- | ----- | -------------- |  | - | ------ | - |  | - | ------- | -
|                                             |  | Household      |         | Prepaid Telephone |  | Inter-segment |       |                |  |  
|For the three months ended December 31, 2003 |  | Rental Segment |         | Service Segment   |  | Activity      |       | Total Segments
|                                             |  |                |         |                   |  |               |       |               
|Total revenue                                |  | $              | 117,603 |                   |  | $             | 6,190 |                |  | $ | (184   | ) |  | $ | 123,609 |  
|                                             |  |                |         |                   |  |               |       |                |  |   |        |   |  |   |         |  
|Operating income (loss)                      |  | $              | 9,101   |                   |  | $             | (612  | )              |  | $ | 30     |   |  | $ | 8,519   |  
|                                             |  |                |         |                   |  |               |       |                |  |   |        |   |  |   |         |  
|Net loss                                     |  | $              | (5,182  | )                 |  | $             | (635  | )              |  | $ |       |   |  | $ | (5,817  | )
|                                             |  |                |         |                   |  |               |       |                |  |   |        |   |  |   |         |  
|Total Assets                                 |  | $              | 463,133 |                   |  | $             | 3,640 |                |  | $ | (4,021 | ) |  | $ | 462,752 |  
|                                             |  |                |         |                   |  |               |       |                |  |   |        |   |  |   |         |  

|                                      |  |                |         |                   |  |               |        |                |  |   |        |   |  |   |         |  
|------------------------------------- |  | -------------- | ------- | ----------------- |  | ------------- | ------ | -------------- |  | - | ------ | - |  | - | ------- | -
|                                      |  | Household      |         | Prepaid Telephone |  | Inter-segment |        |                |  |  
|For the year ended September 30, 2003 |  | Rental Segment |         | Service Segment   |  | Activity      |        | Total Segments
|                                      |  |                |         |                   |  |               |        |               
|Total revenues                        |  | $              | 457,279 |                   |  | $             | 35,351 |                |  | $ | (1,320 | ) |  | $ | 491,310 |  
|                                      |  |                |         |                   |  |               |        |                |  |   |        |   |  |   |         |  
|Operating income                      |  | $              | 36,421  |                   |  | $             | (179   | )              |  | $ | 251    |   |  | $ | 36,493  |  
|                                      |  |                |         |                   |  |               |        |                |  |   |        |   |  |   |         |  
|Net income (loss)                     |  | $              | (29,205 | )                 |  | $             | (304   | )              |  | $ | (132   | ) |  | $ | (29,377 | )
|                                      |  |                |         |                   |  |               |        |                |  |   |        |   |  |   |         |  
|Total Assets                          |  | $              | 457,241 |                   |  | $             | 3,948  |                |  | $ | (3,330 | ) |  | $ | 457,859 |  
|                                      |  |                |         |                   |  |               |        |                |  |   |        |   |  |   |         |  

17. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

The 11 7/8% senior secured notes issued by Rent-Way, Inc. (Parent) have been
guaranteed by each of its restricted subsidiaries (Guarantor Subsidiaries).
The Guarantor Subsidiaries are 100% owned subsidiaries of the Parent. The
guarantees of the Subsidiary Guarantors are full, unconditional and joint and
several. Separate financial statements of the Parent and Guarantor
Subsidiaries are not presented in accordance with the exception provided by
Rule 3-10 of Regulation S-X.

The following schedules set forth the condensed consolidating balance sheets as
of December 31, 2003 and September 30, 2003 and condensed consolidating
statements of operations and condensed consolidating statements of cash flows
for the three-months ended December 31, 2003 and 2002. In the following
schedules, Parent refers to Rent-Way, Inc., Guarantor Subsidiaries refers
to Rent-Ways wholly owned subsidiaries, and Non-Guarantor Subsidiaries
refers to dPi, the Companys 70% owned subsidiary. Eliminations represent the
adjustments necessary to eliminate inter-company investment in subsidiaries.

RENT-WAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
(all dollars in thousands)

|                                               |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |   |         | 
|---------------------------------------------- |  | ----------------- | ------- | ------ | ------- | ------------ | ------ | ------------- | ------- | ------------ | ----- | ------------ | ------ | -------- | ------- | - | ------- | - | ------- | - | ------- | 
|                                               |  |                   |         | Parent |         | Guarantor    |        | Non-Guarantor |         |              |       |              |        | Rent-Way
|                                               |  |                   |         | Issuer |         | Subsidiaries |        | Subsidiary    |         | Eliminations |       | Consolidated
|                                               |  |                   |         |        |         |              |        |               |         |              |       |             
|ASSETS                                         |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|Cash and cash equivalents                      |  | $                 | 2,696   |        |         | $            | 2,502  |               |         | $            | 517   |              |        | $        |        |   |         | $ | 5,715   |  
|Prepaid expenses                               |  |                   | 3,887   |        |         |              | 506    |               |         |              | 510   |              |        |          |        |   |         |   | 4,903   |  
|Income tax receivable                          |  |                   | 4,245   |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 4,245   |  
|Rental merchandise, net                        |  |                   | 159,107 |        |         |              | 39,777 |               |         |              |      |              |        |          |        |   |         |   | 198,884 |  
|Rental merchandise credits due from vendors    |  |                   | 3,263   |        |         |              | 650    |               |         |              |      |              |        |          |        |   |         |   | 3,913   |  
|Property and equipment, net                    |  |                   | 32,018  |        |         |              | 5,889  |               |         |              | 1,255 |              |        |          |        |   |         |   | 39,162  |  
|Goodwill                                       |  |                   | 124,457 |        |         |              | 57,448 |               |         |              | 6,594 |              |        |          |        |   |         |   | 188,499 |  
|Deferred financing costs, net                  |  |                   | 7,972   |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 7,972   |  
|Intangible assets, net                         |  |                   | 388     |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 388     |  
|Other assets                                   |  |                   | 7,364   |        |         |              | 472    |               |         |              | 1,235 |              |        |          |        |   |         |   | 9,071   |  
|Investment in subsidiaries                     |  |                   | 58,706  |        |         |              |       |               |         |              |      |              |        |          | (58,706 | ) |         |   |        |  
|                                               |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|                                               |  | Total assets      |         | $      | 404,103 |              |        | $             | 107,244 |              |       | $            | 10,111 |          |         | $ | (58,706 | ) |         | $ | 462,752 | 
|                                               |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|LIABILIITES AND SHAREHOLDERS EQUITY           |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|Liabilities:                                   |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|Accounts payable                               |  | $                 | 26,370  |        |         | $            | 4,419  |               |         | $            | 1,402 |              |        |          |        |   |         | $ | 32,191  |  
|Other liabilities                              |  |                   | 35,848  |        |         |              | 10,641 |               |         |              | 2,561 |              |        |          |        |   |         |   | 49,050  |  
|Inter-company                                  |  |                   | (39,626 | )      |         |              | 37,954 |               |         |              | 1,672 |              |        |          |        |   |         |   |        |  
|Deferred tax liability                         |  |                   | 6,310   |        |         |              |       |               |         |              |      |              |        |          |         |   |         |   | 6,310   |  
|Debt                                           |  |                   | 252,418 |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 252,418 |  
|                                               |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|                                               |  | Total liabilities |         |        | 281,320 |              |        |               | 53,014  |              |       |              | 5,635  |          |         |   |        |   |         |   | 339,969 | 
|Convertible redeemable preferred stock         |  |                   | 21,787  |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 21,787  |  
|SHAREHOLDERS EQUITY:                          |  |                   |         |        |         |              |        |               |         |              |       |              |        |          |         |   |         |   |         |  
|Common stock                                   |  |                   | 303,920 |        |         |              | 75,248 |               |         |              | 1,600 |              |        |          | (76,848 | ) |         |   | 303,920 |  
|Option to purchase convertible preferred stock |  |                   | 142     |        |         |              |       |               |         |              |      |              |        |          |        |   |         |   | 142     |  
|Accumulated other comprehensive income         |  |                   | (192    | )      |         |              |       |               |         |              |      |              |        |          |        |   |         |   | (192    | )

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RENT-WAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

|                                        |                                            |  |          |         |  |              |         |               |  |              |       |              |  |          |        |         |   |  |          |         |  | 
|--------------------------------------- | ------------------------------------------ |  | -------- | ------- |  | ------------ | ------- | ------------- |  | ------------ | ----- | ------------ |  | -------- | ------ | ------- | - |  | -------- | ------- |  | 
|                                        |                                            |  |          | Parent  |  | Guarantor    |         | Non-Guarantor |  |              |       |              |  | Rent-Way
|                                        |                                            |  |          | Issuer  |  | Subsidiaries |         | Subsidiary    |  | Eliminations |       | Consolidated
|                                        |                                            |  |          |         |  |              |         |               |  |              |       |             
|Retained earnings (accumulated deficit) |                                            |  | (202,874 | )       |  |              | (21,018 | )             |  |              | 2,876 |              |  |          | 18,142 |         |   |  | (202,874 | )      
|                                        |                                            |  |          |         |  |              |         |               |  |              |       |              |  |          |        |         |   |  |          |        
|                                        | Total shareholders equity                 |  |          | 100,996 |  |              |         | 54,230        |  |              |       | 4,476        |  |          |        | (58,706 | ) |  |          | 100,996 | 
|                                        |                                            |  |          |         |  |              |         |               |  |              |       |              |  |          |        |         |   |  |          |        
|                                        | Total liabilities and shareholders equity |  | $        | 404,103 |  |              | $       | 107,244       |  |              | $     | 10,111       |  |          | $      | (58,706 | ) |  | $        | 462,752 | 
|                                        |                                            |  |          |         |  |              |         |               |  |              |       |              |  |          |        |         |   |  |          |        

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
(all dollars in thousands)

|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |        |         |  
|------------------------------------------------------------- | ---------------------------------------------- | ----------------- | ------ | ------ | ------ | ------------ | ------ | ------------- | ------ | ------------ | ----- | ------------ | ----- | -------- | ------ | - | ------ | - | ------- | ------ | ------- | -
|                                                              |                                                |                   |        | Parent |        | Guarantor    |        | Non-Guarantor |        |              |       |              |       | Rent-Way
|                                                              |                                                |                   |        | Issuer |        | Subsidiaries |        | Subsidiary    |        | Eliminations |       | Consolidated
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |             
|REVENUES:                                                     |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Rental revenues                                               |                                                | $                 | 81,863 |        |        | $            | 20,565 |               |        | $            |      |              |       | $        |       |   |        | $ | 102,428 |       
|Prepaid phone service                                         |                                                |                   |       |        |        |              |       |               |        |              | 6,190 |              |       |          |       |   |        |   | 6,190   |       
|Other revenues                                                |                                                |                   | 12,311 |        |        |              | 2,680  |               |        |              |      |              |       |          |       |   |        |   | 14,991  |       
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|                                                              |                                                | Total revenues    |        |        | 94,174 |              |        |               | 23,245 |              |       |              | 6,190 |          |        |   |       |   |         |        | 123,609 |  
|COSTS AND OPERATING EXPENSES:                                 |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Depreciation and amortization:                                |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|                                                              | Rental merchandise                             |                   |        | 26,162 |        |              |        | 6,710         |        |              |       |             |       |          |        |  |        |   |         | 32,872 |        
|                                                              | Property and equipment                         |                   |        | 3,035  |        |              |        | 800           |        |              |       | 147          |       |          |        |  |        |   |         | 3,982  |        
|                                                              | Amortization of goodwill and other intangibles |                   |        | 86     |        |              |        | 29            |        |              |       |             |       |          |        |  |        |   |         | 115    |        
|Cost of prepaid phone service                                 |                                                |                   |       |        |        |              |       |               |        |              | 3,979 |              |       |          |       |   |        |   | 3,979   |       
|Salaries and wages                                            |                                                |                   | 26,305 |        |        |              | 6,334  |               |        |              | 1,003 |              |       |          |       |   |        |   | 33,642  |       
|Advertising, net                                              |                                                |                   | 5,595  |        |        |              | 39     |               |        |              | 495   |              |       |          |       |   |        |   | 6,129   |       
|Occupancy                                                     |                                                |                   | 6,446  |        |        |              | 2,153  |               |        |              | 102   |              |       |          |       |   |        |   | 8,701   |       
|Other operating expenses                                      |                                                |                   | 19,998 |        |        |              | 4,809  |               |        |              | 863   |              |       |          |       |   |        |   | 25,670  |       
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Total costs and operating expenses                            |                                                |                   | 87,627 |        |        |              | 20,874 |               |        |              | 6,589 |              |       |          |       |   |        |   | 115,090 |       
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Operating income(loss)                                        |                                                |                   | 6,547  |        |        |              | 2,371  |               |        |              | (399  | )            |       |          |       |   |        |   | 8,519   |       
|OTHER INCOME (EXPENSE):                                       |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Interest expense                                              |                                                |                   | (8,169 | )      |        |              | 310    |               |        |              |      |              |       |          |       |   |        |   | (7,859  | )     
|Interest income                                               |                                                |                   | 769    |        |        |              |       |               |        |              | 1     |              |       |          |       |   |        |   | 770     |       
|Amortization - deferred financial costs                       |                                                |                   | (344   | )      |        |              |       |               |        |              |      |              |       |          |       |   |        |   | (344    | )     
|Other income (expense), net                                   |                                                |                   | (4,271 | )      |        |              | 35     |               |        |              |      |              |       |          |       |   |        |   | (4,236  | )     
|Equity in net income of subsidiaries                          |                                                |                   | 1,705  |        |        |              |       |               |        |              |      |              |       |          | (1,705 | ) |        |   |        |       
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Income (loss) before income taxes and
discontinued operations |                                                |                   | (3,763 | )      |        |              | 2,716  |               |        |              | (398  | )            |       |          | (1,705 | ) |        |   | (3,150  | )     
|Income tax expense                                            |                                                |                   | 1,395  |        |        |              |       |               |        |              |      |              |       |          |       |   |        |   | 1,395   |       
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|Income (loss) before discontinued operations                  |                                                |                   | (5,158 | )      |        |              | 2,716  |               |        |              | (398  | )            |       |          | (1,705 | ) |        |   | (4,545  | )     
|Loss from discontinued operations                             |                                                |                   | (659   | )      |        |              | (613   | )             |        |              |      |              |       |          |       |   |        |   | (1,272  | )     
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       
|                                                              |                                                | Net income (loss) |        | $      | (5,817 | )            |        | $             | 2,103  |              |       | $            | (398  | )        |        | $ | (1,705 | ) |         | $      | (5,817  | )
|                                                              |                                                |                   |        |        |        |              |        |               |        |              |       |              |       |          |        |   |        |   |         |       

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
(all dollars in thousands)

|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |         |         |  
|---------------------------------------------- | ------------------------------------------------------- | --------------------------------------------------- | ----- | ------- | ------- | ------------ | ----- | ------------- | ----- | ------------ | --- | ------------ | ---- | -------- | - | - | - | - | ----- | ------- | ------- | -
|                                               |                                                         |                                                     |       | Parent  |         | Guarantor    |       | Non-Guarantor |       |              |     |              |      | Rent-Way
|                                               |                                                         |                                                     |       | Issuer  |         | Subsidiaries |       | Subsidiaries  |       | Eliminations |     | Consolidated
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |             
|OPERATING ACTIVITIES:                          |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               |                                                         | Net cash provided by (used in) operating activities |       | $       | (22,469 | )            |       | $             | 2,222 |              |     | $            | (44  | )        |   | $ |  |   |       | $       | (20,291 | )
|INVESTING ACTIVITIES:                          |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               | Purchases of property and equipment                     |                                                     |       | (1,721  | )       |              |       | (203          | )     |              |     | (57          | )    |          |   |  |   |   |       | (1,981  | )      
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               |                                                         | Net cash used in investing activities               |       |         | (1,721  | )            |       |               | (203  | )            |     |              | (57  | )        |   |   |  |   |       |         | (1,981  | )
|FINANCING ACTIVITIES:                          |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               | Proceeds from borrowings                                |                                                     |       | 64,000  |         |              |       |              |       |              |     |             |      |          |   |  |   |   |       | 64,000  |        
|                                               | Payments on borrowings                                  |                                                     |       | (29,255 | )       |              |       |              |       |              |     |             |      |          |   |  |   |   |       | (29,255 | )      
|                                               | Payments on note for settlement of class action lawsuit |                                                     |       | (1,000  | )       |              |       |              |       |              |     |             |      |          |   |  |   |   |       | (1,000  | )      
|                                               | Payments on capital leases                              |                                                     |       | (1,514  | )       |              |       | (399          | )     |              |     |             |      |          |   |  |   |   |       | (1,913  | )      
|                                               | Book overdraft                                          |                                                     |       | (7,389  | )       |              |       |              |       |              |     |             |      |          |   |  |   |   |       | (7,389  | )      
|                                               | Issuance of common stock                                |                                                     |       | 544     |         |              |       |              |       |              |     |             |      |          |   |  |   |   |       | 544     |        
|                                               | Dividends paid                                          |                                                     |       | (303    | )       |              |       |              |       |              |     |             |      |          |   |  |   |   |       | (303    | )      
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               |                                                         | Net cash provided by (used in) financing activities |       |         | 25,083  |              |       |               | (399  | )            |     |              |     |          |   |   |  |   |       |         | 24,684  |  
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|                                               |                                                         | Increase (decrease) in cash and cash equivalents    |       |         | 893     |              |       |               | 1,620 |              |     |              | (101 | )        |   |   |  |   |       |         | 2,412   |  
|Cash and cash equivalents at beginning of year |                                                         |                                                     | 1,803 |         |         |              | 882   |               |       |              | 618 |              |      |          |  |   |   |   | 3,303 |        
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        
|Cash and cash equivalents at end of year       |                                                         | $                                                   | 2,696 |         |         | $            | 2,502 |               |       | $            | 517 |              |      | $        |  |   |   | $ | 5,715 |        
|                                               |                                                         |                                                     |       |         |         |              |       |               |       |              |     |              |      |          |   |   |   |   |       |        

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

RENT-WAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
(all dollars in thousands)

|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |         | 
|---------------------------------------------- | ------------------------------------------ | - | -------- | ------- | ------------ | - | ------------- | ------- | ------------ | - | ------------ | ------ | -------- | - | ------- | ------- | - | - | -------- | ------- | 
|                                               |                                            |   | Parent   |         | Guarantor    |   | Non-Guarantor |         |              |   |              |        | Rent-Way
|                                               |                                            |   | Issuer   |         | Subsidiaries |   | Subsidiary    |         | Eliminations |   | Consolidated
|                                               |                                            |   |          |         |              |   |               |         |              |   |             
|ASSETS                                         |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|Cash and cash equivalents                      |                                            | $ | 1,803    |         |              | $ | 882           |         |              | $ | 618          |        |          | $ |        |         |   | $ | 3,303    |        
|Restricted cash                                |                                            |   | 10,000   |         |              |   |              |         |              |   |             |        |          |   |         |         |   |   | 10,000   |        
|Prepaid expenses                               |                                            |   | 6,476    |         |              |   | 1,190         |         |              |   | 478          |        |          |   |        |         |   |   | 8,144    |        
|Income tax receivable                          |                                            |   | 3,461    |         |              |   | 784           |         |              |   |             |        |          |   |        |         |   |   | 4,245    |        
|Rental merchandise, net                        |                                            |   | 136,797  |         |              |   | 35,185        |         |              |   |             |        |          |   |        |         |   |   | 171,982  |        
|Rental merchandise credits due from vendors    |                                            |   | 3,507    |         |              |   | 649           |         |              |   |             |        |          |   |        |         |   |   | 4,156    |        
|Property and equipment, net                    |                                            |   | 31,053   |         |              |   | 6,419         |         |              |   | 1,293        |        |          |   |        |         |   |   | 38,765   |        
|Goodwill                                       |                                            |   | 124,457  |         |              |   | 57,448        |         |              |   | 6,594        |        |          |   |        |         |   |   | 188,499  |        
|Deferred financing costs, net                  |                                            |   | 8,316    |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 8,316    |        
|Intangible assets, net                         |                                            |   | 503      |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 503      |        
|Other assets                                   |                                            |   | 17,970   |         |              |   | 501           |         |              |   | 1,475        |        |          |   |        |         |   |   | 19,946   |        
|Investment in subsidiaries                     |                                            |   | 57,001   |         |              |   |              |         |              |   |             |        |          |   | (57,001 | )       |   |   |         |        
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|                                               | Total assets                               |   | $        | 401,344 |              |   | $             | 103,058 |              |   | $            | 10,458 |          |   | $       | (57,001 | ) |   | $        | 457,859 | 
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|LIABILITIES AND SHAREHOLDERS EQUITY           |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|Liabilities:                                   |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|Accounts payable                               |                                            | $ | 23,992   |         |              | $ | 4,965         |         |              | $ | 1,287        |        |          |   |        |         |   | $ | 30,244   |        
|Other liabilities                              |                                            |   | 69,507   |         |              |   | 12,820        |         |              |   | 3,001        |        |          |   |        |         |   |   | 85,328   |        
|Inter-company                                  |                                            |   | (33,262  | )       |              |   | 31,966        |         |              |   | 1,296        |        |          |   |        |         |   |   |         |        
|Deferred tax liability                         |                                            |   | 3,735    |         |              |   | 1,180         |         |              |   |             |        |          |   |        |         |   |   | 4,915    |        
|Debt                                           |                                            |   | 214,592  |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 214,592  |        
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|                                               | Total liabilities                          |   |          | 278,564 |              |   |               | 50,931  |              |   |              | 5,584  |          |   |         |        |   |   |          | 335,079 | 
|Convertible redeemable preferred stock         |                                            |   | 15,991   |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 15,991   |        
|SHAREHOLDERS EQUITY:                          |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|Common stock                                   |                                            |   | 303,220  |         |              |   | 75,248        |         |              |   | 1,600        |        |          |   | (76,848 | )       |   |   | 303,220  |        
|Common stock warrants                          |                                            |   | 156      |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 156      |        
|Option to purchase convertible preferred stock |                                            |   | 142      |         |              |   |              |         |              |   |             |        |          |   |        |         |   |   | 142      |        
|Accumulated other comprehensive income         |                                            |   | (69      | )       |              |   |              |         |              |   |             |        |          |   |        |         |   |   | (69      | )      
|Retained earnings (accumulated deficit)        |                                            |   | (196,660 | )       |              |   | (23,121       | )       |              |   | 3,274        |        |          |   | 19,847  |         |   |   | (196,660 | )      
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|                                               | Total shareholders equity                 |   |          | 106,789 |              |   |               | 52,127  |              |   |              | 4,874  |          |   |         | (57,001 | ) |   |          | 106,789 | 
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        
|                                               | Total liabilities and shareholders equity |   | $        | 401,344 |              |   | $             | 103,058 |              |   | $            | 10,458 |          |   | $       | (57,001 | ) |   | $        | 457,859 | 
|                                               |                                            |   |          |         |              |   |               |         |              |   |              |        |          |   |         |         |   |   |          |        

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2002
(all dollars in thousands)

|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |         |   |        |  
|------------------------------------------------------------- | --------------------------- | - | ----------------- | ------ | ------ | ------ | ------------ | ------ | ------------- | ----- | ------------ | ----- | ------------ | -- | -------- | - | - | ------ | ------- | ------- | - | ------ | -
|                                                              |                             |   |                   |        | Parent |        | Guarantor    |        | Non-Guarantor |       |              |       |              |    | Rent-Way
|                                                              |                             |   |                   |        | Issuer |        | Subsidiaries |        | Subsidiary    |       | Eliminations |       | Consolidated
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |             
|REVENUES:                                                     |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Rental revenues                                               |                             | $ | 66,911            |        |        | $      | 29,876       |        |               | $     |             |       |              | $  |         |   |   | $      | 96,787  |        
|Prepaid phone service                                         |                             |   |                  |        |        |        |             |        |               |       | 9,261        |       |              |    |         |   |   |        | 9,261   |        
|Other revenues                                                |                             |   | 9,654             |        |        |        | 4,136        |        |               |       |             |       |              |    |         |   |   |        | 13,790  |        
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|                                                              | Total revenues              |   |                   | 76,565 |        |        |              | 34,012 |               |       |              | 9,261 |              |    |          |  |   |        |         | 119,838 |  
|COSTS AND OPERATING EXPENSES:                                 |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Depreciation and amortization:                                |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|                                                              | Rental merchandise          |   |                   | 19,456 |        |        |              | 9,237  |               |       |              |      |              |    |          |  |   |        |         | 28,693  |  
|                                                              | Property and equipment      |   |                   | 4,772  |        |        |              | 748    |               |       |              | 136   |              |    |          |  |   |        |         | 5,656   |  
|                                                              | Amortization of intangibles |   |                   | 406    |        |        |              | 72     |               |       |              |      |              |    |          |  |   |        |         | 478     |  
|Cost of prepaid phone service                                 |                             |   |                  |        |        |        |             |        |               |       | 5,727        |       |              |    |         |   |   |        | 5,727   |        
|Salaries and wages                                            |                             |   | 22,603            |        |        |        | 9,804        |        |               |       | 1,338        |       |              |    |         |   |   |        | 33,745  |        
|Advertising, net                                              |                             |   | 7,784             |        |        |        | 104          |        |               |       | 872          |       |              |    |         |   |   |        | 8,760   |        
|Occupancy                                                     |                             |   | 4,045             |        |        |        | 3,515        |        |               |       | 100          |       |              |    |         |   |   |        | 7,660   |        
|Other operating expenses                                      |                             |   | 17,487            |        |        |        | 6,132        |        |               |       | 1,006        |       |              |    |         |   |   |        | 24,625  |        
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Total costs and operating expenses                            |                             |   | 76,553            |        |        |        | 29,612       |        |               |       | 9,179        |       |              |    |         |   |   |        | 115,344 |        
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Operating income                                              |                             |   | 12                |        |        |        | 4,400        |        |               |       | 82           |       |              |    |         |   |   |        | 4,494   |        
|OTHER INCOME (EXPENSE):                                       |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Interest expense                                              |                             |   | (8,971            | )      |        |        | 277          |        |               |       | (4           | )     |              |    |         |   |   |        | (8,698  | )      
|Interest income                                               |                             |   | 8                 |        |        |        |             |        |               |       | 3            |       |              |    |         |   |   |        | 11      |        
|Amortization and write-off of deferred financial costs        |                             |   | (398              | )      |        |        |             |        |               |       |             |       |              |    |         |   |   |        | (398    | )      
|Other income, net                                             |                             |   | 1,372             |        |        |        | 115          |        |               |       |             |       |              |    |         |   |   |        | 1,487   |        
|Equity in losses of subsidiaries                              |                             |   | 4,409             |        |        |        |             |        |               |       |             |       |              |    | (4,409   | ) |   |        |        |        
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Income (loss) before income taxes and discontinued
operations |                             |   | (3,568            | )      |        |        | 4,792        |        |               |       | 81           |       |              |    | (4,409   | ) |   |        | (3,104  | )      
|Income tax expense                                            |                             |   | 1,430             |        |        |        |             |        |               |       |             |       |              |    |         |   |   |        | 1,430   |        
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|Income (loss) before discontinued operations                  |                             |   | (4,998            | )      |        |        | 4,792        |        |               |       | 81           |       |              |    | (4,409   | ) |   |        | (4,534  | )      
|Loss from discontinued operations                             |                             |   | (363              | )      |        |        | (464         | )      |               |       |             |       |              |    |         |   |   |        | (827    | )      
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        
|                                                              |                             |   | Net income (loss) |        | $      | (5,361 | )            |        | $             | 4,328 |              |       | $            | 81 |          |   | $ | (4,409 | )       |         | $ | (5,361 | )
|                                                              |                             |   |                   |        |        |        |              |        |               |       |              |       |              |    |          |   |   |        |         |        

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RENT-WAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except per share data)
(Unaudited)

RENT-WAY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2002
(all dollars in thousands)

|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |          |         |  
|---------------------------------------------- | --------------------------------------------- | --------------------------------------------------- | ----- | -------- | ------- | ------------ | ----- | ------------- | ----- | ------------ | --- | ------------ | --- | -------- | - | - | - | - | ----- | -------- | ------- | -
|                                               |                                               |                                                     |       | Parent   |         | Guarantor    |       | Non-Guarantor |       |              |     |              |     | Rent-Way
|                                               |                                               |                                                     |       | Issuer   |         | Subsidiaries |       | Subsidiaries  |       | Eliminations |     | Consolidated
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |             
|OPERATING ACTIVITIES:                          |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               |                                               | Net cash provided by (used in) operating activities |       | $        | (19,665 | )            |       | $             | 1,466 |              |     | $            | (31 | )        |   | $ |  |   |       | $        | (18,230 | )
|INVESTING ACTIVITIES:                          |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               | Purchase of businesses, net of cash acquired  |                                                     |       | (259     | )       |              |       |              |       |              |     |             |     |          |   |  |   |   |       | (259     | )      
|                                               | Purchases of property and equipment           |                                                     |       | (1,798   | )       |              |       | (185          | )     |              |     | (8           | )   |          |   |  |   |   |       | (1,991   | )      
|                                               | Proceeds from sale of stores and other assets |                                                     |       | 303      |         |              |       |              |       |              |     |             |     |          |   |  |   |   |       | 303      |        
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               |                                               | Net cash used in investing activities               |       |          | (1,754  | )            |       |               | (185  | )            |     |              | (8  | )        |   |   |  |   |       |          | (1,947  | )
|FINANCING ACTIVITIES:                          |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               | Proceeds from borrowings                      |                                                     |       | 174,000  |         |              |       |              |       |              |     |             |     |          |   |  |   |   |       | 174,000  |        
|                                               | Payments on borrowings                        |                                                     |       | (166,170 | )       |              |       |              |       |              |     |             |     |          |   |  |   |   |       | (166,170 | )      
|                                               | Payments on capital leases                    |                                                     |       | 685      |         |              |       | (685          | )     |              |     |             |     |          |   |  |   |   |       |         |        
|                                               | Book overdraft                                |                                                     |       | 13,509   |         |              |       |              |       |              |     |             |     |          |   |  |   |   |       | 13,509   |        
|                                               | Deferred financing costs                      |                                                     |       | (2,688   | )       |              |       |              |       |              |     |             |     |          |   |  |   |   |       | (2,688   | )      
|                                               | Interest on shareholder loans                 |                                                     |       | (3       | )       |              |       |              |       |              |     |             |     |          |   |  |   |   |       | (3       | )      
|                                               | Payment of loans by directors/shareholders    |                                                     |       | 251      |         |              |       |              |       |              |     |             |     |          |   |  |   |   |       | 251      |        
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               |                                               | Net cash provided by (used in) financing activities |       |          | 19,584  |              |       |               | (685  | )            |     |              |    |          |   |   |  |   |       |          | 18,899  |  
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|                                               |                                               | Increase (decrease) in cash and cash equivalents    |       |          | (1,835  | )            |       |               | 596   |              |     |              | (39 | )        |   |   |  |   |       |          | (1,278  | )
|Cash and cash equivalents at beginning of year |                                               |                                                     | 4,702 |          |         |              | 2,316 |               |       |              | 277 |              |     |          |  |   |   |   | 7,295 |         
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         
|Cash and cash equivalents at end of year       |                                               | $                                                   | 2,867 |          |         | $            | 2,912 |               |       | $            | 238 |              |     | $        |  |   |   | $ | 6,017 |         
|                                               |                                               |                                                     |       |          |         |              |       |               |       |              |     |              |     |          |   |   |   |   |       |         

18.     RECENT ACCOUNTING PRONOUNCEMENTS:

In May, 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for
how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise
effective at the beginning of the first interim period beginning after June 15,
2003. The Company has adopted the provisions of this Statement. The
classification and measurement provisions in paragraphs 9, 10 and 22 of FAS 150
are deferred for an indefinite period for certain mandatory, redeemable,
non-controlling interests with finite-lived subsidiaries.

On January 15, 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities. The objective of this interpretation is to improve
financial reporting by enterprises involved with variable interest entities.
This interpretation is effective for financial statements issued after October
9, 2003. The application of FIN 46 would not have a material impact on the
financial statements for the Company.

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RENT-WAY, INC.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

OVERVIEW

Rent-Way currently operates 753 rental-purchase stores located in 33 states,
which is the second largest number of stores in the rental-purchase industry.
The Company offers quality brand name home entertainment equipment, furniture,
computers, major appliances, and jewelry to customers under full-service
rental-purchase agreements that generally allow the customer to obtain
ownership of the merchandise at the conclusion of an agreed upon rental period.
The Company also provides prepaid local phone service to consumers on a monthly
basis through DPI. DPI is a non-facilities based provider of local phone
service.

Since late 2000, the Company has focused on improving gross margins, decreasing
operating expenses, and reducing debt. To accomplish these objectives, the
Company has significantly upgraded its merchandise mix, implemented higher
rental rates, and closed, combined, or sold under-performing stores. On June
2, 2003, the Company closed a refinancing of its bank credit facility through
the issuance of $205.0 million of senior secured notes, borrowings under a new
$60.0 million bank revolving credit facility and the sale of $15.0 million of
convertible preferred stock.

The Company generates revenues from three categories: rental revenue, prepaid
phone service revenue, and other revenue. The household rental business
revenues include both rental revenue and other revenue. Rental revenue
consists of revenues derived from rental-purchase agreements. Prepaid phone
service revenue represents revenues from DPI. Other revenue includes revenues
related to services offered that complement the rental-purchase agreements and
the sale of rental merchandise. These revenues include insurance fees,
liability damage waiver premiums, Preferred Customer Club fees and revenues
from the sale of merchandise. The Company considers the rental-purchase
business and prepaid telephone services to be two separate business units.

While there is constant turnover within the portfolio of rental agreements, the
total number of rental agreements in a store does not change significantly.
This stability in the number of rental agreements facilitates revenue
forecasting. The typical store experiences a slight decrease in the number of
agreements during the summer months while, on balance, the rest of the year
demonstrates growth in agreements.

The major components of the Companys cost structure are the cost of rental
merchandise and personnel and, to a lesser extent, sales and marketing expense
and general and administrative costs. Costs associated with rental merchandise
are driven by the need to purchase merchandise to maintain the quality and
availability of the product mix and to maximize inventory utilization rates.
Compensation, incentives, and employee benefits are the main components of
personnel costs. Sales and marketing expenses are driven primarily by
advertising costs, business development activities, and the development of new
service offerings. Other operating expenses include general and administrative
costs, which primarily include corporate overhead expenses, costs associated
with the information technology infrastructure, and other store related
expenses.

USE OF ESTIMATES IN OUR FINANCIAL STATEMENTS

The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. On an ongoing basis, management reviews its estimates,
including those related to litigation, liability for self-insurance, impairment
of goodwill and other intangibles, based on currently available information.
Changes in facts and circumstances may result in revised estimates.

CRITICAL ACCOUNTING POLICIES

Revenue.Rental merchandise is rented to customers pursuant to rental
agreements, which provide for either weekly, biweekly, semi-monthly or monthly
rental payments collected in advance. Revenue is recognized as collected, not
over the rental term, since at the time of collection the rental merchandise
has been placed in service and costs of installation and delivery have been
incurred. This method of revenue recognition does not produce materially
different results than if rental revenue were recognized over the weekly,
biweekly, semi-monthly or monthly rental term.

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RENT-WAY, INC.

Rental Merchandise Depreciation.The Company uses the units of activity
depreciation method for all rental merchandise except computers and computer
games. Under the units of activity method, rental merchandise is depreciated as
revenue is collected or earned during free-rent promotions. Thus, rental
merchandise is not depreciated during periods when it is not on rent and
therefore not generating rental revenue. Personal computers, added to the
Companys product line in June 1999, are principally depreciated on the
straight-line basis beginning on acquisition date over 12 months to 24 months,
depending on the type of computer. Write-offs of rental merchandise arising
from customers failure to return merchandise, obsolescence and losses due to
excessive wear and tear of merchandise are recognized using the direct
write-off method, which is materially consistent with the results that would be
recognized under the allowance method. The rental merchandise write-offs
approximate 3% of revenue from month to month over the prior 2 fiscal years.
The Company reviews this analysis on a monthly basis.

Prepaid Phone Service. Prepaid phone service is provided to customers on a
prepaid month-to-month basis. Prepaid phone service revenues are comprised of
monthly service revenues and activation revenues. Monthly service revenues are
recognized on a straight-line basis over the related monthly service period,
commencing when the service period begins. The cost of monthly service is also
recognized over the monthly service period and is included in cost of prepaid
phone service in the condensed consolidated statement of operations.
Activation revenues and costs are recognized on a straight-line basis over the
average estimated life of the customer relationship. The Company reviews the
average estimated life of the customer relationship from time to time in making
this determination of average estimated life.

Convertible Redeemable Preferred Stock.The Companys sale of convertible
preferred stock in June 2003 resulted in proceeds of $14.1 million, net of
issuance costs of $0.9 million, which were used to refinance the previous
senior credit facility. The net proceeds are classified outside of permanent
equity because of the redemption date and other redemption provisions of the
preferred stock, except for $0.1 million classified as an option to purchase
additional convertible preferred stock which is included in permanent equity.
The Company has determined that the conversion feature of the convertible
redeemable preferred stock is a derivative financial instrument that was
bifurcated and recorded in temporary equity classification on the balance
sheet. This derivative financial instrument is marked to market through other
income (expense) in the Companys condensed consolidated statements of
operations.

Closed Store Reserves.From time to time, the Company closes or consolidates
stores. An estimate is recorded of the future obligation related to closed
stores based upon the present value of the future lease payments and related
lease commitments, net of estimated sublease income. If the estimates related
to sublease income are not correct, the actual liability may be more or less
than the liability recorded, and the Company adjusts the liability accordingly.

Company Insurance Programs. For fiscal years 2004 and 2003, the Company is
primarily self-insured for health insurance. The self-insurance liability for
health costs is determined based on funding factors determined by cost plus
rates for a fully insured plan and monthly headcount. The contracted rate is
determined based on experience, prior claims filed and an estimate of future
claims. A retrospective adjustment for over (under) funding of claims is
recorded when determinable and probable.

Discontinued Operations.On February 8, 2003, the Company completed the
definitive purchase agreement and sold rental merchandise and related contracts
of 295 stores to Rent-A-Center, Inc. Rent-A-Center, Inc. purchased certain
fixed assets and assumed related store leases of 125 of these stores.
Accordingly, for financial statement purposes, the assets, liabilities, results
of operations and cash flows of this component have been segregated from those
of continuing operations and are presented in the Companys financial
statements as discontinued operations (see Note 2 to the condensed consolidated
financial statements).

Deferred Financing Costs. Deferred financing costs consists of bond issuance
costs and loan origination costs incurred in connection with the sale of $205.0
million of senior secured notes and a new $60.0 million revolving credit
facility that closed June 2, 2003. The bond issuance costs of $6.9 million are
amortized using the effective interest method over the 7-year term of the bonds. The loan
origination costs of $2.0 million are amortized over
the 5-year bank credit agreement. Deferred financing costs amortization was
$0.3 and $0.4 million for the three-month period ended December 31, 2003 and
2002, respectively.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items from
the Companys unaudited condensed consolidated statements of operations,
expressed as a percentage of revenues.

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RENT-WAY, INC.

|                                                     |                               |                                     |      |                    |       |      |      |      |       | 
|---------------------------------------------------- | ----------------------------- | ----------------------------------- | ---- | ------------------ | ----- | ---- | ---- | ---- | ----- | 
|                                                     |                               |                                     |      | Three Months Ended
|                                                     |                               |                                     |      | December 31,      
|                                                     |                               |                                     |      |                   
|                                                     |                               |                                     |      | 2003               |       | 2002
|                                                     |                               |                                     |      |                    |       |     
|REVENUES:                                            |                               |                                     |      |                    |       |      |      |     
|                                                     | Rental revenue                |                                     |      | 82.9               | %     |      |      | 80.8 | %    
|                                                     | Prepaid phone service revenue |                                     |      | 5.0                |       |      |      | 7.7  |      
|                                                     | Other revenue                 |                                     |      | 12.1               |       |      |      | 11.5 |      
|                                                     |                               |                                     |      |                    |       |      |      |     
|                                                     |                               | Total revenues                      |      |                    | 100.0 |      |      |      | 100.0 | 
|COSTS AND OPERATING EXPENSES:                        |                               |                                     |      |                    |       |      |      |     
|Depreciation and amortization
Rental merchandise     |                               |                                     | 26.6 |                    |       |      | 23.9 |     
|                                                     | Property and equipment        |                                     |      | 3.2                |       |      |      | 4.7  |      
|                                                     | Amortization of intangibles   |                                     |      | 0.1                |       |      |      | 0.4  |      
|                                                     |                               |                                     |      |                    |       |      |      |     
|                                                     |                               | Total depreciation and amortization |      |                    | 29.9  |      |      |      | 29.0  | 
|Cost of prepaid phone service                        |                               |                                     | 3.2  |                    |       |      | 4.8  |     
|Salaries and wages                                   |                               |                                     | 27.2 |                    |       |      | 28.2 |     
|Advertising                                          |                               |                                     | 5.0  |                    |       |      | 7.3  |     
|Occupancy                                            |                               |                                     | 7.0  |                    |       |      | 6.4  |     
|Other operating expenses                             |                               |                                     | 20.8 |                    |       |      | 20.5 |     
|                                                     |                               |                                     |      |                    |       |      |      |     
|                                                     |                               | Total costs and operating expenses  |      |                    | 93.1  |      |      |      | 96.2  | 
|                                                     |                               |                                     |      |                    |       |      |      |     
|                                                     |                               | Operating income                    |      |                    | 6.9   |      |      |      | 3.8   | 
|Interest expense                                     |                               |                                     | (6.4 | )                  |       |      | (7.3 | )   
|Interest income                                      |                               |                                     | 0.6  |                    |       |      |     |     
|Amortizationdeferred financing costs                |                               |                                     | (0.3 | )                  |       |      | (0.3 | )   
|Other income (expense)                               |                               |                                     | (3.3 | )                  |       |      | 1.2  |     
|                                                     |                               |                                     |      |                    |       |      |      |     
|Loss before income taxes and discontinued operations |                               |                                     | (2.5 | )                  |       |      | (2.6 | )   
|Income tax expense                                   |                               |                                     | 1.2  |                    |       |      | 1.2  |     
|                                                     |                               |                                     |      |                    |       |      |      |     
|Loss before discontinued operations                  |                               |                                     | (3.7 | )                  |       |      | (3.8 | )   
|Income (loss) from discontinued operations           |                               |                                     | (1.0 | )                  |       |      | (0.7 | )   
|                                                     |                               |                                     |      |                    |       |      |      |     
|Net loss                                             |                               |                                     | (4.7 | )%                 |       |      | (4.5 | )%  
|                                                     |                               |                                     |      |                    |       |      |      |     

The following discussion relates only to continuing operations.

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002

Total revenues. Total revenues increased $3.8 million, or 3.2% to $123.6
million from $119.8 million. The increase is attributable to an increase in
revenues of $6.8 million in the household rental segment offset by a $3.1
million decrease in the prepaid telephone service segment. The $3.1 million
decrease in the prepaid telephone service segment is due to a decrease in
customers attributed to an increase in competition. The $6.8 million increase
in revenue in the household rental segment is due a 6.6% increase in same store
revenues.

Same store revenues consists of revenues from stores in the household rental
segment that have been operating for more than 15 months and have had no
changes affecting operations during that time, specifically, mergers,
dispositions or acquisitions. The increase in the same store revenues was due
to an increase in same store rental revenues, early purchase option, sales
revenues and fee revenues. Same store rental revenues increased 6.1% as
compared to the same period last year. This increase is primarily attributable
to more rental-purchase agreements in the portfolio and improved collections in
the three-month period ended December 31, 2003 as compared to the same period
last year. Early purchase options and sales revenues increased 28.8% as
compared to the same period last year. This increase is principally due to
more customers exercising the early purchase option as a result of a 120 days
same as cash promotion that offered customers the opportunity to purchase
rented merchandise at a discount. Fee revenues increased by 2.2% as compared
to the same period last year. This increase is mainly attributable to an
increase in rental-purchase agreements in the portfolio.

Depreciation and Amortization.Depreciation expense related to rental
merchandise increased to 26.6% as a percentage of total revenues from 23.9%.
This increase is primarily due to the Company adding game systems and
additional computers to the product line for the holiday season in November
2003. Both items are depreciated on a straight-line basis. Also, the Company
ran a promotion on big screen televisions for the holidays, which resulted in
an increase in depreciation expense as a percentage of total revenues for the
quarter ended December 31, 2003.

Depreciation expense related to property and equipment decreased to 3.2% as a
percentage of total revenues from 4.7%. This decrease is primarily due to
reduced capital spending and assets becoming fully depreciated.

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RENT-WAY, INC.

Amortization of other intangibles decreased to 0.1% from 0.4% as a percentage
of total revenues. This is due to the expiration of the amortization periods
for certain non-compete agreements and customer contracts. On October 1, 2001,
the Company adopted SFAS 142. SFAS 142 requires the cessation of amortization
of goodwill and other indefinite-lived intangibles on the balance sheet.
Goodwill and other indefinite lived intangibles on the balance sheet are tested
for impairment at least annually.

Cost of Prepaid Phone Service. The cost of prepaid phone service decreased to
$4.0 million or 3.2% of total revenues from $5.7 million, or 4.7% as a
percentage of total revenues. The cost of prepaid phone service as a
percentage of prepaid phone service revenue increased to 64.3% from 61.1%.
This decrease of $1.7 million is primarily due to the decrease in the number of
customers.

Salaries and Wages. Salaries and wages decreased by $0.1 million to $33.6
million from $33.7 million, and decreased to 27.2% as a percentage of total
revenues from 28.2%. Last fiscal year, the company initiated an employee
upgrade program directed at attracting and keeping better talent. The Company
believes this is paying off as demonstrated by a 1.0% decrease in this expense
as a percentage of total revenues.

Advertising. Advertising expense decreased from $8.8 million to $6.1 million.
This decrease is primarily due to the sale of 295 stores to Rent-A-Center. The
Company continues to run a more balanced and efficient media strategy.

Occupancy. Occupancy expense increased to $8.7 million from $7.7 million
primarily due to general rent increases and an increase in maintenance expense.
The increase in maintenance expense is the result of a strategic initiative to
improve the appearance and consistency of the Companys stores.

Other Operating Expense. Other operating expense increased by $1.0 million and
increased to 20.7% as a percentage of total revenues from 20.5%. This increase
is due to increases in payroll taxes and employee benefits, automotive
insurance and service expenses offset by decreases in legal and professional
fees.

Interest Expense. Interest expense decreased from 7.3% to 6.4% as a percentage
of total revenues. This decrease is primarily a result of a $32.6 million
decrease in debt from $285.0 million to $252.4 million.

Other Income (Expense), net. Other income was $1.5 million for the three months
ended December 31, 2002, compared to $4.2 million in expense for the three
months ended December 31, 2003. This change is primarily due to a $5.7 million
charge to record the convertible option derivative liability for the
convertible preferred stock at its fair market value as of December 31, 2003.
Other income (expense) also includes the positive change in the fair market
value of the interest rate swap portfolio, which resulted in income of $1.3
million for the three months ended December 31, 2003 compared to $1.2 million
for the same period last year.

Income Tax Expense. The Company recorded income tax expense of $1.4 million
during the first quarter of fiscal 2003 and 2004 due to the Companys inability
to book the reversal of the deferred tax liability associated with tax
deductible goodwill to offset a portion of its deferred tax asset following the
adoption of SFAS 142.

Loss From Discontinued Operations.The loss from discontinued operations was
$1.3 million, of which $1.0 million relates to the evaluation and write-off of
leasehold improvements related to the stores sold to Rent-A-Center. On
December 17, 2002, the Company entered into a definitive purchase agreement to
sell 295 stores to Rent-A-Center, Inc. for approximately $101.5 million, which
transaction has since closed. These stores are all included in the household
rental segment. Related operating results, in accordance with SFAS 144, have
been reported as discontinued operations (see Note 2 to the condensed
consolidated financial statements).

Net Loss. The Company generated a net loss of $5.8 million in the period as a
result of the factors described above compared to a net loss of $5.4 million in
the same period last year.

Net Income (Loss) Allocable To Common Shareholders. On June 2, 2003, the
Company issued 1,500 shares of convertible redeemable preferred stock for
$10,000 per share and a one-year option to purchase an additional 500 shares of
convertible redeemable preferred stock. The amortization of deemed dividend
and accretion of preferred stock totaled $0.4 million and are charged to
accumulated deficit, but reduce net income or increase net loss allocable to
common stockholders.

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RENT-WAY, INC.

LIQUIDITY AND CAPITAL RESOURCES

The Companys capital requirements relate primarily to purchasing additional
rental merchandise and replacing rental merchandise that has been sold or is no
longer suitable for rent. The Companys principal sources of liquidity are
cash flows from operations, debt capacity available under its revolving credit
facility and available cash reserves.

For the first quarter of fiscal 2004, operations used $20.3 million of cash
flow compared to $18.2 million for the first quarter of fiscal 2003. The
increase in cash used in operating activities is primarily attributable to
rental merchandise purchases and the payment of accrued interest. The first
quarter of the Companys fiscal year is typically the period with the highest
volume of rental merchandise purchases due to buying for the holiday season.
Also, there is a planned increase in store inventory levels to fuel the
agreement growth anticipated for fiscal year 2004. As a result, both rental
merchandise and accounts payable increase during the period. The decrease in
other liabilities is the result of the settlement of a $25.0 million liability
recorded for the class action lawsuit, which was approved by the court December
22, 2003 and payment of accrued interest. The decrease in restricted cash is
$10.0 million funded into escrow used to pay this liability related to the
class action lawsuit. The decrease in other assets is an $11.0 million non-cash
receivable from the insurance company that funded part of the $25.0 million
settlement of the class action lawsuit.

Net cash used in investing activities was $2.0 million for the purchase of
property and equipment for the first quarter of fiscal 2004 and 2003.

For the first quarter of fiscal 2004, financing activities provided $24.7
million as compared to $18.9 million for the same period in 2003. In the first
quarter of fiscal year 2004, the Company increased borrowings on its revolving
credit facility. The Company also paid $1.0 million of a $4.0 million, 6%
unsecured subordinated note payable related to the settlement of the class
action lawsuit.

The Companys senior secured notes have the following material terms. The
$205.0 million of senior secured notes bear interest at 11.875%. The interest
on the secured notes is payable semiannually on June 15 and December 15
beginning December 15, 2003. The secured notes are guaranteed on a senior
basis by all existing and future domestic restricted subsidiaries of the
Company other than DPI, which is an unrestricted subsidiary. The Company may
redeem the secured notes, in whole or in part, at any time prior to June 15,
2010, at a redemption price equal to the greater of:



| | a) |  | 100% of the principal amount of the notes to be redeemed; and                                                                                                                                                                                                                                                                                                        
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | the sum of the present values of (i) 100% of the principal
amount of the notes to be redeemed at June 15, 2010, and (ii) the
remaining scheduled payments of interest from the redemption date
through June 15, 2010, but excluding accrued and unpaid interest to
the redemption date, discounted to the redemption date at the
treasury rate plus 175 basis points;

plus, in either case, accrued and unpaid interest to the redemption date.

The secured notes were offered at a discount of $3.6 million, which is being
amortized using the effective interest method over the term of the secured
notes. Amortization of the discount was $0.1 million for the three months
ending December 31, 2003. Costs representing underwriting fees and other
professional fees of $6.9 million are being amortized, using the
effective interest
method, over the term of the secured notes. The secured notes rank senior in
right to all of the Companys existing and future subordinated debt, have a
lien position ranking second to the bank revolving credit facility and
effectively junior in right of payment to all existing and future debt and
other liabilities of the Companys subsidiaries that are not subsidiary
guarantors. The secured notes contain covenants that will, among other things,
limit the Companys ability to incur additional debt, make restricted payments,
incur any additional liens, sell certain assets, pay dividend distributions
from restricted subsidiaries, transact with affiliates, conduct certain sale
and leaseback transactions and use excess cash flow.

The holders have the option to acquire an additional $5.0 million of preferred
stock, having an initial conversion price of $6.65 per share, exercisable until
June 2, 2004. See Note 9 to the Companys consolidated financial statements
set forth at Item 8 of this report for more information regarding the
convertible preferred stock.

The Company is in compliance with all covenants at December 31, 2003, and
expects to be able to comply with covenants based upon its fiscal 2004
projections.

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RENT-WAY, INC.

In April 2002, the Company sold one million shares of common stock and warrants
to acquire another 100,000 shares of common stock in a private placement to
Calm Waters Partnership and two other investors for $6.0 million. The warrants
had an exercise price of $9.35 per share, which was reduced to $4.90 per share
pursuant to anti-dilution adjustments. The Company re-measured the value of
the warrants in accordance with the arrangement and reclassified the change to
common stock from warrants. These warrants were exercised in November 2003.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is not subject to any off-balance sheet arrangements within the
meaning of Rule 303(a)(4) of Regulation S-K.

CONTRACTUAL OBLIGATIONS

The following table presents obligations and commitments to make future
payments under contracts and contingent commitments at December 31, 2003:

|                                       |  |       |         |               |  |             |        |           |  |         |        |           |  |   |        |  |  |   |         | 
|-------------------------------------- |  | ----- | ------- | ------------- |  | ----------- | ------ | --------- |  | ------- | ------ | --------- |  | - | ------ |  |  | - | ------- | 
|                                       |  |       |         |               |  | Due in less |        | Due in    |  | Due in  |        | Due after
|Contractual Cash Obligations           |  | Total |         | than one year |  | 1-3 years   |        | 4-5 years |  | 5 years
|                                       |  |       |         |               |  |             |        |           |  |        
|Debt (1)                               |  | $     | 249,352 |               |  | $           | 47,750 |           |  | $       |       |           |  | $ |       |  |  | $ | 201,602 | 
|Capital lease obligations              |  |       | 13,954  |               |  |             | 6,729  |           |  |         | 6,473  |           |  |   | 752    |  |  |   |        | 
|Operating leases                       |  |       | 158,550 |               |  |             | 27,661 |           |  |         | 70,315 |           |  |   | 34,763 |  |  |   | 25,811  | 
|Notes payable                          |  |       | 66      |               |  |             | 19     |           |  |         | 47     |           |  |   |       |  |  |   |        | 
|Settlement of class action lawsuit (2) |  |       | 3,000   |               |  |             | 1,000  |           |  |         | 2,000  |           |  |   |       |  |  |   |        | 
|                                       |  |       |         |               |  |             |        |           |  |         |        |           |  |   |        |  |  |   |         | 
|Total cash obligations                 |  | $     | 422,107 |               |  | $           | 82,763 |           |  | $       | 77,162 |           |  | $ | 34,769 |  |  | $ | 227,413 | 
|                                       |  |       |         |               |  |             |        |           |  |         |        |           |  |   |        |  |  |   |         | 

(1)  Consists of senior secured notes, net of discount, and outstanding
revolving loans.

(2)  Consists of unsecured, subordinated note payable to the class of the
class action lawsuit.

|                             |  |               |       |           |  |                                            |       |           |  |         |   |  |  |      |   |  |  |   |   | 
|---------------------------- |  | ------------- | ----- | --------- |  | ------------------------------------------ | ----- | --------- |  | ------- | - |  |  | ---- | - |  |  | - | - | 
|                             |  |               |       |           |  | Amount of Commitment Expiration Per Period |       |           |  |        
|                             |  | Total Amounts |       | Less than |  |                                            |       |           |  |         |   |  |  | Over
|Other Commercial Commitments |  | Committed     |       | one year  |  | 1-3 years                                  |       | 4-5 years |  | 5 years
|                             |  |               |       |           |  |                                            |       |           |  |        
|Lines of credit              |  | $             |      |           |  | $                                          |      |           |  | $       |  |  |  | $    |  |  |  | $ |  | 
|Standby letters of credit    |  |               | 6,020 |           |  |                                            | 6,020 |           |  |         |  |  |  |      |  |  |  |   |  | 
|Guarantees                   |  |               |      |           |  |                                            |      |           |  |         |  |  |  |      |  |  |  |   |  | 
|                             |  |               |       |           |  |                                            |       |           |  |         |   |  |  |      |   |  |  |   |   | 
|Total commercial commitments |  | $             | 6,020 |           |  | $                                          | 6,020 |           |  | $       |  |  |  | $    |  |  |  | $ |  | 
|                             |  |               |       |           |  |                                            |       |           |  |         |   |  |  |      |   |  |  |   |   | 

SEASONALITY AND INFLATION

The Companys operating results are subject to seasonality. The first quarter
typically has a greater number of rental-purchase agreements entered into
because of traditional holiday shopping patterns. The second quarter has
typically a flat to slightly negative change in the number of rental-purchase
agreements and customer accounts and also, fewer deliveries. The third quarter
has typically flat to slightly positive results and the fourth quarter again
experiences a decrease in deliveries. Management plans for these seasonal
variances and takes particular advantage of the first quarter with product
promotions and marketing campaigns. Because many of the Companys expenses do
not fluctuate with seasonal revenue changes, such revenue changes may cause
fluctuations in the Companys quarterly earnings.

In the event of a prolonged recession, the Company acknowledges the possibility
of a decrease in demand, particularly for higher-end products.

During the quarter ended December 31, 2003, the costs of rental merchandise and
store lease rental expense have increased modestly. These increases have not
had a significant effect on the Companys results of operations because the
Company has been able to charge commensurately higher rental for its
merchandise. This trend is expected to continue in the foreseeable future.

RECENT ACCOUNTING PRONOUNCEMENTS

In May, 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how
an

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RENT-WAY, INC.

issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise
effective at the beginning of the first interim period beginning after June 15,
2003. The Company has adopted the provisions of this Statement. The
classification and measurement provisions in paragraphs 9, 10 and 22 of FAS 150
are deferred for an indefinite period for certain mandatory, redeemable,
non-controlling interests with finite-lived subsidiaries.

On January 15, 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities. The objective of this interpretation is to improve
financial reporting by enterprises involved with variable interest entities.
This interpretation is effective for financial statements issued after October
9, 2003. The application of FIN 46 would not have a material impact on the
financial statements for the Company.

CAUTIONARY STATEMENT

This report includes 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. See particularly Item 2,
Managements Discussion and Analysis of Financial Condition, among others.
These statements may be identified by terms and phrases such as anticipate,
believe, intend, estimate, expect, continue, should, could,
may, plan, project, predict, will and similar expressions and relate
to future events and occurrences. These statements are subject to uncertainties
and other factors that could cause actual results to differ materially from
such statements. Factors that could cause actual results to differ materially
from those expressed or implied in such statements include but are not limited
to:

Rent-Ways ability to control and normalize operating expenses and to continue
to realize operating efficiencies.

Rent-Ways ability to make principal and interest payments on or to refinance
on maturity its high-level of outstanding debt.

Rent-Ways ability to develop, implement, and maintain reliable and adequate
internal accounting systems and controls.

Rent-Ways ability to retain existing senior management and attract additional
management employees.

General economic, business, and demographic conditions, including demand for
Rent-Ways products and services.

General conditions relating to the rental-purchase industry and the prepaid
local phone service industry, including the impact of state and federal laws
regulating or otherwise affecting the rental-purchase transaction and prepaid
local phone service transaction.

Competition in the rental-purchase industry and prepaid local phone service
industry, including competition with traditional retailers.

Rent-Ways ability to enter into and to maintain relationships with vendors of
its rental merchandise including its ability to obtain goods and services on
favorable credit terms.

Rent-Ways ability to open new rental-purchase stores and to operate them
profitably.

Given these factors, undue reliance should not be placed on any forward-looking
statements and statements regarding Rent-Ways future prospects and
performance. Such statements speak only as of the date made. Rent-Way
undertakes no obligation to update or revise any such statements whether as a
result of new information, the occurrence of future events, or otherwise.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys major market risk exposure is primarily due to fluctuations in
interest rates. The Company manages its exposure to changes in short-term
interest rates, particularly to reduce the impact on floating-rate borrowings
under its revolving credit facility, by entering into interest rate swap
agreements. These swap agreements involve the receipt of amounts by the
Company when floating rates exceed fixed rates and the payment of amounts by
the Company to the counter parties when fixed rates exceed the floating rates
in the agreements over their term. The Company accrues the differential as
interest rates change, and recognizes it as an adjustment to the floating rate
interest expense related to the debt. The counter-parties to these contracts
are high credit quality commercial banks, which the Company believes minimizes
the risk of counter party default, to a large extent.

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RENT-WAY, INC.

At December 31, 2003, the Company had swap agreements with total notional
principal amounts of $51.4 million, which effectively fixed the interest rate
on obligations in the notional amount of $47.8 million of debt under the $60.0
million revolving credit facility. The swap agreements lock in a LIBOR rate
ranging from 5.09% to 6.97% and have maturities ranging from 2003 to 2005.
Falling interest rates and/or a flattening of the yield curve will negatively
impact the market value of the interest rate swaps. Changes in the valuation
of such swap agreements are recorded directly to earnings. The face value of
interest rate swap agreements was a liability of approximately $3.8 million at
December 31, 2003. A 1% adverse change in the interest rates on variable rate
obligations would affect pre-tax earnings by approximately $0.5 million.

The Company does not enter into derivative financial instruments for trading or
speculative purposes. As of June 2, 2003, the Company is over-hedged because
of the refinancing. The existing interest rate swaps hedged a portion of the
previous LIBOR debt. As a result of the refinancing, the only LIBOR debt the
Company has is the $60.0 million revolver credit facility, of which $47.8
million was outstanding at December 31, 2003. The Company will reduce its
interest rate swap position as they mature through August 2005 because of the
current cost to terminate those agreements.




ITEM 4. CONTROLS AND PROCEDURES



|A. |  | Disclosure Controls and Procedures. The Company carried out an
evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures pursuant to Exchange
Act Rule 13a-15. Based upon the evaluation, the Companys Chief Executive
Officer and Chief Financial Officer concluded that, as of December 31,
2003, the Companys disclosure controls and procedures are effective to
ensure that information required to be disclosed in Company reports filed
or submitted under the Exchange Act is made known to them on a timely
basis, and that this information is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions rules and forms.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | Changes in Internal Control over Financial Reporting. There has not been
any change in the Companys internal control over financial reporting that
occurred during the last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Companys internal control
over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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RENT-WAY, INC.




PART IIOTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

As previously reported, following the discovery of accounting
improprieties in October 2000, the Company, its former independent accountants,
and certain of its current and former officers were named in a consolidated
class action complaint filed in the U.S. District Court for the Western
District of Pennsylvania alleging violations of the securities laws and seeking
damages in unspecified amounts purportedly on behalf of a class of
shareholders. On April 18, 2003, the Company entered into an agreement
settling the class action. The settlement required the Company to pay the
class the sum of $25.0 million, with $21.0 million in cash and $4.0 million in
6% unsecured subordinated notes payable in four equal installments over two
years commencing December 31, 2003. Of the $21.0 million payable in cash,
$11.0 million has been funded from available insurance proceeds. The
settlement agreement provided for the release of the Company and all other
defendants except the Companys former controller and the Companys former
independent accountants. The settlement received court approval and became
final by virtue of an order dated December 22, 2003.

The Company is also subject to litigation in the ordinary course of
business. The Company believes the ultimate outcome of any existing litigation
would not have a material adverse effect on the financial condition, results of
operation or cash flows of the Company.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | a. |  | EXHIBITS
| | -- |  | --------



| | See exhibit index.
| | ------------------



| | b. |  | REPORTS ON FORM 8-K
| | -- |  | -------------------

The Company filed the following reports on Form 8-K in the quarter ended
December 31, 2003:



| | (1) |  | On November 13, 2003, the Company filed a Current Report on Form 8-K,
which reported the issuance of a news release announcing financial
results for its fourth quarter and fiscal year ended September 30, 2003.       
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | On December 29, 2003, the company filed a Current Report on Form 8-K,
which reported the issuance of a news release regarding the commencement
of the Companys exchange offer of its senior secured notes.             
|
| | (3) |  | On December 29, 2003, the Company filed a Current Report on Form 8-K,
which reported the Company engaged the accounting firm of Ernst & Young
LLP as its new independent public accountants effective December 22,
2003.

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RENT-WAY, INC.




SIGNATURES

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

|                  |  |                |  |                                           
|----------------- |  | -------------- |  | ------------------------------------------
|                  |  | Rent-Way, Inc. |  |                                           
|                  |  |                |  |                                           
|                  |  | (Registrant)   |  |                                           
|                  |  |                |  |                                           
|                  |  |                |  | By:                                       
|                  |  |                |  |                                           
|February 13, 2004 |  |                |  | /S/ WILLIAM A. MCDONNELL                  
|                  |  |                |  |                                           
|Date              |  |                |  | (Signature)                               
|                  |  |                |  | William A. McDonnell                      
|                  |  |                |  | Vice President and Chief Financial Officer
|                  |  |                |  |                                           
|                  |  |                |  | By:                                       
|                  |  |                |  |                                           
|February 13, 2004 |  |                |  | /S/ JOHN A. LOMBARDI                      
|                  |  |                |  |                                           
|Date              |  |                |  | (Signature)                               
|                  |  |                |  | John A. Lombardi                          
|                  |  |                |  | Chief Accounting Officer and Controller   

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EXHIBIT INDEX

|      |  |                                                                                                                                                                                                                                                                     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.   |  | Exhibit Name                                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                     
|3.1   |  | Articles of Incorporation of Rent-Way, Inc., as amended (incorporated by reference to Exhibit
3.1 to the Companys Annual Report on Form 10-K for the year ended September 30, 1997, filed
November 6, 1997.)                                                       
|      |  |                                                                                                                                                                                                                                                                     
|3.2   |  | Statement with Respect to Shares of Series A Convertible Preferred Stock of the Company dated
May 30, 2003 (incorporated by reference to exhibit 3.1 to Amendment No. 5 to the Companys
registration statement on Form S-3, No. 333-102525 filed on June 25, 2003).
|      |  |                                                                                                                                                                                                                                                                     
|3.3   |  | Bylaws of Rent-Way, Inc., as amended (incorporated by reference to Exhibit 3.2 to the
Companys Annual Report on Form 10-K for the year ended September 30, 2000, filed July 2,
2001.)                                                                              
|      |  |                                                                                                                                                                                                                                                                     
|31.1* |  | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                     
|31.2* |  | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                     
|32.1* |  | Certification pursuant to Section 906 of Sarbanes-Oxley Action of 2002                                                                                                                                                                                              



---

|*Filed herewith.
|----------------

33