##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    no. 1-14537
 Lodgian, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

52-2093696(State or other jurisdiction
    of

(I.R.S. Employerincorporation or organization)

Identification No.)3445 Peachtree Road N.E., Suite 700

30326Atlanta, GA

(Zip Code)(Address of principal executive
    offices)   Registrants telephone
    number, including area code:
 (404) 364-9400
  Securities registered pursuant
    to Section 12(b) of the Act
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value per share

American Stock Exchange   Securities registered pursuant
    to Section 12(g) of the Act
 Title of Each
    Class
 Class A warrants
 Class B warrants
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12-b-2 o þ
    þ o
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





LODGIAN,
    INC.Form 10-K
    For the Year Ended December 31, 2007
    TABLE OF CONTENTS
  PagePART I.Item 1.


Business

1Item 1A.


Risk Factors

14Item 1B.


Unresolved Staff Comments

23Item 2.


Properties

23Item 3.


Legal Proceedings

24Item 4.


Submission of Matters to a Vote of Security
    Holders

24PART II.Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

24Item 6.


Selected Financial Data

28Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation

29Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk

56Item 8.


Financial Statements and Supplementary Data

57Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

57Item 9A.


Controls and Procedures

57PART III.Item 10.


Directors, Executive Officers and Corporate
    Governance

59Item 11.


Executive Compensation

59Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters

59Item 13.


Certain Relationships, Related Transactions and
    Director Independence

59Item 14.


Principal Accountant Fees and Services

59PART IV.Item 15.


Exhibits, Financial Statement Schedules

59Signatures

60EX-21 SUBSIDIARIES OF LODGIAN, INC.EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO




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##### Table of Contents



PART I  Item 1.
    Business  When we use the terms Lodgian, we,
    our, and us, we mean Lodgian, Inc. and
    its subsidiaries.
  Our
    Company
    
    45 hotels that we wholly own and operate through
    subsidiaries; and
    one hotel that we operate in a joint venture in the form of a
    limited partnership, in which a Lodgian subsidiary serves as the
    general partner, has a 50% voting interest and exercises
    significant control.      Our
    Operations
  day-to-day
   1




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Corporate
    History
             2




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Franchise
    Affiliations
            
    Six hotels are in non-compliance or failure of the franchise
    agreements because of substandard guest satisfaction scores or
    failed operational reviews, but are being granted additional
    time to cure these low scores by the franchisors. If the Company
    does not achieve scores above the required thresholds by the
    designated dates, these hotels could be subject to subsequent
    default and termination notices on the franchise agreements. Two
    of these six hotels are held for sale as of March 1, 2008. 3




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
    One hotel is in default of the franchise agreement for failure
    to complete a Property Improvement Plan. If the Company does not
    cure the default by June 30, 2008, the hotels
    franchise agreement could be terminated by the franchisor.
    However, the Company has met with the franchisor and is planning
    capital improvements to improve guest satisfaction for which the
    franchisor is expected to extend the default cure period. This
    hotel is held for sale as of March 1, 2008.
    One hotel is in default because of substandard guest
    satisfaction scores. However, the franchisor has granted a
    six-month extension, following the completion of major guest
    room renovations.        Sales and
    Marketing
        on-site on-site 35-50
 4




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Joint
    Ventures
      Competition
    and Seasonality
        The
    Lodging Industry
      Chain-Scale
    Segmentation
   5




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
    Upper Upscale (Hilton and Marriott);
    Upscale (Courtyard by Marriott, Crowne Plaza, Four Points by
    Sheraton, Radisson, Residence Inn by Marriott, SpringHill Suites
    by Marriott and Wyndham);
    Midscale with Food & Beverage (Holiday Inn, Holiday
    Inn Select); and
    Midscale without Food & Beverage (Fairfield Inn by
    Marriott and Holiday Inn Express);    Properties
  day-to-day
  Portfolio
    Year ofRoom Count




Last Major Renovation orFranchisor/Hotel Name

Held for Use


Held for Sale


Total


Location

ConstructionInterContinental Hotels Group PLC (IHG)Crowne Plaza Albany


384







384


Albany, NY

2001Crowne Plaza Houston


294







294


Houston, TX

1999Crowne Plaza Melbourne


270







270


Melbourne, FL

2006Crowne Plaza Phoenix Airport


299







299


Phoenix, AZ

2004Crowne Plaza Pittsburgh


193







193


Pittsburgh, PA

2001Crowne Plaza Silver Spring


231







231


Silver Spring, MD

2005Crowne Plaza West Palm Beach (50% owned)


219







219


West Palm Beach, FL

2005Crowne Plaza Worcester






243



243


Worcester, MA

1996Holiday Inn BWI Airport


260







260


Baltimore, MD

Planning and DiligenceHoliday Inn Cromwell Bridge






139



139


Cromwell Bridge, MD

2000Holiday Inn East Hartford






130



130


East Hartford, CT

2000Holiday Inn Frederick






158



158


Frederick, MD

2000Holiday Inn Frisco






217



217


Frisco, CO

1997Holiday Inn Glen Burnie North






127



127


Glen Burnie, MD

2000Holiday Inn Hilton Head


202







202


Hilton Head, SC

2001Holiday Inn Inner Harbor


375







375


Baltimore, MD

Planning and DiligenceHoliday Inn Marietta(1)


193







193


Marietta, GA

2003Holiday Inn Meadowlands


138







138


Pittsburgh, PA

2005Holiday Inn Monroeville


187







187


Monroeville, PA

2005 6




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##### Table of Contents



Year ofRoom Count




Last Major Renovation orFranchisor/Hotel Name

Held for Use


Held for Sale


Total


Location

ConstructionHoliday Inn Myrtle Beach


133







133


Myrtle Beach, SC

2006Holiday Inn Phoenix West






144



144


Phoenix, AZ

2003Holiday Inn Santa Fe


130







130


Santa Fe, NM

2003Holiday Inn Express Palm Desert


129







129


Palm Desert, CA

2003Holiday Inn Select Strongsville


303







303


Cleveland, OH

2005Holiday Inn Select Windsor






214



214


Windsor, Ontario

2004Total IHG Room Count


3,940



1,372



5,312Total IHG Hotel Count


17



8



25Marriott International Inc.Courtyard by Marriott Abilene


99







99


Abilene, TX

2004Courtyard by Marriott Bentonville


90







90


Bentonville, AR

2004Courtyard by Marriott Buckhead


181







181


Atlanta, GA

2008Courtyard by Marriott Florence


78







78


Florence, KY

2004Courtyard by Marriott Lafayette


90







90


Lafayette, LA

2004Courtyard by Marriott Paducah


100







100


Paducah, KY

2004Courtyard by Marriott Tulsa


122







122


Tulsa, OK

2004Fairfield Inn by Marriott Merrimack


115







115


Merrimack, NH

2002Marriott Denver Airport


238







238


Denver, CO

Being RenovatedResidence Inn by Marriott Dedham


81







81


Dedham, MA

Planning and DiligenceResidence Inn by Marriott Little Rock


96







96


Little Rock, AR

Planning and DiligenceSpringHill Suites by Marriott Pinehurst


107







107


Pinehurst, NC

2007Total Marriott Room Count


1,397







1,397Total Marriott Hotel Count


12







12Hilton Hotels CorporationHilton Columbia


152







152


Columbia, MD

2003Hilton Fort Wayne


244







244


Fort Wayne, IN

Planning and DiligenceHilton Northfield






191



191


Troy, MI

2003Total Hilton Room Count


396



191



587Total Hilton Hotel Count


2



1



3Carlson CompaniesRadisson New Orleans Airport Plaza


244







244


New Orleans, LA

2005Radisson Phoenix


159







159


Phoenix, AZ

2005Total Carlson Room Count


403







403Total Carlson Hotel Count


2







2Starwood Hotels & Resorts Worldwide, Inc.Four Points by Sheraton Philadelphia(2)


190







190


Philadelphia, PA

2008Total Starwood Room Count


190







190Total Starwood Hotel Count


1







1 7




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Year ofRoom Count




Last Major Renovation orFranchisor/Hotel Name

Held for Use


Held for Sale


Total


Location

ConstructionWyndham Hotels and Resorts, LLCWyndham DFW Airport North


282







282


Dallas, TX

Being RenovatedTotal Wyndham Room Count


282







282Total Wyndham Hotel Count


1







1Non-branded hotelsFrench Quarter Suites Memphis






105



105


Memphis, TN

1997Arden Hills/St. Paul Hotel(1)






156



156


St. Paul, MN

1995Total Non-branded Room Count






261



261Total Non-branded Hotel Count






2



2Grand Total Room Count


6,608



1,824



8,432Grand Total Hotel Count


35



11



46     (1)
    
    This hotel is currently closed.(2)
    
    This hotel converted from a DoubleTree Club in January 2008.  Dispositions
    Number ofHotels


Land ParcelsOwned at December 31, 2005


78



1Surrendered to lender in 2006


(2
)


Deeded to the lender in 2006


(1
)


Sold in 2006


(6
)


(1
)Owned at December 31, 2006


69



Sold in 2007


(23
)


Owned at December 31, 2007


46



     Hotel
    data by market segment and region
    Held
    for Use (Continuing Operations)
  
    the Holiday Inn hotel in Marietta, GA is excluded because it was
    closed since 2006 due to a fire that occurred in January 2006;
    the Crowne Plaza Melbourne, FL hotel is excluded because it was
    closed throughout 2005 for hurricane renovations; and
    the Crowne Plaza West Palm Beach, FL hotel is excluded because
    it was closed during most of 2005 for hurricane renovations. 8




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Held
    for Sale (Discontinued Operations)
      Combined
    Continuing and Discontinued Operations  42 hotels
    (excludes the Marietta, Melbourne, West Palm Beach and St. Paul
    hotels)
  2007


2006


2005Upper UpscaleNumber of properties


4



4



4Number of rooms


825



825



825Occupancy


72.4
%


68.3
%


69.7
%Average daily rate

$
118.74


$
113.65


$
101.39RevPAR

$
86.00


$
77.67


$
70.63UpscaleNumber of properties


19



18



18Number of rooms


3,370



3,088



3,088Occupancy


67.2
%


69.7
%


69.1
%Average daily rate

$
105.42


$
103.56


$
94.52RevPAR

$
70.89


$
72.16


$
65.28Midscale with Food & BeverageNumber of properties


16



17



17Number of rooms


3,047



3,329



3,329Occupancy


68.5
%


67.0
%


63.1
%Average daily rate

$
99.20


$
94.57


$
88.73RevPAR

$
67.91


$
63.38


$
55.98Midscale without Food & BeverageNumber of properties


2



2



2Number of rooms


245



245



245Occupancy


58.0
%


58.6
%


62.7
%Average daily rate

$
90.00


$
87.58


$
74.35RevPAR

$
52.24


$
51.34


$
46.63Independent HotelsNumber of properties


1



1



1Number of rooms


105



105



105Occupancy


54.7
%


58.6
%


45.3
%Average daily rate

$
48.36


$
49.77


$
61.80RevPAR

$
26.46


$
29.17


$
27.98All HotelsNumber of properties


42



42



42Number of rooms


7,592



7,592



7,592Occupancy


67.8
%


67.9
%


66.0
%Average daily rate

$
103.38


$
99.68


$
91.95RevPAR

$
70.12


$
67.64


$
60.67  9




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Continuing
    Operations  41 hotels (excludes the Marietta,
    Melbourne and West Palm Beach hotels, and 2 hotels held for sale
    as of December 31, 2007).
  2007


2006


2005Upper UpscaleNumber of properties


4



4



4Number of rooms


825



825



825Occupancy


72.4
%


68.3
%


69.7
%Average daily rate

$
118.74


$
113.65


$
101.39RevPAR

$
86.00


$
77.67


$
70.63UpscaleNumber of properties


19



18



18Number of rooms


3,370



3,088



3,088Occupancy


67.2
%


69.7
%


69.1
%Average daily rate

$
105.42


$
103.56


$
94.52RevPAR

$
70.89


$
72.16


$
65.28Midscale with Food & BeverageNumber of properties


15



16



16Number of rooms


2,889



3,171



3,171Occupancy


68.8
%


67.1
%


62.9
%Average daily rate

$
100.58


$
95.51


$
89.73RevPAR

$
69.19


$
64.07


$
56.46Midscale without Food & BeverageNumber of properties


2



2



2Number of rooms


245



245



245Occupancy


58.0
%


58.6
%


62.7
%Average daily rate

$
90.00


$
87.58


$
74.35RevPAR

$
52.24


$
51.34


$
46.63IndependentNumber of properties


1



1



1Number of rooms


105



105



105Occupancy


54.7
%


58.6
%


45.3
%Average daily rate

$
48.36


$
49.77


$
61.80RevPAR

$
26.46


$
29.17


$
27.98All HotelsNumber of properties


41



41



41Number of rooms


7,434



7,434



7,434Occupancy


67.9
%


67.9
%


66.0
%Average daily rate

$
104.01


$
100.19


$
92.43RevPAR

$
70.66


$
68.03


$
60.97       
    Northeast:  Canada, Connecticut, Massachusetts,
    Maryland, New Hampshire, New York, Ohio, Pennsylvania;
    Southeast:  Florida, Georgia, Kentucky, Louisiana,
    North Carolina, South Carolina, Tennessee;
    Midwest:  Arkansas, Indiana, Michigan, Oklahoma,
    Texas; and
    West:  Arizona, California, Colorado, New Mexico. 10




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Combined
    Continuing and Discontinued Operations  42 hotels
    (excludes the Marietta, Melbourne, West Palm Beach and St. Paul
    hotels)
  2007


2006


2005Northeast RegionNumber of properties


18



18



18Number of rooms


3,621



3,621



3,621Occupancy


67.9
%


66.9
%


66.1
%Average daily rate

$
104.36


$
102.08


$
95.69RevPAR

$
70.88


$
68.32


$
63.22Southeast RegionNumber of properties


9



9



9Number of rooms


1,240



1,240



1,240Occupancy


66.7
%


69.5
%


63.4
%Average daily rate

$
103.17


$
104.73


$
97.14RevPAR

$
68.79


$
72.77


$
61.55Midwest RegionNumber of properties


8



8



8Number of rooms


1,415



1,415



1,415Occupancy


63.2
%


68.0
%


66.7
%Average daily rate

$
98.27


$
89.23


$
83.11RevPAR

$
62.11


$
60.70


$
55.43West RegionNumber of properties


7



7



7Number of rooms


1,316



1,316



1,316Occupancy


73.6
%


68.7
%


67.4
%Average daily rate

$
105.80


$
99.58


$
86.69RevPAR

$
77.90


$
68.41


$
58.45All HotelsNumber of properties


42



42



42Number of rooms


7,592



7,592



7,592Occupancy


67.8
%


67.9
%


66.0
%Average daily rate

$
103.38


$
99.68


$
91.95RevPAR

$
70.12


$
67.64


$
60.67  11




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Continuing
    Operations  41 hotels (excludes the Marietta,
    Melbourne and West Palm Beach hotels, and 2 hotels held for sale
    as of December 31, 2007).
  2007


2006


2005Northeast RegionNumber of properties


17



17



17Number of rooms


3,463



3,463



3,463Occupancy


68.2
%


67.0
%


66.0
%Average daily rate

$
105.74


$
103.28


$
96.88RevPAR

$
72.08


$
69.17


$
63.99Southeast RegionNumber of properties


9



9



9Number of rooms


1,240



1,240



1,240Occupancy


66.7
%


69.5
%


63.4
%Average daily rate

$
103.17


$
104.73


$
97.14RevPAR

$
68.79


$
72.77


$
61.55Midwest RegionNumber of properties


8



8



8Number of rooms


1,415



1,415



1,415Occupancy


63.2
%


68.0
%


66.7
%Average daily rate

$
98.27


$
89.23


$
83.11RevPAR

$
62.11


$
60.70


$
55.43West RegionNumber of properties


7



7



7Number of rooms


1,316



1,316



1,316Occupancy


73.6
%


68.7
%


67.4
%Average daily rate

$
105.80


$
99.58


$
86.69RevPAR

$
77.90


$
68.41


$
58.45All HotelsNumber of properties


41



41



41Number of rooms


7,434



7,434



7,434Occupancy


67.9
%


67.9
%


66.0
%Average daily rate

$
104.01


$
100.19


$
92.43RevPAR

$
70.66


$
68.03


$
60.97   Hotel
    Encumbrances
    Insurance
    
    general liability;
    property damage and business interruption (including coverage
    for terrorism);
    flood;
    directors and officers liability;
    liquor liability; 12




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
    workers compensation;
    fiduciary liability;
    business automobile;
    environmental; and
    employment practices liability insurance.      Regulation
          Employees
   13




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Legal
    Proceedings
          SEC
    Filings and Financial Information
  Form 10-K, Form 10-Q, Form 8-K,
  1-800-SEC-0330. (http://www.sec.gov)
  page F-1.
  Item 1A.
    Risk
    Factors    
    The effects of regional, national and international economic
    conditions;
    Competitive conditions in the lodging industry and increases in
    room supply;
    The effects of actual and threatened terrorist attacks and
    international conflicts in the Middle East and elsewhere, and
    their impact on domestic and international travel;
    The effectiveness of changes in management and our ability to
    retain qualified individuals to serve in senior management
    positions;
    Requirements of franchise agreements, including the right of
    franchisors to immediately terminate their respective agreements
    if we breach certain provisions;
    Our ability to complete planned hotel dispositions;
    Seasonality of the hotel business;
    The effects of unpredictable weather events such as hurricanes; 14




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
    The financial condition of the airline industry and its impact
    on air travel;
    The effect that Internet reservation channels may have on the
    rates that we are able to charge for hotel rooms;
    Increases in the cost of debt and our continued compliance with
    the terms of our loan agreements;
    The effect of self-insured claims in excess of our reserves, or
    our ability to obtain adequate property and liability insurance
    to protect against losses, or to obtain insurance at reasonable
    rates;
    Potential litigation
    and/or
    governmental inquiries and investigations;
    Laws and regulations applicable to our business, including
    federal, state or local hotel, resort, restaurant or land use
    regulations, employment, labor or disability laws and
    regulations;
    A downturn in the economy due to several factors, including but
    not limited to, high energy costs, natural gas and gasoline
    prices; and
    The risks identified below under Risks Related to Our
    Business and Risks Related to Our Common Stock.      Risks
    Related to Our Business
  We may
    not be able to meet the requirements imposed by our franchisors
    in our franchise agreements and therefore could lose the right
    to operate one or more hotels under a national
    brand.
        
    multiple franchise agreement defaults and the continuance
    thereof beyond all notice and grace periods for hotels whose
    allocated loan amounts total 10% or more of the outstanding
    principal amount of such Refinancing Debt;
    either the termination of franchise agreements for more than one
    property or the termination of franchise agreements for hotels
    whose allocated loan amounts represent more than 5% of the
    outstanding principal amount of the fixed rate loan, and such
    hotels continue to operate for more than five consecutive days
    without being subject to replacement franchise
    agreements; or 15




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
    a franchise termination for any hotel currently subject to a
    franchise agreement that remains without a franchise agreement
    for more than six months.        Hotels
    typically require a higher level of capital expenditures,
    maintenance and repairs than other building types. If we are not
    able to meet the requirements of our hotels appropriately, our
    business and operating results will suffer.
  and/or
  Most
    of our hotels are pledged as collateral for mortgage loans, and
    we have a significant amount of debt that could limit our
    operational flexibility or otherwise adversely affect our
    financial condition. In addition, market conditions may limit
    our ability to refinance on favorable terms or at
    all.
    
    We may not be able to repay or refinance our maturing
    indebtedness on favorable terms or at all. If we are unable to
    refinance or extend the maturity of our maturing indebtedness,
    we may not otherwise be able to repay such indebtedness. Debt
    defaults could lead us to sell one or more of our hotels on
    unfavorable terms or, in the case of secured debt, to convey the
    mortgaged hotel(s) to the lender, causing a loss of any
    anticipated income and cash flow from, and our invested capital
    in, such hotel(s);
    38 of our consolidated hotels are pledged as collateral for
    existing mortgage loans as of December 31, 2007. These 38
    hotels represented 85.2% of the book value of our consolidated
    property and equipment, net, as of December 31, 2007. As a
    result, we have limited flexibility to sell our hotels to
    satisfy cash needs;
    Increased vulnerability to downturns in our business, the
    lodging industry and the general economy;
    Our ability to obtain other financing to fund future working
    capital, capital expenditures and other general corporate
    requirements may be limited;
    Our cash flow from operations may be insufficient to make
    required debt service payments, and we may be required to
    dedicate a substantial portion of our cash flow from operations
    to debt service payments, reducing the availability of our cash
    flow to fund working capital, capital expenditures, and other
    needs and placing us at a competitive disadvantage with other
    companies that have greater resources
    and/or less
    debt; and 16




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
    Our flexibility in planning for, or reacting to, changes in our
    business and industry may be restricted, placing us at a
    competitive disadvantage to our competitors that may have
    greater financial strength than we have.  The
    terms of our debt instruments place many restrictions on us,
    which reduce operational flexibility and create default
    risks.
    Increases
    in interest rates could have an adverse effect on our cash flow
    and interest expense.
    To
    service our indebtedness, we require a significant amount of
    cash. Our ability to generate cash depends on many factors
    beyond our control and a cash shortfall could adversely affect
    our ability to fund our operations, planned capital expenditures
    and other needs.
    
    Dependence on business and leisure travelers, who have been and
    continue to be affected by threats of terrorism, or other
    outbreaks of hostilities, and new laws to counter terrorism
    which result to some degree in a reduction of foreign travelers
    visiting the U.S.;
    Cyclical overbuilding in the lodging industry;
    Varying levels of demand for rooms and related services;
    Competition from other hotels, motels and recreational
    properties, some of which may be owned or operated by companies
    having greater marketing and financial resources than we have;
    Effects of economic and market conditions;
    Decreases in air travel;
    Fluctuations in operating costs;
    Changes in governmental laws and regulations that influence or
    determine wages or required remedial expenditures;
    Natural disasters, including, but not limited to hurricanes; 17




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##### Table of Contents




    Changes in interest rates and changes in the availability, cost
    and terms of credit; and
    The perception of the lodging industry and lodging companies in
    the debt and equity markets.  The
    value of our hotels and our ability to repay or refinance our
    debt are dependent upon the successful operation and cash flows
    of the hotels.
      
    general market conditions;
    the markets perception of our growth potential;
    our current debt levels and property encumbrances;
    our current and expected future earnings;
    our cash flow and cash needs; and
    the market price per share of our common stock.  If we
    are not able to execute our strategic initiatives, we may not be
    able to improve our financial performance.
    We
    have a history of significant losses and we may not be able to
    successfully improve our performance to achieve
    profitability.
  and/or
 18




---



##### Table of Contents



Force
    majeure events, including natural disasters, acts and threats of
    terrorism, the ongoing war against terrorism, military conflicts
    and other factors have had and may continue to have a negative
    effect on the lodging industry and our results of
    operations.
    Our
    expenses may remain constant or increase even if revenues
    decline.
    
    Rising interest rates;
    Tightening of funding available to the lodging industry on
    favorable terms, or at all;
    Rising energy costs, gasoline or heating fuel supply shortages;
    Rising insurance premiums;
    Rising property tax expenses;
    Increase in labor and related costs; and
    Changes in, and as a result, increases in the cost of compliance
    with new governmental regulations, including those governing
    environmental, usage, zoning and tax matters.  We may
    make acquisitions or investments that are not successful and
    that adversely affect our ongoing operations.
    
    Significant errors or miscalculations in identifying suitable
    acquisition or investment candidates, performing appropriate due
    diligence, identifying potential liabilities and negotiating
    favorable terms;
    Reducing our working capital and hindering our ability to expand
    or maintain our business, including making capital expenditures
    and funding operations;
    The potential distraction of our management, diversion of our
    resources and disruption of our business;
    Overpaying by competing for acquisition opportunities with
    resourceful competitors;
    Inaccurate forecasting of the financial impact of an acquisition
    or investment; and
    Failure to effectively integrate acquired companies or
    investments into our Company and the resultant inability to
    achieve expected synergies. 19




---



##### Table of Contents



Losses
    may exceed our insurance coverage or estimated reserves, which
    could impair our results of operations, financial condition and
    liquidity.
      
    the insurance coverages that we have obtained will fully protect
    us against insurable losses (i.e., losses may exceed coverage
    limits); or,
    we will not incur losses from risks that are not insurable or
    that are not economically insurable.    Competition
    in the lodging industry could have a material adverse effect on
    our business and results of operations.
    Adverse
    conditions in major metropolitan markets in which we do
    substantial business could negatively affect our results of
    operations.
    The
    lodging business is seasonal.
   20




---



##### Table of Contents



We are
    exposed to potential risks of brand concentration.
    We
    have experienced significant changes in our senior management
    team and Board of Directors.
      Our
    success is dependent on recruiting and retaining high caliber
    key personnel.
    The
    increasing use of third-party travel websites by consumers may
    adversely affect our profitability.
    We
    will be unable to utilize all of our net operating loss
    carryforwards.
    Many
    aspects of our operations are subject to government regulations,
    and changes in these regulations may adversely affect our
    results of operations and financial condition.
   21




---



##### Table of Contents



Costs
    of compliance with environmental laws and regulations could
    adversely affect operating results.
                A
    downturn in the economy due to high energy costs and gasoline
    prices could negatively impact our financial performance, our
    customer guest satisfaction scores and customer service
    levels.
   22




---



##### Table of Contents



Risks
    Related to Our Common Stock
  Our
    stock price may be volatile.
    
    Actual or anticipated variations in our results of operations;
    Announcements of new services or products or significant price
    reductions by us or our competitors;
    Market performance by our competitors;
    Future issuances of our common stock, or securities convertible
    into or exchangeable or exercisable for our common stock, by us
    directly, or the perception that such issuances are likely to
    occur;
    Sales of our common stock by stockholders or the perception that
    such sales may occur in the future;
    The size of our market capitalization;
    Loss of our franchises;
    Default on our indebtedness
    and/or
    foreclosure of our properties;
    Changes in financial estimates by securities analysts; and
    Domestic and international economic, legal and regulatory
    factors unrelated to our performance.  We may
    never pay dividends on our common stock, in which event our
    stockholders only return on their investment, if any, will
    occur on the sale of our common stock.
    Our
    charter documents, employment contracts and Delaware law may
    impede attempts to replace or remove our management or inhibit a
    takeover, which could adversely affect the value of our common
    stock.
    
    Authorizing the issuance of preferred stock, the terms of which
    may be determined at the sole discretion of the board of
    directors;
    Establishing advance notice requirements for nominations for
    election to the board of directors or for proposing matters that
    can be acted on by stockholders at meetings; and
    Requiring all stockholder action to be taken at a duly called
    meeting, not by written consent.    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   23




---



##### Table of Contents



Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Historical
    Data
    2006High


LowFirst Quarter

$
13.93


$
10.69Second Quarter

$
14.25


$
10.92Third Quarter

$
14.21


$
11.61Fourth Quarter

$
15.66


$
12.79   2007High


LowFirst Quarter

$
14.40


$
11.98Second Quarter

$
15.41


$
13.05Third Quarter

$
15.50


$
10.14Fourth Quarter

$
12.63


$
11.05   2008High


LowFirst Quarter (up to March 1, 2008)

$
11.11


$
8.45       Stock
    Repurchase Programs
     24




---



##### Table of Contents



Stock
    Awards
              Equity
    Compensation Plan Information
    Number ofNumber of





Securities RemainingSecurities to be


Weighted-Average


Available for FutureIssued Upon


Exercise Price of


Issuance UnderExercise


Outstanding


Equity Compensationof Outstanding


Options,


Plans (ExcludingOptions, Warrants


Warrants and


Securities Reflectedand Rights (1)


Rights


in Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


212,408
(1)(2)


10.60



2,536,666(2
)Equity compensations plans not approved by security holders










     (1)
    
    Column (a) excludes Class B warrants which are not a
    component of the Equity Compensation Plan.(2)
    
    All of the awards have been granted under the Stock Incentive
    Plan.(3)
    
    After taking into account the outstanding options, the exercised
    options and the shares of nonvested common stock, we have
    2,536,666 shares of common stock available for grant under
    the Stock Incentive Plan.   25




---



##### Table of Contents



:
  Available under the plan, less previously issued as of
    December 31, 2006


2,568,029Nonvested stock issued January 26, 2007


(63,000
)Nonvested stock issued February 12, 2007


(46,000
)Nonvested stock issued March 30, 2007


(18,800
)Shares of nonvested stock withheld from awards to satisfy tax
    withholding obligations


6,989Nonvested shares forfeited in 2007


9,629Stock options forfeited in 2007


79,819Available for issuance, December 31, 2007


2,536,666   Treasury
    Stock Repurchases
    Total Number of


Maximum Dollar Amount ofShares Purchased as


Shares That May Yet BeTotal Number of


Average Price


Part of Publicly


Purchased Under theShares


Paid per Share


Announced Plans or


Publicly Announced Plans orPeriod

Purchased(1)


(2)


Programs


ProgramsOctober 2007


228,715


$
12.17



228,715


$
22,162,687.02November 2007


315,242


$
11.49



315,242


$
18,541,281.12December 2007


319,808


$
11.73



319,808


$
14,800,275.17863,765


$
11.81



863,765     (1)
    
    The total number of shares purchased includes:  (a)
    
    shares purchased pursuant to the August 2007 share
    repurchase program, which granted a maximum of $30 million
    of repurchase authority expiring in August 2009, and(b)
    
    shares surrendered to the Company to satisfy tax withholding
    obligations in connection with the Stock Incentive Plan, of
    which there were none in October, November and December 2007.  (2)
    
    The average price paid per share excludes commissions. 26




---



##### Table of Contents



Performance
    Graph
      
   1/28/03


12/03


12/04


12/05


12/06


12/07Lodgian, Inc.



100.00




99.06




77.36




67.48




85.53




70.82Dow Jones Wilshire 5000



100.00




134.81




151.82




161.42




187.05




197.78Dow Jones US Hotels



100.00




151.78




221.79




242.09




309.16




262.09  27




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Selected
    Consolidated Financial Data
      Form 10-K.
  Form 10-K, page F-1.
  (In thousands, except per-share data)2007


2006


2005


2004


2003Income statement data:Revenues  continuing operations

$
278,079


$
261,785


$
222,762


$
217,189


$
210,089Revenues  discontinued operations


40,071



89,986



117,465



143,119



162,462Revenues  continuing and discontinued operations


318,150



351,771



340,227



360,308



372,551(Loss) income  continuing operations


(9,926
)


(10,267
)


10,836



(27,383
)


(16,140
)Income (loss)  discontinued operations


1,480



(4,909
)


1,465



(4,451
)


(15,537
)Net (loss) income


(8,446
)


(15,176
)


12,301



(31,834
)


(31,677
)Net (loss) income attributable to common stock


(8,446
)


(15,176
)


12,301



(31,834
)


(39,271
)(Loss) income from continuing operations attributable to common
    stock before discontinued operations


(9,926
)


(10,267
)


10,836



(27,383
)


(23,734
)Basic (loss) earnings per common share:(Loss) income  continuing operations


(0.41
)


(0.42
)


0.44



(1.98
)


(6.92
)Income (loss)  discontinued operations


0.06



(0.20
)


0.06



(0.32
)


(6.66
)Net (loss) income


(0.35
)


(0.62
)


0.50



(2.30
)


(13.58
)Net (loss) income attributable to common stock


(0.35
)


(0.62
)


0.50



(2.30
)


(16.83
)(Loss) income from continuing operations attributable to common
    stock before discontinued operations


(0.41
)


(0.42
)


0.44



(1.98
)


(10.17
)Diluted (loss) earnings per common share:(Loss) income  continuing operations


(0.41
)


(0.42
)


0.44



(1.98
)


(6.92
)Income (loss)  discontinued operations


0.06



(0.20
)


0.06



(0.32
)


(6.66
)Net (loss) income


(0.35
)


(0.62
)


0.50



(2.30
)


(13.58
)Net (loss) income attributable to common stock


(0.35
)


(0.62
)


0.50



(2.30
)


(16.83
)(Loss) income from continuing operations attributable to common
    stock before discontinued operations


(0.41
)


(0.42
)


0.44



(1.98
)


(10.17
)Basic weighted average shares


24,292



24,617



24,576



13,817



2,333Diluted weighted average shares


24,292



24,617



24,630



13,817



2,333 28




---



##### Table of Contents



(In thousands, except per-share data)2007


2006


2005


2004


2003Balance sheet data (at period end):Total assets

$
624,730


$
699,158


$
726,685


$
723,648


$
709,460Assets held for sale


8,009



89,437



14,866



30,559



68,617Long-term liabilities


355,728



292,301



394,432



393,143



551,292Liabilities related to assets held for sale


961



68,351



4,610



30,572



57,998Total liabilities


404,142



446,122



466,424



495,385



666,534Total stockholders equity


220,588



242,114



249,044



226,634



40,606   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  You should read the discussion below in conjunction with the
    consolidated financial statements and accompanying notes. Also,
    the discussion which follows contains forward-looking statements
    which involve risks and uncertainties. Our actual results could
    differ materially from those anticipated in these
    forward-looking statements as a result of various factors,
    including those discussed above under the caption Risk
    Factors.
  Executive
    Summary
    Held for Use


Held for Sale


TotalHotel count in portfolio as of December 31, 2007(a)


44



2



46Reclassified to held for sale from January 1, 2008 to
    March 1, 2008


(9
)


9



Hotel count in portfolio as of March 1, 2008


35



11



46     (a)
    
    Includes 2 hotels which are closed.  Overview
    of Continuing Operations
    
    Revenues increased $16.3 million, or 6.2%. Rooms revenues
    increased $10.5 million, or 5.3%, as ADR rose 3.8% and
    occupancy grew 1.5%. Food and beverage revenues increased
    $5.1 million, or 9.2%, boosted by the successful
    implementation of our food and beverage and profitability
    initiatives.
    Operating income declined $4.2 million. Impairment charges
    increased $6.1 million. Of this amount, $5.2 million
    was related to the write-down of three of the nine hotels that
    we identified for sale in December 2007 to their estimated fair
    values. Since the assets did not meet the held for sale criteria
    of SFAS No. 144 until January 2008, the assets
    remained in our held for use portfolio as of December 31,
    2007. Accordingly, the impairment charge was recorded in
    continuing operations in 2007. Casualty gains decreased
    $1.0 million due to the wind-down of our insurance claim
    activity related to our hurricane-damaged hotels. Additionally,
    the Company incurred a $1.2 million restructuring charge in
    2007 in conjunction with a cost-saving initiative to improve
    future profitability. These factors more than offset our
    improved operating performance driven by 29




---



##### Table of Contents



sales and profitability initiatives. We also benefited from a
    $1.2 million reduction in the provision for our
    self-insured workers compensation, general liability and
    automobile programs. The reduction, which was allocated to
    several line items in our statement of operations based on the
    underlying cost, resulted primarily from lower expenditures than
    previously estimated.  Overview
    of Discontinued Operations
              Critical
    Accounting Policies and Estimates
    Consolidation policy 
   30




---



##### Table of Contents



Deferral policy 
  Asset impairment 
                  Accrual of self-insured obligations 
 31




---



##### Table of Contents



Income
    Statement Overview
    Revenues
    
    Room revenues  derived from guest room rentals;
    Food and beverage revenues  derived from hotel
    restaurants, room service, hotel catering and meeting room
    rentals; and
    Other revenues  derived from guests
    long-distance telephone usage, laundry services, parking
    services, in-room movie services, vending machine commissions,
    leasing of hotel space and other miscellaneous revenues.      
    Occupancy  computed by dividing total room nights
    sold by the total available room nights;
    Average Daily Rate (ADR)  computed by dividing total
    room revenues by total room nights sold; and
    Revenue per available room (RevPAR)  computed by
    dividing total room revenues by total available room nights.
    RevPAR can also be obtained by multiplying the occupancy by the
    ADR.
    RevPAR Index  computed by dividing Lodgians
    RevPAR performance by the industry (or market) RevPAR
    performance which is a measure of market share.  ,
   32




---



##### Table of Contents



Operating
    expenses
    
    Direct operating expenses  these expenses tend to
    vary with available rooms and occupancy. However, hotel level
    expenses contain significant elements of fixed costs and,
    therefore, do not decline proportionately with revenues. Direct
    expenses are further categorized as follows:  
    Room expenses  expenses incurred in generating room
    revenues;
    Food and beverage expenses  expenses incurred in
    generating food and beverage revenues; and
    Other direct expenses  expenses incurred in
    generating the revenue activities classified in other
    revenue;  and/or
  
    Other hotel operating expenses  these expenses
    include salaries for hotel management, advertising and
    promotion, franchise fees, repairs and maintenance and utilities;
    Property and other taxes, insurance and leases  these
    expenses include equipment, ground and building rentals,
    insurance, and property, franchise and other taxes;
    Corporate and other  these expenses include corporate
    salaries and benefits, legal, accounting and other professional
    fees, directors fees, costs for office space and
    information technology costs. Also included are costs related to
    compliance with Sarbanes-Oxley legislation;
    Casualty (gains) losses, net   these expenses include
    hurricane and other repair costs and charges related to the
    assets written off that were damaged, netted against any gains
    realized on the final settlement of property damage claims;
    Depreciation and amortization  depreciation of fixed
    assets (primarily hotel assets) and amortization of deferred
    franchise fees; and
    Impairment of long-lived assets  charges which were
    required to write down the carrying values of long-lived assets
    to their fair values on assets where the estimated undiscounted
    cash flows over the life of the asset were less than the
    carrying value of the asset.  Non-operating
    items
    
    Business interruption insurance proceeds represent insurance
    proceeds for lost profits as a result of a business shutdown.
    Our 2007 business interruption proceeds relate primarily to the
    recovery of lost profits and reimbursement for additional
    expenses incurred at the Holiday Inn Hotel & Suites
    Marietta, which was closed as a result of a fire in January 2006.
    Interest expense and other financing costs represent interest
    expense, which includes amortization of deferred loan costs; 33




---



##### Table of Contents




    Interest income;
    Minority interests  our equity partners share
    of the income or loss of the hotel owned by joint venture that
    we consolidate.  Results
    of Operations  Continuing Operations
  Results
    of operations for the twelve months ended December 31, 2007
    and December 31, 2006
  Revenues 
    Continuing Operations
  Increase2007


2006


(decrease)($ in thousands)Revenues:Rooms

$
208,222


$
197,719


$
10,503



5.3
%Food and beverage


60,898



55,792



5,106



9.2
%Other


8,959



8,274



685



8.3
%Total revenues


278,079



261,785


$
16,294



6.2
%Occupancy


68.4
%


67.5
%






1.5
%ADR

$
105.29


$
101.47


$
3.81



3.8
%RevPAR

$
72.00


$
68.45


$
3.55



5.2
%        34




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##### Table of Contents



Hotel


Room










IncreaseCount


Count




2007


2006


(decrease)43



7,923


All Continuing Operations less one hotel closed in 2006 due
    to fireOccupancy


68.4
%


67.4
%






1.5
%ADR

$
105.29


$
101.54


$
3.75



3.7
%RevPAR

$
72.00


$
68.48


$
3.52



5.1
%RevPAR Index


99.3
%


98.4
%






0.9
%36



6,419


Continuing Operations less one hotel closed in 2006 due to
    fire and hotels under renovation in 2006 and 2007Occupancy


69.7
%


66.9
%






4.2
%ADR

$
103.56


$
101.06


$
2.50



2.5
%RevPAR

$
72.22


$
67.64


$
4.58



6.8
%RevPAR Index


102.3
%


99.6
%






2.7
%10



2,259


Hotels completing major renovations in 2005 and 2006Occupancy


71.6
%


65.6
%






9.1
%ADR

$
109.86


$
109.71


$
0.15



0.1
%RevPAR

$
78.63


$
71.98


$
6.65



9.2
%RevPAR Index


97.5
%


93.4
%






4.4
%12



1,398


Marriott HotelsOccupancy


71.1
%


72.5
%






(1.9
)%ADR

$
113.72


$
106.59


$
7.13



6.7
%RevPAR

$
80.81


$
77.31


$
3.50



4.5
%RevPAR Index


112.9
%


114.2
%






(1.1
)%4



777


Hilton HotelsOccupancy


67.2
%


64.7
%






3.9
%ADR

$
107.15


$
104.47


$
2.68



2.6
%RevPAR

$
72.04


$
67.57


$
4.47



6.6
%RevPAR Index


95.1
%


91.3
%






4.2
%23



4,958


IHG Hotels less one hotel closed in 2006 due to fireOccupancy


69.0
%


66.1
%






4.4
%ADR

$
104.95


$
101.49


$
3.46



3.4
%RevPAR

$
72.45


$
67.11


$
5.34



8.0
%RevPAR Index


100.4
%


97.4
%






3.1
%3



685


Other Brands(1)Occupancy


61.6
%


71.0
%






(13.2
)%ADR

$
93.62


$
94.88


$
(1.26
)


(1.3
)%RevPAR

$
57.70


$
67.41


$
(9.71
)


(14.4
)%RevPAR Index


73.2
%


85.9
%






(14.8
)%     (1)
    
    Other Brands include the Wyndham DFW Airport North, which was
    under renovation and brand conversion during 2007 and
    experienced a significant amount of displacement, as well as the
    Radisson New Orleans Airport Hotel in Kenner, LA which,
    experienced a dramatic increase in 2006 (and decrease in
    2007) in occupancy and ADR as a result of Hurricane Katrina. 35




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##### Table of Contents



Direct
    operating expenses  Continuing Operations
  Increase


% of Total Revenues2007


2006


(decrease)


2007


2006($ in thousands)Direct operating expenses:Rooms

$
53,161


$
51,272


$
1,889



3.7
%


19.1
%


19.6
%Food and beverage


41,796



39,623



2,173



5.5
%


15.0
%


15.1
%Other


6,286



6,161



125



2.0
%


2.3
%


2.4
%Total direct operating expenses

$
101,243


$
97,056


$
4,187



4.3
%


36.4
%


37.1
%Direct operating contribution (by revenue source):Rooms

$
155,061


$
146,447


$
8,614



5.9
%Food and beverage


19,102



16,169



2,933



18.1
%Other


2,673



2,113



560



26.5
%Total direct operating contribution

$
176,836


$
164,729


$
12,107



7.3
%Direct operating contribution% (by revenue source):Rooms


74.5
%


74.1
%Food and beverage


31.4
%


29.0
%Other


29.8
%


25.5
%Total direct operating contribution


63.6
%


62.9
%        36




---



##### Table of Contents



Other
    operating expenses  Continuing Operations
  % of Total Revenues2007


2006


Increase (decrease)


2007


2006($ in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative

$
17,459


$
15,650


$
1,809



11.6
%


6.3
%


6.0
%Advertising and promotion


14,828



12,819



2,009



15.7
%


5.3
%


4.9
%Franchise fees


19,761



18,547



1,214



6.5
%


7.1
%


7.1
%Repairs and maintenance


13,017



13,059



(42
)


(0.3
)%


4.7
%


5.0
%Utilities


14,965



14,436



529



3.7
%


5.4
%


5.5
%Other expenses


607



188



419



222.9
%


0.2
%


0.1
%Total other hotel operating expenses


80,637



74,699



5,938



7.9
%


29.0
%


28.5
%Property and other taxes, insurance and leases


20,684



20,793



(109
)


(0.5
)%


7.4
%


7.9
%Corporate and other


21,454



20,760



694



3.3
%


7.7
%


7.9
%Casualty (gains), net


(1,867
)


(2,888
)


1,021



35.4
%


(0.7
)%


(1.1
)%Restructuring


1,232







1,232



n/m



0.4
%


0.0
%Depreciation and amortization


32,145



30,718



1,427



4.6
%


11.6
%


11.7
%Impairment of long-lived assets


6,819



758



6,061



799.6
%


2.5
%


0.3
%Total other operating expenses

$
161,104


$
144,840


$
16,264



11.2
%


57.9
%


55.3
%Total operating expenses

$
262,347


$
241,896


$
20,451



8.5
%


94.3
%


92.4
%Operating income

$
15,732


$
19,889


$
(4,157
)


(20.9
)%


5.7
%


7.6
%     
    General and administrative costs increased $1.8 million. As
    a percent of revenues, general and administrative expenses
    increased 30 basis points in 2007 to 6.3%. The increase was
    due in large part to higher payroll costs (fewer vacant
    positions and higher caliber employees), legal and other
    professional fees, relocation, and travel and training costs.
    Advertising and promotion costs increased $2.0 million, or
    15.7%. As a percentage of revenue, advertising and promotional
    costs increased 40 basis points from 4.9% in 2006 to 5.3%
    in 2007. The increase is largely attributable to staffing
    related to sales and marketing programs designed to drive higher
    revenues.
    Franchise fees increased $1.2 million, or 6.5%, primarily
    as a result of revenue growth. As a percentage of revenues,
    franchise fees remained flat year over year at 7.1%.
    Repairs and maintenance expenses were essentially flat to the
    prior year, resulting from improved preventive maintenance
    programs and the execution of our capital expenditures plan. As
    a percentage of total revenues, repairs and maintenance costs
    decreased 30 basis points from 5.0% in 2006 to 4.7% in 2007.
    Utilities costs increased $0.5 million, or 3.7%. This
    increase is driven largely by higher occupancy. As a percentage
    of total revenues, utilities costs decreased 10 basis
    points to 5.4% in 2007.      
    In January 2007, we announced a review of strategic alternatives
    to enhance shareholder value. During 2007, we incurred
    $1.5 million in related costs. Similar costs were not
    incurred in 2006. 37




---



##### Table of Contents




    $0.4 million related to the amortization of non-vested
    stock awards granted to our Board of Directors in February 2007.
    Two members of the Board did not stand for reelection at the
    April 2007 annual meeting of stockholders. In addition, one
    Board member resigned in August 2007 and another Board member
    resigned in December 2007. The Board of Directors elected to
    accelerate the vesting of the awards for all four of these
    members and the related expense was recorded. The stock awarded
    to the remaining members of our Board of Directors is being
    amortized over a three-year vesting period at an annualized rate
    of $0.1 million.
    These increases in costs were largely offset by lower payroll
    and related expenses primarily as a result of the August 2007
    restructuring plan.          Non-operating
    income (expenses)  Continuing Operations
  2007


2006


Increase (decrease)($ in thousands)Non-operating income (expenses):Business interruption proceeds

$
571


$
3,931


$
(3,360
)


(85.5
)%Interest income and other


4,014



2,607



1,407



54.0
%Interest expense


(26,030
)


(25,348
)


682



2.7
%Loss on debt extinguishment


(3,411
)






3,411



n/mMinority interests


(421
)


295



(716
)


(242.7
)%        38




---



##### Table of Contents



Results
    of operations for the twelve months ended December 31, 2006
    and December 31, 2005
  Revenues 
    Continuing Operations
  2006


2005


Increase (decrease)($ in thousands)Revenues:Rooms

$
197,719


$
168,028


$
29,691



17.7
%Food and beverage


55,792



46,869



8,923



19.0
%Other


8,274



7,865



409



5.2
%Total revenues


261,785



222,762


$
39,023



17.5
%Occupancy


67.5
%


65.9
%






2.4
%ADR

$
101.47


$
91.51


$
9.96



10.9
%RevPAR

$
68.45


$
60.35


$
8.10



13.4
%          39




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##### Table of Contents



Direct
    operating expenses  Continuing Operations
  % of Total Revenues2006


2005


Increase (decrease)


2006


2005($ in thousands)Direct operating expenses:Rooms

$
51,272


$
45,028


$
6,244



13.9
%


19.6
%


20.2
%Food and beverage


39,623



33,114



6,509



19.7
%


15.1
%


14.9
%Other


6,161



6,019



142



2.4
%


2.4
%


2.7
%Total direct operating expenses

$
97,056


$
84,161


$
12,895



15.3
%


37.1
%


37.8
%Direct operating contribution (by revenue source):Rooms

$
146,447


$
123,000


$
23,447



19.1
%Food and beverage


16,169



13,755



2,414



17.5
%Other


2,113



1,846



267



14.5
%Total direct operating contribution

$
164,729


$
138,601


$
26,128



18.9
%Direct operating contribution% (by revenue source):Rooms


74.1
%


73.2
%Food and beverage


29.0
%


29.3
%Other


25.5
%


23.5
%Total direct operating contribution


62.9
%


62.2
%     ramp-up
   40




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##### Table of Contents



Other
    operating expenses  Continuing Operations
  % of Total Revenues2006


2005


Increase (decrease)


2006


2005($ in thousands)Other operating expenses:Other hotel operating costsGeneral and administrative

$
15,650


$
15,110


$
540



3.6
%


6.0
%


6.8
%Advertising and promotion


12,819



11,171



1,648



14.8
%


4.9
%


5.0
%Franchise fees


18,547



15,578



2,969



19.1
%


7.1
%


7.0
%Repairs and maintenance


13,059



11,753



1,306



11.1
%


5.0
%


5.3
%Utilities


14,436



13,215



1,221



9.2
%


5.5
%


5.9
%Other expenses


188



405



(217
)


(53.6
)%


0.1
%


0.2
%Total other hotel operating expenses


74,699



67,232



7,467



11.1
%


28.5
%


30.2
%Property and other taxes, insurance and leases


20,793



16,751



4,042



24.1
%


7.9
%


7.5
%Corporate and other


20,760



20,016



744



3.7
%


7.9
%


9.0
%Casualty (gains) losses, net


(2,888
)


(28,464
)


25,576



89.9
%


(1.1
)%


(12.8
)%Depreciation and amortization


30,718



22,040



8,678



39.4
%


11.7
%


9.9
%Impairment of long-lived assets


758



1,244



(486
)


(39.1
)%


0.3
%


0.6
%Total other operating expenses

$
144,840


$
98,819


$
46,021



46.6
%


55.3
%


44.4
%Total operating expenses

$
241,896


$
182,980


$
58,916



32.2
%


92.4
%


82.1
%Operating income

$
19,889


$
39,782


$
(19,893
)


(50.0
)%


7.6
%


17.9
%     
    Franchise fees increased $3.0 million, or 19.1%, primarily
    as a result of revenue growth. As a percentage of revenues,
    franchise fees increased slightly from 7.0% in 2005 to 7.1% in
    2006.
    Advertising and promotion costs increased $1.6 million, or
    14.8%. As a percentage of revenue, advertising and promotional
    costs declined 10 basis points to 4.9%. Payroll costs were
    up $1.0 million due to the reopening of the West Palm Beach
    and Melbourne, Florida Crowne Plaza hotels as well as increased
    staffing related to marketing and sales programs designed to
    drive higher revenues;
    Repairs and maintenance expenses were increased
    $1.3 million, or 11.1%, primarily because of several large
    repair projects, as well as higher automobile fuel costs
    associated with our fleet of vans. As a percentage of total
    revenues, repairs and maintenance costs decreased 30 basis
    points from 5.3% in 2005 to 5.0% in 2006.
    Utilities costs increased $1.2 million, or 9.2%.
    $0.9 million of the increase was associated with the
    reopening of the Crowne Plaza Hotels in West Palm Beach and
    Melbourne, FL. The remaining increase is driven largely by
    higher occupancy.
    General and administrative costs increased $0.5 million,
    due to the reopening of the West Palm Beach and Melbourne FL,
    Crowne Plaza Hotels. Excluding these two hotels, general and
    administrative costs declined $0.1 million. As a percent of
    revenues, general and administrative expenses declined
    80 basis points in 2006 to 6.0%.     41




---



##### Table of Contents



Non-operating
    income (expenses)  Continuing Operations
  2006


2005


Increase (decrease)($ in thousands)Non-operating income (expenses):Business interruption proceeds

$
3,931


$
9,595


$
(5,664
)


(59.0
)%Interest income and other


2,607



833



1,774



213.0
%Interest expense


(25,348
)


(21,353
)


3,995



18.7
%Minority interests


295



(9,492
)


(9,787
)


(103.1
)%           Results
    of Operations  Discontinued Operations
    
    On January 15, 2007, we sold the University Plaza, a 186
    room hotel located in Bloomington, IN.
    On March 9, 2007, we sold the Holiday Inn, a 130 room hotel
    located in Hamburg, NY. 42




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##### Table of Contents




    On June 13, 2007, we sold the following 16 hotels:  
    Holiday Inn, a 202 room hotel located in Sheffield, AL
    Clarion Hotel, a 393 room hotel located in Louisville, KY
    Crowne Plaza Hotel, a 275 room hotel located in Cedar Rapids, IA
    Augusta West Inn Hotel, a 117 room hotel located in Augusta, GA
    Holiday Inn Hotel, a 201 room hotel located in Greentree, PA
    Holiday Inn Hotel, a 189 room hotel located in Lancaster East, PA
    Holiday Inn Hotel, a 244 room hotel located in Lansing, MI
    Holiday Inn Hotel, a 152 room hotel located in Pensacola, FL
    Holiday Inn Hotel, a 228 room hotel located in Winter Haven, FL
    Holiday Inn Hotel, a 100 room hotel located in York, PA
    Holiday Inn Express Hotel, a 112 room hotel located in Dothan, AL
    Holiday Inn Express Hotel, a 122 room hotel located in
    Pensacola, FL
    Park Inn Hotel, a 126 room hotel located in Brunswick, GA
    Quality Inn Hotel, a 102 room hotel located in Dothan, AL
    Ramada Plaza Hotel, a 297 room hotel located in Macon, GA
    Ramada Inn Hotel, a 197 room hotel located in North Charleston,
    SC  
    On July 12, 2007, we sold the Holiday Inn Hotel, a 159 room
    hotel located in Clarksburg, WV.
    On July 20, 2007, we sold the Holiday Inn Hotel, a 208 room
    hotel located in Fort Wayne, IN.
    On August 14, 2007, we sold the Holiday Inn Hotel, a 106
    room hotel located in Fairmont, WV.
    On December 18, 2007, we sold the Holiday Inn Hotel, a 146
    room hotel located in Jamestown, NY.
    On December 27, 2007, we sold the Vermont Maple Inn, a 117
    room hotel located in Burlington, VT.     43




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##### Table of Contents



December 31,


December 31,


December 31,2007


2006


2005($ in thousands)Total revenues

$
40,071


$
89,986


$
117,465Total operating expenses (excluding impairment)


(33,826
)


(82,982
)


(104,891
)Impairment of long-lived assets


(4,714
)


(23,122
)


(11,062
)Interest income and other


1



11



308Interest expense


(1,669
)


(5,856
)


(7,444
)Business interruption proceeds






754



Gain on asset disposition


3,956



2,961



6,872(Loss) gain on extinguishment of debt, net


(1,747
)


10,231



(Provision) benefit for income taxes


(592
)


3,108



313Minority interest in (income)










(96
)Income (loss) from discontinued operations

$
1,480


$
(4,909
)

$
1,465     
    $1.8 million on the Holiday Inn Frederick, MD to reflect
    the estimated selling price less costs to sell;
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect
    the estimated selling price less costs to sell and to record the
    final disposition of the hotel;
    $0.8 million on the Vermont Maple Inn Colchester, VT to
    reflect the estimated selling price less costs to sell and to
    record the final disposition of the hotel;
    $0.6 million on the Holiday Inn Jamestown, NY to reflect
    the estimated selling price less costs to sell and to record the
    final disposition of the hotel; and
    $0.1 million on the University Plaza Bloomington, IN to
    record the final disposition of the hotel.    
    $3.9 million on the Holiday Inn Manhattan, KS to record the
    loss on disposal of fixed assets;
    $2.2 million on the Holiday Inn Lawrence, KS to record the
    loss on disposal of fixed assets;
    $1.4 million on the Holiday Inn Sheffield, AL which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.3 million on the Holiday Inn McKnight, PA to reflect the
    lowered estimated selling price less, the write-off of capital
    improvements spent on this hotel for franchisor compliance that
    did not add incremental value or revenue generating capacity to
    the property, and the final disposition of the hotel;
    $0.1 million on the Holiday Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel; 44




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##### Table of Contents




    $0.7 million on the University Plaza Bloomington, IN, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.3 million on the Ramada Plaza Macon, GA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less cost to sell;
    $2.1 million on the Holiday Inn University Mall, FL, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.8 million on the Holiday Inn Express Pensacola, FL,
    which was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $0.8 million on the Holiday Inn Greentree, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.2 million on the Holiday Inn York, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell; and
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel.    
    $1.8 million on the Azalea Inn Valdosta, GA to reduce the
    carrying value to estimated selling price;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    reflect the lowered selling price and to record the final
    disposition of the hotel;
    $1.7 million on the Holiday Inn Sheffield, AL to reduce the
    carrying value to estimated selling price;
    $1.6 million on the Holiday Inn Lawrence, KS to reflect the
    reduced fair value appraisal;
    $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel;
    $1.1 million on the Park Inn Brunswick, GA, to write-off
    the capital improvements made on this property related to the
    franchise conversion that did not result in an increase in the
    fair value of this hotel;
    $0.9 million on the Holiday Inn Hamburg, NY, as the
    undiscounted future cash flows were less than the assets
    carrying value and the resulting broker opinion required a
    write-down of the carrying value of the asset to its fair value;
    $0.4 million on the land parcel in Mt. Laurel, NJ to
    reflect the lowered estimated selling price of the land;
    $0.3 million on the Holiday Inn Express Gadsden, AL to
    reflect the estimated selling costs as this hotel was identified
    for sale in January 2005, to reflect the write-off of capital
    improvements spent on this hotel for franchisor compliance that
    did not add incremental value or revenue generating capacity to
    the property, and to record the final disposition of the hotel;
    $0.3 million on the Holiday Inn Morgantown, WV to reflect
    the reduced selling price of the hotel and the additional
    charges to dispose of the hotel in February 2005; and
    $0.1 million on the Holiday Inn McKnight, PA as the hotel
    was identified for sale in 2005 and its carrying value was
    adjusted to the estimated selling price less selling costs. 45




---



##### Table of Contents



Income
    Taxes
    true-ups,
  SOP 90-7
     46




---



##### Table of Contents



Quarterly
    Results of Operations
  Forms 10-Q
  2007


2006Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(Unaudited in thousands)Revenues:Rooms

$
47,576


$
54,187


$
56,216


$
50,243


$
45,617


$
50,445


$
53,788


$
47,869Food and beverage


15,894



14,381



16,779



13,844



15,134



12,912



15,636



12,110Other


2,028



2,417



2,453



2,061



2,066



2,105



2,154



1,94965,498



70,985



75,448



66,148



62,817



65,462



71,578



61,928Direct operating expenses:Rooms


12,569



14,157



13,756



12,679



12,462



13,297



13,310



12,203Food and beverage


10,140



10,651



11,021



9,984



10,363



9,772



10,469



9,019Other


1,449



1,683



1,642



1,512



1,456



1,523



1,657



1,52524,158



26,491



26,419



24,175



24,281



24,592



25,436



22,74741,340



44,494



49,029



41,973



38,536



40,870



46,142



39,181Other operating expenses:Other hotel operating costs


19,222



20,924



20,478



20,013



18,304



19,078



18,755



18,562Property and other taxes, insurance and leases


5,127



4,734



5,212



5,611



5,813



5,862



4,717



4,401Corporate and other


4,257



5,585



5,930



5,682



4,959



5,592



5,292



4,917Casualty (gain) losses, net














(1,867
)






(3,085
)


31



166Restructuring


(26
)


1,258Depreciation and amortization


8,297



8,086



7,960



7,802



7,770



7,886



7,704



7,358Impairment of long-lived assets


5,797



535



222



265



225



323



16



194Other operating expenses


42,674



41,122



39,802



37,506



37,071



35,656



36,515



35,598(1,334
)


3,372



9,227



4,467



1,465



5,214



9,627



3,583Other income (expenses):Business interruption insurance proceeds






299



272







530



2,706



695



Interest income and other


937



1,330



822



925



664



786



848



309Other interest expense


(6,423
)


(6,642
)


(6,767
)


(6,198
)


(6,297
)


(6,482
)


(6,227
)


(6,342
)Loss on debt extinguishment










(3,411
)


















(Loss) income before income taxes and minority interests


(6,820
)


(1,641
)


143



(806
)


(3,638
)


2,224



4,943



(2,450
)Minority interests (net of taxes, nil)










(56
)


(365
)


335



100



(136
)


(4
)(Loss) income before income taxes  continuing
    operations


(6,820
)


(1,641
)


87



(1,171
)


(3,303
)


2,324



4,807



(2,454
)(Provision) benefit for income taxes  continuing
    operations


(1,792
)


744



(19
)


686



(9,082
)


(1,039
)


(2,245
)


725(Loss) income from continuing operations


(8,612
)


(897
)


68



(485
)


(12,385
)


1,285



2,562



(1,729
) 47




---



##### Table of Contents



2007


2006Fourth


Third


Second


First


Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter(Unaudited in thousands)Discontinued operations:(Loss) income from discontinued operations before income taxes


(845
)


1,300



(565
)


2,182



(12,765
)


(1,917
)


1,853



4,812Benefit (provision) for income taxes


1,384



(356
)


234



(1,854
)


4,437



794



(414
)


(1,709
)Income (loss) from discontinued operations


539



944



(331
)


328



(8,328
)


(1,123
)


1,439



3,103Net (loss) income attributable to common stock

$
(8,073
)

$
47


$
(263
)

$
(157
)

$
(20,713
)

$
162


$
4,001


$
1,374Net (loss) income from continuing operations attributable to
    common stockBasic

$
(0.36
)

$
(0.04
)

$
0.00


$
(0.02
)

$
(0.50
)

$
0.05


$
0.10


$
(0.07
)Diluted

$
(0.36
)

$
(0.04
)

$
0.00


$
(0.02
)

$
(0.50
)

$
0.05


$
0.10


$
(0.07
)     Liquidity
    and Capital Resources
  Working
    Capital
           48




---



##### Table of Contents



Cash
    Flow
    Operating
    activities
    Investing
    activities
     49




---



##### Table of Contents



Financing
    activities
  and/or
    Debt and
    contractual obligations
    Debt Obligations


MaturitiesDecember 31, 2007


2008


2009


2010


2011


2012


Thereafter(In thousands)DEBT OBLIGATIONSMortgage Debt(1) :Merrill Lynch Mortgage Lending, Inc.  Fixed

$
153,940


$
3,099


$
150,841


$



$



$



$
Goldman Sachs


130,000







130,000















Wachovia


35,425



691



740



3,633



30,361







IXIS


40,041



534



39,507















Total  Mortgage Debt


359,406



4,324



321,088



3,633



30,361







Other Long-term Liabilities(2) :Tax Notes Issued Pursuant to our Joint Plan of Reorganization


633



601



32















Other Long-term Liabilities


781



167



166



124



91



42



1911,414



768



198



124



91



42



191Total Debt Obligations


360,820



5,092



321,286



3,757



30,452



42



191Less: Debt Obligations  Discontinued Operations


























Total Debt Obligations  Continuing Operations

$
360,820


$
5,092


$
321,286


$
3,757


$
30,452


$
42


$
191OTHER OBLIGATIONSInterest Expense(3)


49,138


$
24,500


$
18,717


$
5,653


$
268


$



$
Ground, Parking and Other Lease Obligations


85,483



3,446



3,468



3,495



3,120



2,994



68,960Total Other Obligations


134,621



27,946



22,185



9,148



3,388



2,994



68,960Less: Other Obligations  Discontinued Operations


























Total Other Obligations  Continuing Operations

$
134,621


$
27,946


$
22,185


$
9,148


$
3,388


$
2,994


$
68,960TOTAL OBLIGATIONSTotal Other Obligations


495,441



33,038



343,471



12,905



33,840



3,036



69,151Less: Other Obligations  Discontinued Operations


























Total Other Obligations  Continuing Operations

$
495,441


$
33,038


$
343,471


$
12,905


$
33,840


$
3,036


$
69,151     (1)
    
    Discussed in Note 9, Long-Term Liabilities in
    the notes to our consolidated financial statements.(2)
    
    Comprised of unsecured notes payable of $0.6 million for
    pre-petition bankruptcy related tax obligations and
    $0.8 million of other obligations.(3)
    
    The computation of interest expense related to our variable rate
    debt assumes a LIBOR of 4.60% for all future periods. 50




---



##### Table of Contents



Debt and
    Contractual Obligations
  five-year
  12-month
           51




---



##### Table of Contents




    $46.1 million of the loan proceeds, along with
    $9.7 million in funds held in reserve by Merrill Lynch,
    were used to pay off the $55.8 million Merrill Lynch
    Floating Rate Loan, which was secured by 14 hotels (2 hotels
    were classified as held for use, while 12 hotels were classified
    as held for sale). The unamortized deferred loan costs of
    $0.3 million were recorded as a Loss on Debt Extinguishment
    in the statement of operations. Of this amount, approximately
    $0.1 million was recorded in continuing operations and
    approximately $0.3 million was recorded in discontinued
    operations.
    $59.6 million of the loan proceeds, along with
    $11.7 million of the Companys cash, were used to
    defease the Merrill Lynch Fixed Rate #2 Loan, as discussed
    below.
    $15.7 million was held in a restricted cash account,
    pending resolution or settlement of the terms of a ground lease
    relating to one of the ten hotels securing the loan. In June
    2007, the terms of the ground lease were settled and
    $15.4 million of the restricted cash balance was
    transferred into an unrestricted cash account.           52




---



##### Table of Contents



Summary
    of Long-term Debt
    December 31, 2007


December 31, 2006Number


Property and


Long-Term


Long-Termof Hotels


Equipment, Net


Liabilities


Liabilities


Interest Rates at December 31, 2007($ in thousands)Mortgage DebtMerrill Lynch Mortgage Lending, Inc.  Floating





$



$



$
58,118Merrill Lynch Mortgage Lending, Inc.  Fixed


20



239,371



153,940



239,383


6.58%Goldman Sachs


10



120,103



130,000






LIBOR plus 1.50%; capped at 8.50%Computer Share Trust Company of Canada














7,551Lehman Brothers Holdings, Inc.














15,194Wachovia


4



36,493



35,425



36,081


$9,666 at 6.03%; $3,053 at 5.78%; 22,706 at 6.04%$18,765 at LIBOR plus 2.90%, capped at 8.4%;IXIS


4



36,645



40,041



40,501


$21,276 at LIBOR plus 2.95%, capped at 8.45%Total


38



432,612



359,406



396,828


6.74%(1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan of Reorganization










633



1,263Other










781



1,038







1,414



2,301Property and equipment  unencumbered


8



75,155







46



507,767



360,820



399,129Held for sale


(2
)


(7,781
)






(60,271
)Total December 31, 2007(2)


44


$
499,986


$
360,820


$
338,858     (1)
    
    The rate represents the annual effective weighted average cost
    of debt at December 31, 2007.(2)
    
    Debt obligations at December 31, 2007 include the current
    portion.  Franchise
    Agreements and Capital Expenditures
   53




---



##### Table of Contents



2007


2006


2005($ in thousands)Continuing operations

$
19,761


$
18,547


$
15,578Discontinued operations


2,875



6,996



8,066$
22,636


$
25,543


$
23,644           Off
    Balance Sheet Arrangements
   54




---



##### Table of Contents



New
    Accounting Pronouncements
      EITF 06-03,
  EITF 06-03 EITF 06-03
    , .
 55




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    12-month
  24-month
  24-month
   56




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure  Form 10-K.
  Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure, Controls and
    Procedures.
    Managements Report on Internal Control over Financial
    Reporting. Rule 13a-15(f) Internal
    Control  Integrated Framework,
  Changes in Internal Control Over Financial
    Reporting.
 57




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       Internal Control  Integrated Framework
        Internal Control  Integrated Framework
  Share-Based Payment,
  
   58




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships, Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a)
    (1) Our Consolidated Financial Statements are filed as a
    separate section of this report commencing on
    page F-1:         59




---



##### Table of Contents



SIGNATURES      By:
    /s/  Peter
    T. Cyrus   Interim President and Chief Executive Officer
    Signature

Title/s/  Peter
    T. CyrusPeter
    T. Cyrus

Interim President, Chief Executive Officer and Director/s/  James
    A. MacLennanJames
    A. MacLennan

Executive Vice President and Chief Financial Officer/s/  Stewart
    J. BrownStewart
    J. Brown

Chairman of the Board of Directors/s/  W.
    Blair AllenW.
    Blair Allen

Director/s/  Paul
    J. GarityPaul
    J. Garity

Director/s/  Stephen
    P. GrathwohlStephen
    P. Grathwohl

Director/s/  Michael
    J. GrondahlMichael
    J. Grondahl

Director/s/  Alex
    R. LieblongAlex
    R. Lieblong

Director/s/  Mark
    S. OeiMark
    S. Oei

Director  60




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
     
 PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2007 and December 31, 2006


F-3Consolidated Statements of Operations for the
    Years Ended December 31, 2007, December 31, 2006 and
    December 31, 2005


F-4Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2007,
    December 31, 2006 and December 31, 2005


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007, December 31, 2006 and
    December 31, 2005


F-6Notes to the Consolidated Financial Statements


F-7     F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              Internal Control  Integrated Framework
  
   F-2




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31, 2007


December 31, 2006($ in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
54,389


$
48,188Cash, restricted


8,363



13,791Accounts receivable (net of allowances: 2007  $323;
    2006  $277)


8,794



7,404Insurance receivable


2,254



2,347Inventories


3,097



2,893Prepaid expenses and other current assets


18,186



22,450Assets held for sale


8,009



89,437Total current assets


103,092



186,510Property and equipment, net


499,986



487,022Deposits for capital expenditures


16,565



19,802Other assets


5,087



5,824$
624,730


$
699,158LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
9,692


$
7,742Other accrued liabilities


28,336



27,724Advance deposits


1,683



1,384Insurance advances


2,650



2,063Current portion of long-term liabilities


5,092



46,557Liabilities related to assets held for sale


961



68,351Total current liabilities


48,414



153,821Long-term liabilities


355,728



292,301Total liabilities


404,142



446,122Minority interests






10,922Commitments and contingencies (Note 13)Stockholders equity:Common stock, $.01 par value, 60,000,000 shares
    authorized; 25,008,621 and 24,860,321 issued at
    December 31, 2007 and December 31, 2006, respectively


250



249Additional paid-in capital


329,694



327,634Accumulated deficit


(93,262
)


(84,816
)Accumulated other comprehensive income


4,115



2,088Treasury stock, at cost, 1,709,878 and 251,619 shares atDecember 31, 2007 and December 31, 2006, respectively


(20,209
)


(3,041
)Total stockholders equity


220,588



242,114$
624,730


$
699,158    F-3




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Years Ended December 31,2007


2006


2005($ in thousands, except per share data)Revenues:Rooms

$
208,222


$
197,719


$
168,028Food and beverage


60,898



55,792



46,869Other


8,959



8,274



7,865Total revenues


278,079



261,785



222,762Direct operating expenses:Rooms


53,161



51,272



45,028Food and beverage


41,796



39,623



33,114Other


6,286



6,161



6,019Total direct operating expenses


101,243



97,056



84,161176,836



164,729



138,601Other operating expenses:Other hotel operating costs


80,637



74,699



67,232Property and other taxes, insurance, and leases


20,684



20,793



16,751Corporate and other


21,454



20,760



20,016Casualty (gains), net


(1,867
)


(2,888
)


(28,464
)Restructuring


1,232







Depreciation and amortization


32,145



30,718



22,040Impairment of long-lived assets


6,819



758



1,244Total other operating expenses


161,104



144,840



98,819Operating income


15,732



19,889



39,782Other income (expenses):Business interruption insurance proceeds


571



3,931



9,595Interest income and other


4,014



2,607



833Interest expense


(26,030
)


(25,348
)


(21,353
)Loss on debt extinguishment


(3,411
)






(Loss) income before income taxes and minority interests


(9,124
)


1,079



28,857Minority interests (net of taxes, nil)


(421
)


295



(9,492
)(Provision) for income taxes  continuing operations


(381
)


(11,641
)


(8,529
)(Loss) income from continuing operations


(9,926
)


(10,267
)


10,836Discontinued operations:Income (loss) from discontinued operations before income taxes


2,072



(8,017
)


1,248Minority interests  discontinued operations










(96
)(Provision) benefit for income taxes  discontinued
    operations


(592
)


3,108



313Income (loss) from discontinued operations


1,480



(4,909
)


1,465Net (loss) income attributable to common stock

$
(8,446
)

$
(15,176
)

$
12,301Net (loss) income per share attributable to common stock:Basic

$
(0.35
)

$
(0.62
)

$
0.50Diluted

$
(0.35
)

$
(0.62
)

$
0.50    F-4




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  Accumulated








TotalAdditional


Unearned





Other








StockholdersCommon Stock


Paid-In


Stock


Accumulated


Comprehensive


Treasury Stock


EquityShares


Amount


Capital


Compensation


Deficit


Income


Shares


Amount


(Deficit)($ in thousands, except share data)Balance December 31, 2004


24,579,255


$
246


$
306,943


$
(315
)

$
(81,941
)

$
1,777



7,211


$
(76
)

$
226,634Amortization of unearned stock compensation














494



















494Issuance of restricted shares










783



(783
)


















Vesting of restricted stock units


45,826































Release of surplus accrual on final settlement of bankruptcy
    claims










1,292























1,292Retirement of disputed claims shares


(16,676
)






























Exercise of stock options


40,000







361























361Repurchases of treasury stock


























14,422



(150
)


(150
)Realization of pre-emergence deferred tax asset










7,692























7,692Other










(37
)






















(37
)Comprehensive income:Net income


















12,301















12,301Currency translation adjustments (related taxes estimated at nil)






















457











457Total comprehensive income


































12,758Balance December 31, 2005


24,648,405


$
246


$
317,034


$
(604
)

$
(69,640
)

$
2,234



21,633


$
(226
)

$
249,044Reclassification of unearned stock compensation to additional
    paid-in capital










(604
)


604



















Amortization of unearned stock compensation










1,406























1,406Issuance and vesting of restricted and nonvested shares


49,913



3



159























162Exercise of stock options


162,003







1,673























1,673Repurchases of treasury stock


























229,986



(2,815
)


(2,815
)Income tax benefit from stock options exercised










67























67Realization of pre-emergence deferred tax asset










7,899























7,899Comprehensive loss:Net loss


















(15,176
)














(15,176
)Currency translation adjustments (related taxes estimated at nil)






















(146
)










(146
)Total comprehensive loss


































(15,322
)Balance December 31, 2006


24,860,321


$
249


$
327,634


$



$
(84,816
)

$
2,088



251,619


$
(3,041
)

$
242,114Amortization of unearned stock compensation










1,387























1,387Issuance and vesting of nonvested shares


85,587



1



(1
)






















Exercise of stock options


64,086







621























621Repurchases of treasury stock


























1,458,259



(17,168
)


(17,168
)Other


(1,373
)






53























53Comprehensive income:






















Net loss


















(8,446
)














(8,446
)Currency translation adjustments (related taxes estimated at nil)






















2,027











2,027Total comprehensive income


































(6,419
)Balance, December 31, 2007


25,008,621


$
250


$
329,694


$



$
(93,262
)

$
4,115



1,709,878


$
(20,209
)

$
220,588    F-5




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2007


2006


2005($ in thousands)Operating activities:Net (loss) income

$
(8,446
)

$
(15,176
)

$
12,301Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation and amortization


32,145



36,227



30,147Impairment of long-lived assets


11,533



23,880



12,307Stock compensation expense


1,387



1,566



494Casualty gain, net


(4,525
)


(3,128
)


(30,769
)Deferred income taxes






7,968



7,692Minority interests


421



(295
)


9,588Gain on asset dispositions


(3,956
)


(2,961
)


(6,872
)Loss (gain) on extinguishment of debt


5,158



(10,231
)


Amortization of deferred financing costs


1,431



1,384



942Other






78



(540
)Changes in operating assets and liabilities:Accounts receivable, net of allowances


119



(581
)


(313
)Insurance receivable


1,230



1,696



(3,121
)Inventories


(152
)


(371
)


(526
)Prepaid expenses and other assets


6,491



(4,331
)


(2,617
)Accounts payable


(4,169
)


(575
)


58Other accrued liabilities


(2,037
)


565



(294
)Advance deposits


262



(122
)


251Net cash provided by operating activities


36,892



35,593



28,728Investing activities:Capital improvements


(41,520
)


(35,787
)


(86,476
)Proceeds from sale of assets, net of related selling costs


77,961



22,925



36,396Acquisition of minority partners interest


(16,361
)






Withdrawals for capital expenditures


4,926



9,371



15,361Insurance receipts related to casualty claims, net


63



3,194



26,193Net decrease (increase) in restricted cash


5,428



1,212



(5,163
)Other


38



(159
)


(99
)Net cash provided by (used in) investing activities


30,535



756



(13,788
)Financing activities:Proceeds from issuance of long term debt


130,000



44,954



32,200Proceeds from exercise of stock options


621



1,673



361Principal payments on long-term debt


(169,424
)


(49,767
)


(63,612
)Purchases of treasury stock


(16,818
)


(2,696
)


(150
)Payments of deferred financing costs


(1,666
)


(870
)


(913
)Payments of defeasance costs


(4,206
)


(546
)


Other


(16
)


10



(37
)Net cash used in financing activities


(61,509
)


(7,242
)


(32,151
)Effect of exchange rate changes on cash


283



(16
)


74Net increase (decrease) in cash and cash equivalents


6,201



29,091



(17,137
)Cash and cash equivalents at beginning of year


48,188



19,097



36,234Cash and cash equivalents at end of year

$
54,389


$
48,188


$
19,097Supplemental cash flow information:Cash paid during the year for:Interest, net of the amounts capitalized shown below

$
26,504


$
32,734


$
27,154Interest capitalized


443



117



2,121Income taxes, net of refunds


1,485



845



359Supplemental disclosure of non-cash investing and financing
    activities:Net non-cash debt decrease






10,250



1,277Treasury stock repurchases traded, but not settled


469



119



Purchases of property and equipment on account


6,276



1,923



3,330    F-6




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 December 31,
    2007
  1.
    Summary
    of Significant Accounting Policies  Description
    of Business
    
    45 hotels that are wholly owned and operated through
    subsidiaries; and
    one hotel that is operated in a joint venture in the form of a
    limited partnership, in which a Lodgian subsidiary serves as the
    general partner, has a 50% voting interest and exercises control.    Principles
    of Consolidation
      Inventories
   F-7




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Minority
    Interests
    Property
    and Equipment
        Assets
    Held for Sale and Discontinued Operations
                 F-8




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Cash
    and Cash Equivalents
    Restricted
    Cash
    Fair
    Values of Financial Instruments
      Concentration
    of Credit Risk
    Concentration
    of Market Risk
    Income
    Taxes
   F-9




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Earnings
    per Common and Common Equivalent Share
    Stock-Based
    Compensation
      Income from continuing operations

$
908Income before income taxes


908Net income


556Basic earnings per share


0.023Diluted earnings per share


0.023     Income (loss) from continuing operations:As reported

$
10,836Add: Stock-based compensation expense as reported


302Deduct: Total pro forma stock-based employee compensation expense


(1,354
)Pro forma


9,784Income (loss) from discontinued operations:As reported


1,465Add: Stock-based compensation expense as reported


Deduct: Total pro forma stock-based employee compensation expense


Pro forma


1,465 F-10




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Net income (loss) attributable to common stock:As reported


12,301Add: Stock-based compensation expense as reported


302Deduct: Total pro forma stock-based employee compensation expense


(1,354
)Pro forma

$
11,249Basic earnings per common shareIncome (loss) from continuing operations:As reported

$
0.44Add: Stock-based compensation expense as reported


0.01Deduct: Total pro forma stock-based employee compensation expense


(0.06
)Pro forma


0.40Income (loss) from discontinued operations:As reported


0.06Add: Stock-based compensation expense as reported


Deduct: Total pro forma stock-based employee compensation expense


Pro forma


0.06Net income (loss) attributable to common stock:As reported


0.50Add: Stock-based compensation expense as reported


0.01Deduct: Total pro forma stock-based employee compensation expense


(0.06
)Pro forma

$
0.46Diluted earnings per common shareIncome (loss) from continuing operations:As reported

$
0.44Add: Stock-based compensation expense as reported


0.01Deduct: Total pro forma stock-based employee compensation expense


(0.05
)Pro forma


0.40Income (loss) from discontinued operations:As reported


0.06Add: Stock-based compensation expense as reported


Deduct: Total pro forma stock-based employee compensation expense


Pro forma


0.06Net income (loss) attributable to common stock:As reported


0.50Add: Stock-based compensation expense as reported


0.01Deduct: Total pro forma stock-based employee compensation expense


(0.05
)Pro forma

$
0.46    F-11




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        Revenue
    Recognition
    Foreign
    Currency Translation
    Operating
    Segments
    Use of
    Estimates
    Self-insurance
   F-12




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  New
    Accounting Pronouncements
      EITF 06-03,
  EITF 06-03 EITF 06-03
   F-13




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  , .
    2.
    Stock-Based
    Compensation   F-14




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Available under the plan, less previously issued as of
    December 31, 2006


2,568,029Nonvested stock issued January 26, 2007


(63,000
)Nonvested stock issued February 12, 2007


(46,000
)Nonvested stock issued March 30, 2007


(18,800
)Shares of nonvested stock withheld from awards to satisfy tax
    withholding obligations


6,989Nonvested shares forfeited in 2007


9,629Stock options forfeited in 2007


79,819Available for issuance, December 31, 2007


2,536,666   Stock
    Options
      Weighted AverageStock Options


Exercise PriceBalance, December 31, 2004


526,410


$
11.46Granted


440,000



9.29Exercised


(40,000
)


9.05Forfeited


(332,516
)


10.75Balance, December 31, 2005


593,894


$
10.41Exercised


(162,003
)


10.12Forfeited


(75,578
)


10.18Balance, December 31, 2006


356,313


$
10.60Exercised


(64,086
)


9.69Forfeited


(79,819
)


11.36Balance, December 31, 2007


212,408


$
10.60    F-15




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Options Outstanding


Options ExercisableWeighted Average


Weighted





Weighted Average


WeightedRemaining Life


Average





Remaining Life


AverageRange of Prices

Number


(in years)


Exercise Price


Number


(in Years)


Exercise Price$7.83 to $9.39


94,828



7.4


$
9.05



56,499



7.4


$
9.05$9.40 to $10.96


83,588



6.6


$
10.48



81,088



6.6


$
10.50$10.97 to $15.66


33,992



5.7


$
15.21



33,992



5.7


$
15.21212,408



6.8


$
10.60



171,579



6.6


$
10.95Expected to vest


201,503



6.8


$
10.68   ($ in thousands)Aggregate intrinsic value of stock options outstanding

$
141Aggregate intrinsic value of stock options expected to vest

$
117Aggregate intrinsic value of stock options exercisable

$
53     Expected life of option


10 yearsRisk free interest rate


4.56
%Expected volatility


22.80
%Expected dividend yield


       Weighted average fair value of options granted

$
4.21Total number of options granted


440,000Total fair value of all options granted

$
1,852,400   Restricted
    Stock
   F-16




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Weighted AverageRestricted Stock


Grant Date Fair ValueBalance, December 31, 2005






Granted


12,413


$
12.88Withheld to satisfy tax obligations


(4,719
)


12.88Balance, December 31, 2006


7,694


$
12.88Expiration of restrictions


(7,694
)


12.88Balance, December 31, 2007





$
     Nonvested
    Stock
         F-17




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Weight AverageNonvested Stock


Grant Date Fair ValueBalance, December 31, 2004

$
44,445


$
9.00Vested


(44,444
)


9.00Stock lost due to reverse stock split


(1
)


9.00Granted


75,000



10.44Balance, December 31, 2005


75,000


$
10.44Granted


45,884



12.63Forfeited


(777
)


12.88Vested


(37,500
)


10.44Balance, December 31, 2006


82,607


$
11.63Granted


127,800



12.96Forfeited


(9,629
)


13.32Vested


(85,587
)


11.72Balance, December 31, 2007


115,191


$
12.89      Unrecognized


Weighted-AverageCompensation


AmortizationType of Award

Expense ($000s)


Period (in years)Stock Options

$
113



0.45Nonvested Stock


975



1.96Total

$
1,088



1.98     Twelve Months Ended December 31, 2007


Twelve Months Ended December 31, 2006Compensation


Income Tax


Compensation


Income TaxType of Award

Expense


Benefit


Expense


Benefit(Unaudited in thousands)Stock Options

$
174


$
68


$
908


$
352Nonvested Stock


1,213



471



498



193Restricted Stock










160



62Total

$
1,387


$
539


$
1,566


$
607  F-18




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  3.
    Discontinued
    Operations  Dispositions
    
    On January 20, 2005, the Company sold the Four Points
    Hotel, a 189 room hotel, located in Niagara Falls, NY.
    On February 17, 2005, the Company sold the Holiday Inn
    Hotel, a 147 room hotel, located in Morgantown, WV.
    On March 31, 2005, the Company sold the Holiday Inn Hotel,
    a 177 room hotel, located in Pittsburgh, PA.
    On June 1, 2005, the Company sold the Holiday Inn Hotel, a
    210 room hotel, located in Austin, TX.
    On July 7, 2005, the Company sold the Holiday Inn Hotel, a
    390 room hotel, located in St. Louis, MO.
    On July 15, 2005, the Company sold the Holiday Inn Select
    Hotel, a 397 room hotel located in Niagara Falls, NY.
    On September 15, 2005, the Company sold the Holiday Inn
    Express Hotel, a 141 room hotel, located in Gadsden, AL.
    On September 16, 2005, the Company sold the Holiday Inn
    Hotel, a 422 room hotel, located in Rolling Meadows, IL.      
    On March 9, 2006, the Company sold the Fairfield Inn Hotel,
    a 105 room hotel located in Jackson, TN.
    On April 3, 2006, the Company sold a land parcel located in
    Mt. Laurel, NJ.
    On April 25, 2006, the Company sold the Holiday Inn Hotel,
    a 146 room hotel located in Pittsburgh, PA.
    On October 24, 2006, the Company sold the Holiday Inn
    Hotel, a 167 room hotel located in Valdosta, GA.
    On October 24, 2006, the Company sold the Azalea Inn Hotel,
    a 108 room hotel located in Valdosta, GA.
    On November 28, 2006, the Company sold its rights to the
    ground lease of the former Holiday Inn Hotel located in Jekyll
    Island, GA.
    On December 1, 2006, the Company sold the Quality Hotel, a
    205 room hotel located in Metairie, LA.      
    On January 15, 2007, the Company sold the University Plaza,
    a 186 room hotel located in Bloomington, IN.
    On March 9, 2007, the Company sold the Holiday Inn, a 130
    room hotel located in Hamburg, NY. F-19




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    On June 13, 2007, the Company sold the following 16 hotels:  
    Holiday Inn, a 202 room hotel located in Sheffield, AL
    Clarion Hotel, a 393 room hotel located in Louisville, KY
    Crowne Plaza Hotel, a 275 room hotel located in Cedar Rapids, IA
    Augusta West Inn Hotel, a 117 room hotel located in Augusta, GA
    Holiday Inn Hotel, a 201 room hotel located in Greentree, PA
    Holiday Inn Hotel, a 189 room hotel located in Lancaster East, PA
    Holiday Inn Hotel, a 244 room hotel located in Lansing, MI
    Holiday Inn Hotel, a 152 room hotel located in Pensacola, FL
    Holiday Inn Hotel, a 228 room hotel located in Winter Haven, FL
    Holiday Inn Hotel, a 100 room hotel located in York, PA
    Holiday Inn Express Hotel, a 112 room hotel located in Dothan, AL
    Holiday Inn Express Hotel, a 122 room hotel located in
    Pensacola, FL
    Park Inn Hotel, a 126 room hotel located in Brunswick, GA
    Quality Inn Hotel, a 102 room hotel located in Dothan, AL
    Ramada Plaza Hotel, a 297 room hotel located in Macon, GA
    Ramada Inn Hotel, a 197 room hotel located in North Charleston,
    SC  
    On July 12, 2007, the Company sold the Holiday Inn Hotel, a
    159 room hotel located in Clarksburg, WV.
    On July 20, 2007, the Company sold the Holiday Inn Hotel, a
    208 room hotel located in Fort Wayne, IN.
    On August 14, 2007, the Company sold the Holiday Inn Hotel,
    a 106 room hotel located in Fairmont, WV.
    On December 18, 2007, the Company sold the Holiday Inn
    Hotel, a 146 room hotel located in Jamestown, NY.
    On December 27, 2007, the Company sold the Vermont Maple
    Inn, a 117 room hotel located in Burlington, VT.    Assets
    Held for Sale and Discontinued Operations
     F-20




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    
    $1.8 million on the Holiday Inn Frederick, MD to reflect
    the estimated selling price;
    $1.3 million on the Holiday Inn Clarksburg, WV to reflect
    the estimated selling price, and to reflect the final
    disposition of the hotel;
    $0.8 million on the Vermont Maple Inn Colchester, VT to
    reflect the estimated selling price, and to reflect the final
    disposition of the hotel;
    $0.6 million on the Holiday Inn Jamestown, NY to reflect
    the estimated selling price, and to reflect the final
    disposition of the hotel;
    $0.1 million on the University Plaza Bloomington, IN to
    record the final disposition of the hotel.    
    $3.9 million on the Holiday Inn Manhattan, KS to record the
    loss on disposal of fixed assets;
    $2.2 million on the Holiday Inn Lawrence, KS to record the
    loss on disposal of fixed assets;
    $1.4 million on the Holiday Inn Sheffield, AL which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.3 million on the Holiday Inn McKnight, PA to reflect the
    lowered estimated selling price less costs to sell, the
    write-off of capital improvements for franchisor compliance that
    did not add incremental value and the final disposition of the
    hotel;
    $0.1 million on the Holiday Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.1 million on the Azalea Inn Valdosta, GA to reflect the
    estimated selling costs of the sale as this hotel was identified
    for sale during 2006, and to reflect the final disposition of
    the hotel;
    $0.7 million on the University Plaza Bloomington, IN, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.3 million on the Ramada Plaza Macon, GA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less cost to sell;
    $2.1 million on the Holiday Inn University Mall, FL, which
    was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $1.8 million on the Holiday Inn Express Pensacola, FL,
    which was classified as held for sale during 2006, to reduce the
    carrying value to estimated selling price less costs to sell;
    $0.8 million on the Holiday Inn Greentree, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.2 million on the Holiday Inn York, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.9 million on the Holiday Inn Lancaster, PA, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell; F-21




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    $6.4 million on the Holiday Inn Lansing, MI, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell;
    $0.6 million on the Holiday Inn Clarksburg, WV, which was
    classified as held for sale during 2006, to reduce the carrying
    value to estimated selling price less costs to sell; and
    $0.1 million on the Holiday Inn Jekyll Island, GA to record
    the disposal costs of furniture, fixtures and equipment incurred
    during the closing of the hotel.    
    $1.8 million on the Azalea Inn Valdosta, GA to reduce the
    carrying value to estimated selling price;
    $1.7 million on the Holiday Inn Rolling Meadows, IL to
    reflect the lowered selling price and to record the final
    disposition of the hotel;
    $1.7 million on the Holiday Inn Sheffield, AL to reduce the
    carrying value to estimated selling price;
    $1.6 million on the Holiday Inn Lawrence, KS to reflect the
    reduced fair value appraisal;
    $1.3 million on the Holiday Inn St. Louis, MO to
    reflect the reduced selling price of the hotel;
    $1.1 million on the Park Inn Brunswick, GA, to write-off
    the capital improvements made on this property related to the
    franchise conversion that did not result in an increase in the
    fair value of this hotel;
    $0.9 million on the Holiday Inn Hamburg, NY, as the
    undiscounted future cash flows were less than the assets
    carrying value and the resulting broker opinion required a
    write-down of the carrying value of the asset to its fair value;
    $0.4 million on the land parcel in Mt. Laurel, NJ to
    reflect the lowered estimated selling price of the land;
    $0.3 million on the Holiday Inn Express Gadsden, AL to
    reflect the estimated selling costs as this hotel was identified
    for sale in January 2005, to reflect the write-off of capital
    improvements spent on this hotel for franchisor compliance that
    did not add incremental value or revenue generating capacity to
    the property, and to record the final disposition of the hotel;
    $0.3 million on the Holiday Inn Morgantown, WV to reflect
    the reduced selling price of the hotel and the additional
    charges to dispose of the hotel in February 2005; and
    $0.1 million on the Holiday Inn McKnight, PA as the hotel
    was identified for sale in 2005 and its carrying value was
    adjusted to the estimated selling price less selling costs.    
    Holiday Inn Frederick, MD; and
    Holiday Inn St Paul, MN F-22




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     December 31, 2007


December 31, 2006($ in thousands)Property and equipment, net

$
7,781


$
83,462Other assets


228



5,975Assets held for sale

$
8,009


$
89,437Other liabilities

$
961


$
10,630Long-term debt






57,721Liabilities related to assets held for sale

$
961


$
68,351     December 31, 2007


December 31, 2006


December 31, 2005($ in thousands)Total revenues

$
40,071


$
89,986


$
117,465Total operating expenses (excluding impairment)


(33,826
)


(82,982
)


(104,891
)Impairment of long-lived assets


(4,714
)


(23,122
)


(11,062
)Interest income and other


1



11



308Interest expense


(1,669
)


(5,856
)


(7,444
)Business interruption proceeds






754



Gain on asset disposition


3,956



2,961



6,872(Loss) gain on extinguishment of debt, net


(1,747
)


10,231



(Provision) benefit for income taxes


(592
)


3,108



313Minority interest in (income)










(96
)Income (loss) from discontinued operations

$
1,480


$
(4,909
)

$
1,465      F-23




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  4.
    Accounts
    Receivable    December 31, 2007


December 31, 2006($ in thousands)Trade accounts receivable

$
8,144


$
7,362Allowance for doubtful accounts


(323
)


(277
)Other receivables


973



319$
8,794


$
7,404   5.
    Prepaid
    Expenses and Other Current Assets    December 31, 2007


December 31, 2006($ in thousands)Deposits for property taxes

$
4,954


$
6,956Prepaid insurance


3,358



5,379Lender-required insurance deposits


4,686



5,750Deposits and other prepaid expenses


5,188



4,365$
18,186


$
22,450   6.
    Property
    and Equipment, net    Useful Lives


December 31,


December 31,(years)


2007


2006($ in thousands)Land





$
52,656


$
52,119Buildings and improvements


10  40



407,652



394,314Property and equipment


3  10



145,101



125,018China, glass and silverware






2,239



1,656607,648



573,107Less accumulated depreciation






(116,266
)


(86,651
)Construction in progress






8,604



566$
499,986


$
487,022    F-24




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    7.
    Other
    Assets    December 31,


December 31,2007


2006($ in thousands)Deferred financing costs

$
2,879


$
3,167Deferred franchise fees


1,255



1,430Utility and other deposits


248



555Linen inventory


705



672$
5,087


$
5,824       Total


2008


2009


2010


2011


2012


After 2012($ in thousands)Deferred financing costs

$
2,879


$
1,558


$
1,002


$
310


$
9


$



$
Deferred franchise fees


1,255



132



122



116



112



103



670$
4,134


$
1,690


$
1,124


$
426


$
121


$
103


$
670   8.
    Other
    Accrued Liabilities    December 31, 2007


December 31, 2006($ in thousands)Salaries and related costs

$
5,780


$
5,584Self-insurance loss accruals


12,193



11,502Property and sales taxes


5,662



5,715Professional fees


818



727Accrued franchise fees


1,083



1,024Accrued interest


1,864



2,089Other


936



1,083$
28,336


$
27,724   9.
    Long-Term
    Liabilities   F-25




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      December 31, 2007


December 31, 2006Number


Property and


Long-Term


Long-Term


Interest Rates at December 31,of Hotels


Equipment, Net


Liabilities


Liabilities


2007($ in thousands)Mortgage DebtMerrill Lynch Mortgage Lending, Inc.  Floating





$



$



$
58,118Merrill Lynch Mortgage Lending, Inc.  Fixed


20



239,371



153,940



239,383


6.58%Goldman Sachs


10



120,103



130,000






LIBOR plus 1.50%; capped at 8.50%Computer Share Trust Company of Canada














7,551Lehman Brothers Holdings, Inc.














15,194Wachovia


4



36,493



35,425



36,081


$9,666 at 6.03%; $3,053 at 5.78%; 22,706 at 6.04%$18,765 at LIBOR plus 2.90%, capped at 8.4%; $21,276 atIXIS


4



36,645



40,041



40,501


LIBOR plus 2.95%, capped at 8.45%Total


38



432,612



359,406



396,828


6.74%(1)Long-term liabilities  otherTax notes issued pursuant to our Joint Plan of Reorganization










633



1,263Other










781



1,038







1,414



2,301Property and equipment  unencumbered


8



75,155







46



507,767



360,820



399,129Held for sale


(2
)


(7,781
)






(60,271
)Total December 31, 2007(2)


44


$
499,986


$
360,820


$
338,858     (1)
    
    The rate represents the annual effective weighted average cost
    of debt at December 31, 2007.(2)
    
    Debt obligations at December 31, 2007 include the current
    portion.    Mortgage
    Debt
   F-26




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    12-month
              
    $46.1 million of the loan proceeds, along with
    $9.7 million in funds held in reserve by Merrill Lynch,
    were used to pay off the $55.8 million Merrill Lynch
    Floating Rate Loan, which was secured by 14 hotels (2 hotels
    were classified as held for use, while 12 hotels were classified
    as held for sale). The unamortized deferred F-27




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  loan costs of $0.3 million were recorded as a Loss on Debt
    Extinguishment in the statement of operations. Of this amount,
    approximately $0.1 million was recorded in continuing
    operations and approximately $0.3 million was recorded in
    discontinued operations.  
    $59.6 million of the loan proceeds, along with
    $11.7 million of the Companys cash, were used to
    defease the Merrill Lynch Fixed Rate #2 Loan, as discussed
    below.
    $15.7 million was held in a restricted cash account,
    pending resolution or settlement of the terms of a ground lease
    relating to one of the ten hotels securing the loan. In June
    2007, the terms of the ground lease were settled and
    $15.4 million of the restricted cash balance was
    transferred into an unrestricted cash account.             F-28




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Interest
    Rate Cap Agreements
      Future
    Loan Repayment Projections
    DebtObligationsDecember 31,


Maturities2007


2008


2009


2010


2011


2012


Thereafter($ in thousands)Mortgage Debt :Merrill Lynch Mortgage Lending, Inc.  Fixed

$
153,940


$
3,099


$
150,841


$



$



$



$
Goldman Sachs


130,000







130,000















Wachovia


35,425



691



740



3,633



30,361







IXIS


40,041



534



39,507















Total  Mortgage Debt


359,406



4,324



321,088



3,633



30,361







Other Long-term Liabilities :Tax Notes Issued Pursuant to our Joint Plan of Reorganization


633



601



32















Other Long-term Liabilities


781



167



166



124



91



42



1911,414



768



198



124



91



42



191Total Debt Obligations


360,820



5,092



321,286



3,757



30,452



42



191Less: Debt Obligations  Discontinued Operations


























Total Debt Obligations  Continued Operations

$
360,820


$
5,092


$
321,286


$
3,757


$
30,452


$
42


$
191  F-29




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  10.
    Stockholders
    Equity  Treasury
    Stock
              Class A
    and Class B Warrants
       F-30




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  11.
    Income
    Taxes    2007


2006Current


Deferred


Total


Current


Deferred


Total($ in thousands)Federal

$



$



$



$
264


$
6,839


$
7,103State and Local


837







837



268



966



1,234Foreign


136







136



196







196$
973


$



$
973


$
728


$
7,805


$
8,533Less: discontinued operations


592







592







(3,108
)


(3,108
)$
381


$



$
381


$
728


$
10,913


$
11,641     2007


2006Total


Current


Non-Current


Total


Current


Non-Current($ in thousands)Property and equipment

$
(33,958
)

$



$
(33,958
)

$
(11,143
)

$



$
(11,143
)Net operating loss carryforwards (NOLs)


84,540







84,540



123,722







123,722Loan costs














573







573Legal and workers compensation reserves


4,414



4,414







3,760



3,760



AMT and FICA credit carryforwards


2,360







2,360



2,624







2,624Other operating accruals


1,604



1,604







2,289



2,289



Other


284







284



(407
)






(407
)Total

$
59,244


$
6,018


$
53,226


$
121,418


$
6,049


$
115,369Less valuation allowance


(59,244
)


(6,018
)


(53,226
)


(121,418
)


(6,049
)


(115,369
)$



$



$



$



$



$
     2007


2006($ in thousands)Federal income tax benefit at statutory federal rate

$
(2,489
)

$
(2,259
)State income tax (benefit) charge, net


485



(319
)Non-deductible items


324



(203
)Foreign


136



196Change in valuation allowance


2,517



11,118$
973


$
8,533Less discontinued operations


592



(3,108
)Provision for income taxes

$
381


$
11,641  F-31




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  true-
  true-ups, SOP 90-7,
       F-32




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  12.
    Earnings
    Per Share    2007


2006


2005($ in thousands, except share data)Numerator:(Loss) income from continuing operations

$
(9,926
)

$
(10,267
)

$
10,836Income (loss) from discontinued operations


1,480



(4,909
)


1,465Net (loss) income attributable to common stock

$
(8,446
)

$
(15,176
)

$
12,301Denominator:Basic weighted average shares


24,292



24,617



24,576Diluted weighted average shares


24,292



24,617



24,630Basic (loss) income per common share:(Loss) income from continuing operations

$
(0.41
)

$
(0.42
)

$
0.44Income (loss) from discontinued operations


0.06



(0.20
)


0.06Net (loss) income attributable to common stock

$
(0.35
)

$
(0.62
)

$
0.50Diluted (loss) income per common share:(Loss) income from continuing operations

$
(0.41
)

$
(0.42
)

$
0.44Income (loss) from discontinued operations


0.06



(0.20
)


0.06Net (loss) income attributable to common stock

$
(0.35
)

$
(0.62
)

$
0.50   No. D-62,
       F-33




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  13.
    Commitments
    and Contingencies  Franchise
    Agreements and Capital Expenditures
    2007


2006


2005($ in thousands)Continuing operations

$
19,761


$
18,547


$
15,578Discontinued operations


2,875



6,996



8,066$
22,636


$
25,543


$
23,644       
    Six hotels are in non-compliance or failure of the franchise
    agreements because of substandard guest satisfaction scores or
    failed operational reviews, but are being granted additional
    time to cure these low scores by the franchisors. If the Company
    does not achieve scores above the required thresholds by the
    designated dates, these hotels could be subject to subsequent
    default and termination notices on the franchise agreements. Two
    of these six hotels are held for sale as of March 1, 2008.
    One hotel is in default of the franchise agreement for failure
    to complete a Property Improvement Plan. If the Company does not
    cure the default by June 30, 2008, the hotels
    franchise agreement could be terminated by the franchisor.
    However, the Company has met with the franchisor and is planning
    some additional capital improvements to improve guest
    satisfaction for which the franchisor is expected to extend the
    default cure period. This hotel is held for sale as of
    March 1, 2008.
    One hotel is in default because of substandard guest
    satisfaction scores. However, the franchisor has granted a
    six-month extension, following the completion of major guest
    room renovations.     F-34




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##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        
    multiple franchise agreement defaults and the continuance
    thereof beyond all notice and grace periods for hotels whose
    allocated loan amounts total 10% or more of the outstanding
    principal amount of such Refinancing Debt;
    either the termination of franchise agreements for more than one
    property or the termination of franchise agreements for hotels
    whose allocated loan amounts represent more than 5% of the
    outstanding principal amount of the fixed rate loan, and such
    hotels continue to operate for more than five consecutive days
    without being subject to replacement franchise
    agreements; or
    a franchise termination for any hotel currently subject to a
    franchise agreement that remains without a franchise agreement
    for more than six months.      Letters
    of Credit
    Self-insurance
   F-35




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Casualty
    gains (losses), net and business interruption
    insurance
    ramp-up
             F-36




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Litigation
          Operating
    Leases
    2007


2006


2005($ in thousands)Continuing operations

$
3,186


$
2,974


$
3,213Discontinuing operations


222



539



557Total operations

$
3,408


$
3,513


$
3,770     2008


3,4462009


3,4682010


3,4952011


3,1202012


2,9942013 and thereafter


68,960$
85,483   14.
    Employee
    Retirement Plans   F-37




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006


2005($ in thousands)Continuing operations

$
142


$
151


$
178Discontinued operations


13







$
155


$
151


$
178     2007


2006


2005($ in thousands)Continuing operations

$
718


$
563


$
583Discontinued operations


73



128



163$
791


$
691


$
746   15.
    Restructuring    Beginning liability


1,258Less adjustments


(26
)Restructuring costs


1,232Less payments


(1,232
)Ending liability


   16.
    Subsequent
    Events  Stock
    Awards
       F-38




---



##### Table of Contents



LODGIAN,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Stock
    Repurchase Program
    Other
       F-39




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1

Certificate of Correction to the Second Amended and Restated
    Certificate of Incorporation and Second Amended and Restated
    Certificate of Incorporation of Lodgian, Inc. (Incorporated by
    reference to Exhibit 3.1 to Amendment No. 2 to the
    Companys Registration Statement on
    Form S-1
    (File
    No. 333-113410),
    filed on June 4, 2004).3
.2

Amended and Restated Bylaws of Lodgian, Inc. (Incorporated by
    reference to Exhibit 3.4 to the Companys Annual
    Report for the period ended December 31, 2003 (File
    No. 1-14537),
    filed on March 9, 2004).4
.1

Specimen Common Stock Certificate (Incorporated by reference to
    Exhibit 4.1 to Amendment No. 2 to the Companys
    Registration Statement on
    Form S-1
    (File
    No. 333-113410),
    filed on June 6, 2004).4
.2

Class A Warrant Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and Wachovia Bank, N.A.
    (Incorporated by reference to Exhibit 10.9 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File
    No. 1-14537),
    filed on March 9, 2004).4
.3

Class B Warrant Agreement, dated as of November 25,
    2002, between Lodgian, Inc. and Wachovia Bank, N.A.
    (Incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report for the period ended
    December 31, 2003 (File
    No. 1-14537),
    filed on March 9, 2004).10
.1

Amended and Restated Executive Employment Agreement between
    Lodgian, Inc. and Daniel E. Ellis, dated March 29, 2007
    (Incorporated be reference to Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 1-12537),
    filed with the Commission on March 30, 2007).10
.2

Participation Form for Daniel E. Ellis under the Lodgian, Inc.
    Executive Incentive Plan (Incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on February 6, 2006).10
.3

Amended and Restated Executive Employment Agreement between
    Edward J. Rohling and Lodgian, Inc., dated April 23, 2007
    (Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on April 26, 2007).10
.4

Restricted Stock Award Agreement between Edward J. Rohling and
    Lodgian, Inc., dated July 15, 2005 (Incorporated by
    reference to Exhibit 10.36 to the Companys Quarterly
    Report for the period ended June 30, 2005 (File
    No. 1-14537),
    filed with the Commission on August 9, 2005).10
.5

Separation and Release Agreement between Edward J. Rohling and
    Lodgian, Inc. dated January 29, 2008 (Incorporated by
    reference to Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on February 4, 2008).10
.6

Amended and Restated Executive Employment Agreement between
    Lodgian, Inc. and James A. MacLennan dated March 29, 2007
    (Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on March 30, 2007).10
.7

Restricted Stock Award Agreement between Lodgian, Inc. and James
    A. MacLennan dated March 1, 2006 (Incorporated by reference
    to Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on March 3, 2006).10
.8

Participation Form for James A. MacLennan under the Lodgian,
    Inc. Executive Incentive Plan (Incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on March 3, 2006).10
.9

Amended and Restated 2002 Stock Incentive Plan of Lodgian, Inc.
    (as amended through April 24, 2007 (Incorporated by
    reference to Exhibit 10.10 to the Companys Quarterly
    Report for the period ended June 30, 2007 (File
    No. 1-14537),
    filed with the Commission on August 8, 2007).10
.10

Form of Stock Option Award Agreement (Incorporated by reference
    to Exhibit 10.37 to the Companys Annual Report for
    the period ended December 31, 2004 (File
    No. 1-14537),
    filed with the Commission on March 23, 2005).10
.11

Lodgian, Inc. 401(k) Plan, As Amended and Restated Effective as
    of January 1, 2006 (Incorporated by reference to
    Exhibit 10.13 to the Companys Quarterly Report for
    the period ended June 30, 2007 (File
    No. 1-14537),
    filed with the Commission on August 8, 2007). F-40




---



##### Table of Contents



ExhibitNumber

Description10
.12

Amended and Restated Executive Employment Agreement between Mark
    D. Linch and Lodgian, Inc. dated March 29, 2007
    (Incorporated by reference to Exhibit 10.3 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on March 30, 2007).10
.13

Separation Agreement and General Release between Mark D. Linch
    and Lodgian, Inc. dated September 11, 2007. (Incorporated
    by reference to Exhibit 10.12 to the Companys
    Quarterly Report for the period ended September 30, 2007
    (File
    No. 1-14537),
    filed with the Commission on November 8, 2007).10
.14

Executive Employment Agreement between Donna B. Cohen and
    Lodgian, Inc. dated March 29, 2007 (Incorporated by
    reference to Exhibit 10.4 to the Companys Current
    Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on March 30, 2007).10
.15

Lodgian, Inc. Executive Incentive Plan (Covering the calendar
    years
    2006-2008).
    (Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 1-14537),
    filed with the Commission on February 6, 2006).10
.16

Form of Restricted Stock Award Agreement for Employees
    (Incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K/A
    (File
    No. 1-14537),
    filed with the Commission on March 6, 2007).10
.17

Form of Restricted Stock Award Agreement for Non-Employee
    Directors (Incorporated by reference to Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K/A
    (File
    No. 1-14537),
    filed with the Commission on March 6, 2007).21


Subsidiaries of Lodgian, Inc.**31
.1

Sarbanes-Oxley Section 302 Certification by the CEO.**31
.2

Sarbanes-Oxley Section 302 Certification by the CFO.**32


Sarbanes-Oxley Section 906 Certification by the CEO and
    CFO.**     **
    
    Filed herewith. F-41